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Business > U4 > Flashcards

U4 Flashcards

1
Q

how many directors for a private company

A

at least one

(at least one natural person)

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2
Q

how many directors for a public company

A

at least 2

(at least one natural person)

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3
Q

what age must a director be

A

16 or over

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4
Q

what admin must be done when a director is appointed

A

enter director on register of directors and directors residential addresses

notify CH within 14 days of appointment
AP01 (individuals) and AP02 (corporate directors)

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5
Q

executive directors

A

appointed to the board of directors and have a service contract

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6
Q

non executive director

A

appointed to the board but no service contracts

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7
Q

shadow director

A

individuals whose directions the company’s directors are accustomed to follow

NOT formally appointed

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8
Q

de facto directors

A

act as directors w/o being officially appointed

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9
Q

alternative directors

A

a stand in who votes on a directors behalf (MUST HAVE A SPECIAL RESOLUTION)

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10
Q

Does ending the directorship end the service contract?

A

No separate things

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11
Q

what forms should be filed for appointments

A

TM01 (human directors) and TM02 (corporate directors) to notify resignations or removals, filed within 14 days

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12
Q

can a director resign?

A

yes, at any time by giving notice to the company

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13
Q

what needs to be filed when a director resigns

A

TM01 (human directors) and TM02 (corporate) to CH within 14 days of resignation

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14
Q

Who can remove a director?

A

Shareholder by OR (with special notice)

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15
Q

how are directors appointed

A

OR of shareholders or board resolution

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16
Q

Can a director be removed by written resolution?

A

No, at GM only

director has a right to make representations as to why they should not be removed

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17
Q

Can a GM to remove a director be held on short notice?

A

No, directors need time to prepare written representations

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18
Q

Can a term be entrenched in the service contract to prevent a director being removed as a director?

A

NO Indefeasible right in the Companies Act for shareholders to be able to remove a director

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19
Q

When can you NOT use a written resolution?

A
  • Removing directors
  • Removing auditors
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20
Q

what is sprcial notice to remove the director?

A

shareholders must give notice to the company at least 28 days before the GM at which the resolution is proposed

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21
Q

what should the company do when they get notice of SH wanting to remoce director

A

inform the director and give shareholders notice at least 14 days before the GM (either with GM notice or in advertisement)

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22
Q

What rights does the director have?

A

right to speak at the GM and require the company to send written representations to the shareholder

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23
Q

what are the grounds for disqualifying a director?

A
  • Conviction for an indictable offence
  • Persistent breaches of companies legislation
  • Fraud on a winding up
  • Summary conviction for failure to file a required notice or document
  • Being an unfit director of an insolvent company
  • Following an investigation and a finding of unfitness
  • Fraudulent or wrongful trading
  • Breach of competition law
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24
Q

what is the effect of disqualification?

A

A director cannot act as a director (w/o leave of court) or be involved in the promotion, formation, or management of a company without court permission.

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25
Q

what is the punishment for acting as a director whilst being disqualified

A

criminal offence

fines or up to 2 years imprisonment

26
Q

what transactions are subject to SH approval by OR

A
  • SPT
  • Loans to directors
  • long term service contract
  • golden goodbye
27
Q

how is a contract executed

A

by company

by agent of company (director authorised and signs on behalf)

28
Q

what is an SPT

A
  • A director, in their personal capacity, or someone connected with a director
  • Buy from or sells to the company
  • A non-cash asset
  • Of substantial value
29
Q

what is substantial for an SPT

A
  • Value of asset exceeds £100,000 OR
  • Value exceeds £5,000 AND exceeds 10% of the company’s net asset value (look at balance sheet net assets)
30
Q

What if there is no SH approval for SPT

A

transaction voidable by the company

31
Q

Are there any exceptions where shareholder approval for loans to directors is not needed?

A
  • Loans up to £50,000 for company business and enabling them to perform duties
  • Loans for defense in company-related legal proceedings.
  • Minor loans up to £10,000.
32
Q

What are the consequences if a company makes a loan to a director without shareholder approval?

A

The transaction is voidable by the company. The director may have to account for any profits or repay any losses.

33
Q

What happens if shareholder approval is not obtained for the guaranteed term of a long-term service contract?

A

The guaranteed term is void, but the remainder of the contract remains enforceable. The contract can then be terminated on reasonable notice.

