The Removal of Directors Flashcards

1
Q

Can the Board remove a director?

A

No, unless Articles allow for it

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2
Q

Can a director, who is a shareholder, vote in their capacity as shareholder on the resolution to remove them?

A

Yes

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3
Q

How much notice is needed for the removal of a director?

A

28 clear days

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4
Q

Can a written resolution remove a director?

A

No

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5
Q

What is a special notice in removal resolution?

A

28 clear days notice before the General Meeting in which they will vote

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6
Q

Who gives special notice for removal of director?

A

The shareholders give it to the Board

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7
Q

Who usually decides the matters that will be considered at a General Meeting?

A

The Board of Directors

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8
Q

When the Board receives the notice of proposed removal resolution, what courses of action do they have?

A

1) Place removal resolution on agenda of GM
2) DO NOT place the removal resolution on agenda of GM

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9
Q

If Board agrees to put removal resolution on GM, what notice is required for the GM?

A

As standard, 14 clear days’ notice

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10
Q

Why does the board need to give shareholders notice of the removal resolution when it was the shareholders who sent the removal resolution to the board?

A

Some shareholders may not be aware of it

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11
Q

What happens if the Board does not put the matter on the agenda for the GM?

A

It will not be considered in the general meeting. The shareholders may need to force directors to call general meetings in accordance with s303 CA 2006

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12
Q

What is a s303 request by a shareholder?

A

Shareholders with not less than 5% paid up voting share capital can serve a request on the board to call a meeting on any matter, including the removal of a director

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13
Q

What are directors’ obligations on receipt of a s303 request?

A

1) Within 21 days of request, call the GM
2) To be held no longer than 28 days after date of notice

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14
Q

What happens if directors ignore the s303 request?

A

The shareholders can call a GM themselves, pursuant to s305

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15
Q

How long do shareholders have to call a GM themselves under s305?

A

14 clear days’ notice, within 3 months of directors’ receipt date of s303 request

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16
Q

What is standard procedure when submitting a s303 request?

A

Will be done at same time as the special notice to the board, not to waste time

17
Q

What must the company send to the director in question?

A

A copy of the notice

18
Q

What has the director got a right to?

A

A right to make written representations which are circulated and/or read out in GM

19
Q

What if the director is also a shareholder? Authority?

A

May have weighted voting rights, as in Bushell v Faith

20
Q

What must you do when examining a case regarding the removal of a director who is also a shareholder?

A

Check the Articles to see if there is a Bushell clause, which would give that shareholder weighted voting rights to prevent removal

21
Q

Does a shareholder agreement remove the statutory right of majority shareholders to remove a director if it is outlined in the Agreement?

A

No, it would not. It would simply become a Contractual matter if this were breached.

22
Q

Could a director be removed if they are a shareholder and the shareholders agreement said their removal needed unanimity?

A

Yes, they would still be removed.

23
Q

What could director who is a shareholder do if their removal was a breach of the Shareholders Agreement?

A

Can make a claim against other Shareholders, and also apply for an injunction to prevent the breach.

24
Q

Could a director be entitled to compensation for loss of office?

A

The Company can decide – but such payment must be approved by ordinary resolution

25
Q

When would compensation for loss of office not need an ordinary resolution?

A

1) Payment does not exceed £200
2) Payment made in good faith: i) in discharge of existing legal obligation; ii) way of damages in respect of obligation; iii) in settlement or compromise to termination; iv) by way of pension in respect of past services

26
Q

Can the compensation be paid to third party to avoid these restrictions?

27
Q

Do non-cash benefits count as payment for loss of office?

28
Q

How else could a director be entitled to compensation for loss of office?

A

Through damages or compensation for breach as per shareholders agreement