P2. Directors Flashcards

1
Q

5 types of directors

A

Executive
Non-executive
Shadow
De facto
Alternate

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2
Q

What does an executive director do

A

Manage the day-to-day affairs of a company

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3
Q

What is a NED

A

Director without executive responsibilities to the company

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4
Q

Role of a NED acronym

A

POSSM

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5
Q

Role of a NED

A

Provide different perspective
Objective/unbiased challenge
Strategic guidance
Speicalist knowledge
Mentor for chair

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6
Q

3 examples of what could impair independence of NED

A

Employee within last 5 years
Close family ties to director or senior employees
Represents a significant shareholder

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7
Q

What is a shadow director

A

Any person who has not been formally appointed as a company director, does not openly participate in managing the company but on whose instructions the appointed directors and employees usually act

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8
Q

Significance of a shadow director being considered a director for all purposes

A

If the company becomes insolvent, their actions will be reviewed for wrongdoing along with formally appointed directors

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9
Q

What is a de facto director

A

A person who has not been formally appointed as a company director but holds themselves out to be a director and carries out the acts and duties of a company director

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10
Q

What is an alternate director

A

A person appointed by an existing director to act on their behalf in their absence

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11
Q

When can an alternate director be appointed

A

If it is specifically permitted by the Articles

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12
Q

Which model articles allow for appt of alternate director

A

PLC model articles (reg 25)

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13
Q

How are alternate directors handled for the purposes of the Reg of Directors and CH

A

Identically to normal directors

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14
Q

Two eligibility criteria in Act for appointing directors

A

Must be at least one natural director
Must be at least 16 years old

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15
Q

4 examples of persons prohibited from becoming directors

A

Bankrupt person
A person with a disqualification order against the,
Auditor of a company
Director of insolvent co cannot be director of a company with a prohibited name

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16
Q

4 examples of industries where appointment of directors is subject to regulatory approval

A

Financial services companies
NHS foundation trusts
Regulated audit firms
Solicitors’ firms

17
Q

What do PLC model arts say about director rotation

A

All directors must put themselves forward for re-appointment at least every three years

18
Q

What does the governance code recommend on director rotation/re-appointment

A

All directors offer themselves for re-appointment at every AGM

19
Q

Minimum numbers of directors

A

1 for private, 2 for public (unless stipulated otherwise in the articles)

20
Q

If the appointment of a director is found to be defective, do their prior decisions still stand, and why?

A

Yes, in order to protect third parties

21
Q

On what grounds and with what form may a director dispute their appointment

A

If they have not consented, form RP06

22
Q

Collective responsibility of directors explained

A

Board act collectively, and directors can be held collectively responsible for the actions of boards, BUT individual directors can be held to account in an area where they have particular knowledge or experience, and a director cannot hide behind collective responsibility to escape liability

23
Q

Duties of directors - acronym

24
Q

Duties of directors

A

Exercise independent judgement
Promote success of the company
Avoid conflicts of interest
Not to accept benefits from third parties
Act within their powers
Declare interests in any proposed transaction or arrangement
Exercise reasonable care, skill and diligence

25
Role of common law in duties of directors
Codified duties of directors are based on certian common law rules and principles and have effect in place of these rules and principles Directors' duties remain subject to the remaining uncodified common law rules such as on principles of breach of trust or minority oppression
26
6 ways in which a director is removed from office
Resignation Death End of fixed term (rotation) Bankrupt Disqualified by court order Ordinary resolution of members (removal)
27
On what grounds can a director be disqualified by court order (8)
Unfitness (was dir. of insolvent co) Conviction Breach of statutory obligations Fraudulent or wrongful trading Disqual in the public interest Disqualification undertaking Competition disqualification order (re. competition law) Competition undertaking (re. competition law)
28
Succession plans should ensure the delivery of (5)
Skills Expertise Diversity Independence Balance
29
Feb 21 review into gender diversity
Hampton-Alexander Review
30
4 recommendations of Hampton-Alexander Review
Woman in at least one of Chair, CEO, SID, CFO Gender pay gap for board and exec committee published BEIS and GEO should coordinate as much as possible on government backed initiatives in diversity in business BEIS and GEO should annually review with the Investor Association and other investor groups any proposed voting sanctions applied to listed companies which fail to meet the gender diversity targets
31
What is BEIS
Department for Business, Energy and Industrial Strategy
32
What is GEO
Government Equalities Office
33
2017 report on ethnic diversity
Parker Review
34
Main target set out in Parker Review
1 ethnic minority background board member for FTSE100 by Dec 2021, FTSE250 by Dec 2024
35
What proportion of board should be NEDs according to UK CG Code
50%
36
Legislation on unnatural directors
Not yet brought into force. Latest consultation said corp directors would be banned unless their own boards comprised only natural persons