Module 13: Directors and Other Company Officers Flashcards
What are de jure directors?
Formally appointed directors
What are de facto directors?
Held by a company as being one but who never formally appointed as one
Function of a director?
Manage the business and any person who acts in this way
What is an executive director?
Performs specific role in a company under a service contract
Regular involvement in management of the company
May also be an employee as well as member of board- forbidden from voting as conflict
What is a managing director?
Appointed to carry out overall day-to-day management functions
What does NED do?
Contribute an independent view of boards deliberations
Help provide the company with effective leadership
Ensure high standards of financial probity
What is an alternate director?
Director may appoint to attend and vote
Acts in place
What is a shadow director?
Not officially appointed by a person whose directions or instructions the directors are accustomed to act
Excluded: professional capacity
Same legal duties
Shadow director vs De Factor
Shadow- behind the scenes
De facto- claims to be one
Directors powers?
Conferred collectively not individually
The articles for a private company provide inter alia, that?
Any director may call a meeting of directors
Must give reasonable notice unless not practicable or waived entitlement
Appointment of directors?
At least 2 PLC At least 1 LTD Min age 16 Register Address (withheld from public register) so service address
First and subsequent appointment of directors?
Info to registrar
Subsequent in accordance with articles
Ordinary res/decision of directors
Changes 14 days notified
How may a director leave office?
Written resignation Not offering for re-election Death Dissolution Removed Disqualified
Retirement and re-election at AGM?
At AGM any appointed since last must retire and stand to be re-elected
Must retire if not
Removal of a director?
Ordinary resolution Special notice (28 days) to the company Send to director immediately Right to be heard at meeting State case in writing
How is power to remove a director limited?
Weighted voting rights Class rights Shareholding Compensation Section 994 CA 2006 Just and equitable winding up petition
Bushell v Faith 1970
Weighted voting rights to remove director
House of lords upheld validity of provision to increase share vote from 1 to 3
F defeated
Ebrahimi v Westbourne Galleries 1973
E excluded from business when partner introduced his son Profits paid to salaries not dividends No share of profits Sought to wind up Granted Just and equitable winding up
When would a director be disqualified under articles?
Disqualified by the CA or any rule of law
Becomes bankrupt
Unsound mind
Notifies of resignation
Ground for statutory disqualification and penalties?
Indictable offence- max 15 years disq
Public interest- max 15 years disq
Fraudulent/wrongful trading- max 15 years disq
Persistently in default of provisions- max 5 years disq
Fraud- max 15 years disq
Court must make an order disqualifying a person from acting as a director if satisfied that?
Has been one of company that become insolvent
Conduct unfit- breach (max 15)
Min 2 years disq, max 15
What are the 7 general statutory duties?
Act in accordance with constitution Benefit of company Independent judgement Reasonable skill, care and diligence Avoid conflicts of interest Not accept benefits from 3rd parties Declare any interest in a transaction
Hogg v Cramphorn Ltd 1967
Directors acting in good faith issued special voting rights Breach? Improper use to issue shares Members did ratify in general meting Best interests Not use wrongly issued votes
Dorchester Finance Co Ltd v Stebbings 1989
Exec and 2 NEDs were accountants
NEDs signed blank checks the exec used for own purpose
Sued all three, NED argued no liability as NED
3 directors had been negligent
NED duties same as Exec
IDC v Cooley 1972
Cooley MD of IDC
C personally wanted contract IDC wouldn’t get
Told board ill and was allowed to leave board
IDC sued and successfully recovered profits he made
Conflicts of interest not liable for breach?
Members of company authorise actions
Does not give rise to one
Authorised- ltd articles don’t prevent, plc expressly allow
Multinational Gas 1983
If solvent don’t owe duty to creditors
Insolvent creditors may sure
Transactions with directors requiring shareholder approval?
Interest in existing transaction
Substantial property transactions (assets exceeding £100,000 or 10% net assets, £5000 de minimis)
Loans and quasi loans to directors
Payments for loss of office
Substantial property transactions approval?
Assets exceeding £100,000 or 10% net assets
£5000 de minimis
Loans and quasi loans to directors?
Member approval
PLC only director or person connected- includes spouse, children or step children (lives with under 18)
Exceptions which mean loan to director does not require approval?
Small of up to £10,000
Purpose to assist in performance of duties as long does not exceed £50,000
Money lending is ordinary course of business
Directors Service Agreements?
Kept for inspection
If not in writing then the memorandum of its terms
1 year after expired
Punishable by fine every officer in default
Listed tougher- AGM 15 mins prior and during
Include in service contracts for inspection?
Name of company Date and notice period Pay Commission/profit sharing Compensation for early terminations Possible liability
Director has no personal liability for debts with what exceptions?
Lifting the veil
Unlimited liability
Liable to creditors in some circumstances on winding up
Company secretary?
PLC must appoint
LTD may chose
14 days notify change
What are the offences in the Bribery Act 2010 (1 July 2011)?
Active - to give a bribe
Passive - to receive
Public- bribe public foreign
Corporate offence- failing to prevent bribery
What does giving a bribe mean?
Giving a financial or other advantage with the intention of inducing the other person to perform improperly, or reward for doing so
What does a ‘relevant corporate organisation’ include
UK incorp or partnership formed in UK
Carries on business in UK
Corporate offence of failing to prevent bribery will committed if?
Committed by person associated with org
Intends to secure business advantage
ACTIVE OR PUBLIC
Even if management unaware
Max penalties offence under the Bribery Act?
Individual up to 10 years imprisonment or unlimited fine
Company unlimited fine
