Members, Directors, Sectretary & Auditor

Question 1

Who are Members

Answer 1

Owner of companies / shareholder if company has share capital

Subscribe to company’s memorandum & deemed 1st members upon registration

Anyone name entered & agreed on RoM

Articles constitute a contract / obligations of members / rights depend on type of shares held (limited)

Don’t owe fiduciary duty to company / act in own interests

Question 2

Rights of members

Answer 2

Attend & vote at general meetings (unless shares non voting) / proxy/ must be given notice

Inspect mins & financial statements

Copy of M&As

Inspect RoM

Receive distribution (board discretion)

Unlimited shares in surplus of assets when company wound up/ equitable grounds

Share cert (received in respect of shareholding)

Casting vote to wind up (75% required)

Transfer of shares to others subject to articles/ pre emption rights offer existing shares for sale when member wishes to sell them, before offering to non members)

Compulsory acquisition (holds 90% can give notice to others desire to acquire their shares)

Unfair prejudice / petition to court/ action claims against directors

Question 3

Who is a secretary

Answer 3

CA06 specifies requirement for PLC to have company secretary

Offshore, service provider or subsidiary act as corporate secretary where professional SP admins company on behalf of client

Question 4

Outline qualification requirement of secretary

Answer 4

Director duty to ensure person has knowledge & experience to discharge function of secretary ;

Solicitor
Accountant
Chartered sec / member of professional body
Capable
Held position of sec of plc for min 3-5 years proceeding appointment

Question 5

Outline duty to keep register of secretaries

Answer 5

Companies required to hold registers of sec

Held at RO or elsewhere noticed to registar

Open to inspection (free for members/ charge non members)

Contain name & address (RO)

Corporate secretary only provide name of company & RO address on RoS

Question 6

Outline the powers & liability of secretary

Answer 6

Powers
Sec + directors = legally sealed

Authorised to sign docs on behalf of company

Signatory can provide valid alternative to directors, sign AR, or sign as alternative to 2nd directors signature on share Certs

Liability - liable with directors for penalties as result of non compliance with CA06

Question 7

Who are auditors

Answer 7

Independent

Report to members of company / express opinion as whether financial statements represent true & fair view of company finance

Form opinion if FS prepared in accordance with requirements of CA06 & other relevant legislation

Requirement to appoint an auditor / unless dormant or exempt

ltd resolve audited accounts not needed

Question 8

Outline appointment of auditors

Answer 8

Directors appoint them at general meeting;

• anytime before Company 1st period for appointing auditor
• following period where didn’t appoint one/ before next period
• fill casual vacancy in office

Members:
-appoint by ordinary resolution if directors fail to do so

Question 9

Outline duties of auditors

Answer 9

(Performed with due care & skill)

Main duty to report on company’s FS to members

Carry out investigations/ review books & records to enable them to form opinion / state if unable to form opinion

Duty to company / Independent & not involved with directors informing opinion

Question 10

Outline auditors rights

Answer 10

General right to access all documentation at all times

Legal right to ask certain officers questions / info / explanation deemed necessary for performance of duty

Right to attend GM & speak as capacity as auditor

Independent / not involved with directors

Question 11

Outline importance of auditors

Answer 11

Essential tool for users of FS provides comfort & improved public appearance

Attracts investors if clean report

Helps obtain loans

Types of report; 
Qualified - everything agreed 
Unqualified - difference in opinion
Adverse - materially rei-stated 
Disclaimer - refuse to provide opinion

Question 12

Outline auditors of Trusts

Answer 12

Rare

Used if assets complex or reporting processes

TI/ legislation grant trustee power to appoint auditor

Usually allow fees to be paid from trust fund

Question 13

Outline duties of co-sec

Answer 13

File returns & stat docs

Arrange & attend meeting (prep agendas & notices & mins)

Quorate meeting (conducted in accordance with CA06 & articles)

Registar functions (maintain registers)

