Shareholders And Directors Flashcards
How do directors make decisions and do they have to give notice?
Directors make decisions in board meetings.
These meetings are called board resolutions.
They must give notice to other directors (whatever’s reasonable).
Notice must include time, date and place of meeting.
Quorum
Minimum number of directors who must be present in order for the meeting to be valid.
Requiring 2 directors to be present at all times.
A director may not count in the Quorum if they have a personal interest which benefits them rather than the company.
Where a company has only one shareholder, the Quorum is 1.
How many votes for a board resolution to pass?
Simple majority.
Over half of those present must vote in favour.
What are the 2 types of shareholder resolutions and how many votes are needed to pass each resolution?
1) ordinary resolutions - over half of the votes must be in favour.
2) special resolutions - 75% or more of votes must be in favour.
What are 2 ways of passing shareholders resolutions?
1) general meetings.
2) written resolutions.
How are general meetings called and how much notice is required?
The board will call a general meeting when they want the shareholders to pass a shareholders resolution.
Notice required is 14 clear days - does not count the day the notice is received and the day of the general meeting - must have 14 full days in-between.
If notice is sent by post/email, it is received 48hrs after the notice was posted/emailed - this means 48hrs must be added on to the 14 clear days
Poll votes
Where shareholders vote in a general meeting on the basis of one vote for each share they own, instead of the usual one vote per person.
What are written resolutions?
Board will hand out, write, post, email or put the resolution on the website.
Shareholders will have to sign and return it, if they would like to vote in favour of it.
Each shareholder has one vote for each share that they own.
Shareholders who have 5% or more of the voting rights are entitled to require the company to circulate a written resolution.
DEADLINE 28 days from circulation of the written resolution.
What is a company’s auditor and which companies are exempt from audit?
An accountant whose main duty is to prepare a report on the company’s annual accounts, to be sent to its shareholders.
Small companies and companies that do not trade are exempt from audit
How do you become a shareholder?
2 people who sign the memorandum of association as subscribers automatically become the first shareholders of the company, and must be entered on the company’s register of members.
What is a PSC register?
A register of persons with significant control.
Enables third parties to understand who holds power in the company.
Why should you enter into a shareholders agreement?
Will bind all of the parties to the agreement and provide a remedy if one of its terms is breached.
Gives privacy and protection to minority shareholders.
What are joint shareholders?
Held by two or more individuals jointly.
The register of members needs to record both names but only one address - breach of this section is an offence.
Can shareholders receive dividends if they hold ordinary shares, and attend and vote at general meetings?
Yes they are entitled to receive dividends if the directors recommend the payment and the shareholders approve it.
What are preference shares?
People who have preference shares receive enhanced rights, over and above the ordinary shareholders.
Ordinary shareholders will only receive dividends, if there are any profit left after preferental shareholders have been paid.
