Module 13: Directors and Other Company Officers

Question 1

What are de jure directors?

Answer 1

Formally appointed directors

Question 2

What are de facto directors?

Answer 2

Held by a company as being one but who never formally appointed as one

Question 3

Function of a director?

Answer 3

Manage the business and any person who acts in this way

Question 4

What is an executive director?

Answer 4

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

Question 5

What is a managing director?

Answer 5

Appointed to carry out overall day-to-day management functions

Question 6

What does NED do?

Answer 6

Contribute an independent view of boards deliberations
Help provide the company with effective leadership
Ensure high standards of financial probity

Question 7

What is an alternate director?

Answer 7

Director may appoint to attend and vote

Acts in place

Question 8

What is a shadow director?

Answer 8

Not officially appointed by a person whose directions or instructions the directors are accustomed to act
Excluded: professional capacity
Same legal duties

Question 9

Shadow director vs De Factor

Answer 9

Shadow- behind the scenes

De facto- claims to be one

Question 10

Directors powers?

Answer 10

Conferred collectively not individually

Question 11

The articles for a private company provide inter alia, that?

Answer 11

Any director may call a meeting of directors

Must give reasonable notice unless not practicable or waived entitlement

Question 12

Appointment of directors?

Answer 12

At least 2 PLC
At least 1 LTD
Min age 16
Register 
Address (withheld from public register) so service address

Question 13

First and subsequent appointment of directors?

Answer 13

Info to registrar
Subsequent in accordance with articles
Ordinary res/decision of directors
Changes 14 days notified

Question 14

How may a director leave office?

Answer 14

Written resignation
Not offering for re-election
Death
Dissolution
Removed
Disqualified

Question 15

Retirement and re-election at AGM?

Answer 15

At AGM any appointed since last must retire and stand to be re-elected
Must retire if not

Question 16

Removal of a director?

Answer 16

Ordinary resolution 
Special notice (28 days) to the company
Send to director immediately
Right to be heard at meeting
State case in writing

Question 17

How is power to remove a director limited?

Answer 17

Weighted voting rights
Class rights
Shareholding
Compensation
Section 994 CA 2006
Just and equitable winding up petition

Question 18

Bushell v Faith 1970

Answer 18

Weighted voting rights to remove director
House of lords upheld validity of provision to increase share vote from 1 to 3
F defeated

Question 19

Ebrahimi v Westbourne Galleries 1973

Answer 19

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

Question 20

When would a director be disqualified under articles?

Answer 20

Disqualified by the CA or any rule of law
Becomes bankrupt
Unsound mind
Notifies of resignation

Question 21

Ground for statutory disqualification and penalties?

Answer 21

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

Question 22

Court must make an order disqualifying a person from acting as a director if satisfied that?

Answer 22

Has been one of company that become insolvent
Conduct unfit- breach (max 15)
Min 2 years disq, max 15

Question 23

What are the 7 general statutory duties?

Answer 23

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

Question 24

Hogg v Cramphorn Ltd 1967

Answer 24

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

Question 25

Dorchester Finance Co Ltd v Stebbings 1989

Answer 25

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

Question 26

IDC v Cooley 1972

Answer 26

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

Question 27

Conflicts of interest not liable for breach?

Answer 27

Members of company authorise actions
Does not give rise to one
Authorised- ltd articles don’t prevent, plc expressly allow

Question 28

Multinational Gas 1983

Answer 28

If solvent don’t owe duty to creditors

Insolvent creditors may sure

Question 29

Transactions with directors requiring shareholder approval?

Answer 29

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

Question 30

Substantial property transactions approval?

Answer 30

Assets exceeding £100,000 or 10% net assets

£5000 de minimis

Question 31

Loans and quasi loans to directors?

Answer 31

Member approval

PLC only director or person connected- includes spouse, children or step children (lives with under 18)

Question 32

Exceptions which mean loan to director does not require approval?

Answer 32

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

Question 33

Directors Service Agreements?

Answer 33

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

Question 34

Include in service contracts for inspection?

Answer 34

Name of company
Date and notice period
Pay
Commission/profit sharing
Compensation for early terminations
Possible liability

Question 35

Director has no personal liability for debts with what exceptions?

Answer 35

Lifting the veil
Unlimited liability
Liable to creditors in some circumstances on winding up

Question 36

Company secretary?

Answer 36

PLC must appoint
LTD may chose
14 days notify change

Question 37

What are the offences in the Bribery Act 2010 (1 July 2011)?

Answer 37

Active - to give a bribe
Passive - to receive
Public- bribe public foreign
Corporate offence- failing to prevent bribery

Question 38

What does giving a bribe mean?

Answer 38

Giving a financial or other advantage with the intention of inducing the other person to perform improperly, or reward for doing so

Question 39

What does a ‘relevant corporate organisation’ include

Answer 39

UK incorp or partnership formed in UK

Carries on business in UK

Question 40

Corporate offence of failing to prevent bribery will committed if?

Answer 40

Committed by person associated with org
Intends to secure business advantage
ACTIVE OR PUBLIC
Even if management unaware

Question 41

Max penalties offence under the Bribery Act?

Answer 41

Individual up to 10 years imprisonment or unlimited fine

Company unlimited fine