Members, Directors, Sectretary & Auditor Flashcards
Who are Members
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
Rights of members
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
Who is a secretary
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
Outline qualification requirement of secretary
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
Outline duty to keep register of secretaries
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
Outline the powers & liability of secretary
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
Who are auditors
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
Outline appointment of auditors
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
Outline duties of auditors
(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
Outline auditors rights
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
Outline importance of auditors
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
Outline auditors of Trusts
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
Outline duties of co-sec
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
Who are directors
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
Outline appointment of directors
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
Outline executive & on executive directors
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
Outline
DE JURE DIRECTORS
DE FACTO DIRECTORS
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
Outline corporate & alternative directors
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
Outline shadow directors
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
Outline termination of directors appointment
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
Outline powers & liability of a director
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)
Outline directors duties (CA06)
SPID3
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