34
Q

What document must be available before a general meeting proposing approval of a long-term service contract?

A

A memorandum of the proposed service contract must be kept at the registered office for 15 days before the GM and during the meeting (s188(5)).

35
Q

How can shareholders inspect a director’s service contract?

A

the service contract or a memorandum of its terms must be available at the registered office during the contract’s term and for one year after termination. Shareholders can inspect it without charge within seven days of a request (s229 CA).

36
Q

What types of payments to directors on leaving office do not require shareholder approval?

A
  • Small payments of up to £200,
  • Damages for breach of an existing legal obligation, or
  • Damages related to claims linked with termination (e.g., compensation for wrongful dismissal).
37
Q

What is the consequence if an unauthorized payment is made to a director upon their departure?

A

The recipient holds the payment on trust for the company, and any director authorizing the payment is jointly and severally liable to indemnify the company for any resulting loss.

38
Q

What document must be provided to shareholders when proposing a payment for loss of office?

A

A memorandum detailing the payment must be available at the registered office 15 days before the GM, or circulated with the written resolution.

39
Q

What are the penalties for directors failing to maintain company re

A

Directors can be fined for not maintaining records, and if the records are accounting records, they may face up to two years in prison.

40
Q

What are the consequences for failing to file documents at Companies House?

A

Directors may be fined if they fail to file certain documents, such as a special resolution or memorandum, within 15 days of its passage.

41
Q

what test is applied for s172

A

subjective

42
Q

what test is applied for s174

A

twofold: objective and subjective

43
Q

what is the exception for s175

A

where breach is authorised in advance by a BR

44
Q

What are the three main types of claim an executive director may bring if they are dismissed under employment law?

A

Unfair dismissal, redundancy, wrongful dismissal

45
Q

what are the remedies for breach of the fiduciary duties? ss171, 172, 173, 175, 177

A
  • Account for profits
  • Request to return property
  • Payment of equitable compensation
  • Recission of a contract
  • An injunction (usually pre-breach)
46
Q

what are the remedies for breach of s174

A

common law damages for negligence.

47
Q

what is the remedy for breach of s182

A

criminal offence liable to pay a fine

48
Q

what is ratification

A

shareholders can ratify a breach by OR

49
Q

Who is considered an ‘eligible’ member when passing a written resolution to ratify a director’s breach?

A

The director involved in the breach and any connected members are not ‘eligible’ members for the purpose of voting on the written resolution.

50
Q

In a general meeting, how is the voting handled for ratifying a director’s breach of duty?

A

if the director (who is also shareholder) votes, their vote will be disregarded if the resolution only passes because of their vote

51
Q

what is an unfair prejudice claim

A

Conduct of the company’s affairs is unfair and prejudicial. Petitioner must be affected in their capacity as a shareholder.

52
Q

what court orders are available for unfair prejudice

A

any order the court sees fit

53
Q

when can a shareholder petition to the court for winding up

A

Petitioner must prove a tangible interest in the company - i.e. that they must be able to get back some money if the company is wound up - and that it is just and equitable that the company be wound up.

54
Q

when can a shareholder bring a derivative action

A

An actual or proposed act or omission involving negligence, default, breach of duty or breach of trust by a director of the company.

The court must first grant permission to proceed. The court will consider whether a director acting in accordance with s172 would continue the claim and the chances of authorisation/ratification of the breaches. The court will also consider if the person requesting permission is acting in good faith and give particular regard to the views of members who have no personal interest in the matter.

55
Q

What is the consequence if the shareholders ratify the breach by ordinary resolution before the court hearing for a derirative action?

A

The court must refuse permission to continue the derivative claim

56
Q

What discretionary power does the court have if ratification is likely but not yet completed?

A

The court may refuse permission to continue the claim if ratification could be and is likely to be achieved

57
Q

On what basis would a court decide whether a shareholder has been unfairly prejudiced?

A

objective test to assess whether the company’s actions are unfair and cause harm to the client as a minority shareholder.

58
Q

when must directors call a GM when requisitioned by the sharehodlers?

A

within 21 days

59
Q

can the subjective test under s174 be made lower

A

No only higher

60
Q

who can appoint an administrator

A

holder of a qualifying floating charge, company or directors

61
Q
A

Business (6 decks)

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