The role of directors Flashcards
Who is responsible for managing the company on a day to day basis?
The directors are responsible for managing the company through an agency relationship.
Who are the directors accountable to?
The company itself rather than to shareholders directly.
Where does the director’s authority to manage the company derive from and what authority are they provided with?
CA 2006 reserves certain decisions for shareholder approval e.g. changing articles, changing company name (unless the articles provide otherwise) and removal of directors.
The board is usually free under a company’s articles to make decisions on behalf of the company on all other matters - MA
MA allow the Board of Directors to delegate a particular decision to one of the directors or committee.
In terms of directors accountability, are their powers restricted?
Yes, restricted and regulated by statute.
What are the different type’s of directors at law?
*de jure
*de facto
- shadow directors
In practice, who are the different types of directors?
Executive and non-executive
How many de jure directors must a Ltd and PLC have?
Ltd - must be at least one
PLC - mut be at least two
Can a company be appointed as a director?
Yes, but every company must have at least one director who is a natural person for accountability purposes.
Does the CA prescribe a maximum number of directors?
No and neither do the MA, but a company can put a maximum amount of directors in it’s Articles.
What are the restrictions on who can be a director?
A person may not be appointed as a director unless they are at least 16 years old.
ECCTA has now amended CA 2006 by inserting a new section that prohibits a person from being appointed as a director if that person is disqualified under director disqualification legislation unless they have permission by court.
Who is a de facto director?
Someone who assumes to act as a director but has in fact not been validly appointed. The fiduciary duties and liabilities apply to de facto directors as they do de jure directors.
Who are shadow directors?
Sometimes a person may try to exert influence over the board but without being appointed as director, in an effort to avoid the duties imposed on directors under CA 2006 and common law.
Professional advisors are not to be regarded as shadow directors.
However, a friend of a director who gives advice which the directors follow would be a shadow director.
What is an executive director?
Someone who has been appointed to executive office.
They will spend the majority of their time on the business of the company and will be both an officer and an employee e.g. Managing Director.
What is a non-executive officer?
They are an officer of the company but will not be an employee.
They do not take part in the day-to-day running of the company.
Their role is to provide independent guidance to the board and to protect interests of shareholders.
Who are alternate directors?
Some companies in their Articles provide for an alternate director to take the place of a director where one or more directors are absent.
They are usually a fellow director or someone who has been approved by BR.
They have the voting powers of the absent director.
It is thought that the provisions of CA 2006 apply equally to alternate directors.