Independent advice to board re governance matters

Signing on behalf of company / counter sign & witness

Ensure company meets relevant requirements of CA06 , local law , relevant stock exchange

Issue share certs

Question 14

Who are directors

Answer 14

CA06 describes a director as any person occupying position of director by whatever name called

Directors act as mind & management of company

Owe fiduciary duty to company / act in best interests

Question 15

Outline appointment of directors

Answer 15

1st directors subscribe to memorandum during incorp

CA06 requires named to be stated on application form

Appointment confirmed at inaugural meeting

Articles set out rules of appointment

Future directors appointed by ordinary resolution of shareholders or directors meeting

Willingness shown by letter of appointment

Secretary updates RoD / required to maintain

Question 16

Outline executive & on executive directors

Answer 16

Executive - work for company & involved in day to day management / contract of employment

Non - executive - not involved in daily management / being independent view to matters

Both have same legal responsibility

Question 17

Outline

DE JURE DIRECTORS

DE FACTO DIRECTORS

Answer 17

1) directors formally appointed to company & particulars included on RoD
2) director not formally appointed but still fulfils role / defect in appointment

‘Director is one of function not title’

Owe same fiduciary duty as formally appointed / not necessarily accustomed to act in accordance with instructions

Question 18

Outline corporate & alternative directors

Answer 18

Corporate

• company acts as director
• CA06 specifies companies are required to have 1 director / natural person

Offshore SP appoint corporate directors / individuals of corporate body attend meetings as representatives of directors

Easier to sign docs / quorate meetings

Alternate
-company articles provide alternative to attend meetings / represent another’s interests / power to vote

• fully liable
• decline in use due to use of corporate directors
• modern articles under CA06 for ltd don’t contain provisions to appoint

Question 19

Outline shadow directors

Answer 19

CA06 “person in accordance with whose instructions the directors accustomed to act”

“Directors are mere puppets, shadow pulls the strings”

Directors act on advice given in professional manner (tax / legal)

General duties apply

Shareholders of large / beneficial trusts can become if exert significant influence over decisions to extent become accustomed to act in that manner

Directors use own judgement to decide course of action

When caught = must appoint

Question 20

Outline termination of directors appointment

Answer 20

Resign (accordance with articles)

Retire

Death

Removal by members / ord resolution

Disqualification (under company disqualification act 1986 - person convicted of indictable offence or deemed not CIF)

Modern Articles anyone except;

• disqualified / breach
• insane / prevents exercise of powers / physical or mental incapable (written opinion of medical practitioner)
• minor
• bankrupt
• auditor of company

Person cease by virtue of CA06 provisions or prohibited by law / constitutional docs

Question 21

Outline powers & liability of a director

Answer 21

In accordance with company articles

Modern articles “general authority to exercise powers of the company for purposes of fulfilling responsibility to manage company business”

CA06 “power to bind to the company or authorise others to do so is deemed to be free of limitation under company constitution”

Liability - don’t incur personal liabilities in capacity / when acting outside authority they become liable (wrongful or fraudulent trading / enter a contract in own name/ fail to evidence acting on behalf of company)

Question 22

Outline directors duties (CA06)

SPID3

Answer 22

Success of company promoted - advertised in good faith & benefit of members

Powers - duty to act within / accordance with articles, constitution, resolutions, decisions & agreements / CA not infringed if acting in accordance with agreements which restricts discretion / act in best interest of company

Independent judgement - in fulfilling duties

Declare interest - proposed transitions/ arrangements / declare nature & extent of interest before board meetings

3rd Party benefits - don’t accept - designed to prevent conflict of interest arising

ACTS WITH

Care, skill, diligence - reasonable director (how would they act) / exercise general skill, knowledge & experience reasonably expected to possess

+objective test - reasonable director
+subjective tests - qualification judged

Avoids conflicts - direct or indirect with company interest/ declare before meeting/ conflict result of decision director may not make up quorum & not vote on matter