Week 5 (w/c 30th Oct) - Company Officers

Question 1

who are the officers of a company?

Answer 1

The officers of a company are:

The director(s)

The company secretary (if it has one)

Question 2

What is a director?

Answer 2

Responsible for the management of the company

Agent of the company

Can bind the company by their acts without personal liability (CA 2006, s40)

Question 3

who can be a company director?

Answer 3

Anyone not under 16 years of age (CA 2006, s157)

But certain people may be disqualified (CDDA 1986 – see later slide) or the articles may prohibit certain people from being directors

Can have corporate directors i.e. a company can be a director, but there must be a least one living person as a director (CA 2006, s 155)

Question 4

What is an executive director?

Answer 4

Executive director has management responsibilities within the company (such as managing director, operations director, finance director etc.)

May work full time at a company but not always e.g. corporate directors

If they do work, will have a contract of employment, meaning they are employees of the company

Question 5

what is a non executive director?

Answer 5

Non-executive director is Not employed by the company

Don’t receive a salary (but may be paid a fee per board meeting, for example)

Role is to check company is being managed properly and ensure high standards of financial integrity

Share the same liabilities as Executive Directors

Question 6

What is a shadow director?

Answer 6

A shadow director instructs the other directors of the company on how to act

Can be a natural or corporate person. So for example, a parent company may be a shadow director for its subsidiary

A management consultant or a major creditor could also be considered a SD, but not those who give advice in a professional capacity (e.g. an accountant)

Question 7

What is a defacto director?

Answer 7

De-facto director

Those who are have not been formally appointed as a director (so they won’t be listed on Companies House), but they fulfil the role of a director

Can be difficult to determine whether someone is acting as a director from their tasks and responsibilities in the company

If judged to be a director, will be subject to the same duties and liabilities

Question 8

what is an alternate director?

Answer 8

Alternate director is If a director is unable to attend a board meeting, they may be allowed to appoint someone to attend and vote on their behalf

It depends on what the articles allow

Usually the alternate director is a fellow director rather than an outsider

Question 9

Where are the procedures for appointing a new director found?

Answer 9

Procedure for appointing new directors should be stated in Articles

Question 10

What are first directors?

Answer 10

First directors of a company stated in incorporation documents – no appointment necessary

Question 11

How are directors normally appointed?

Answer 11

Usually directors are appointed by directors or by simple majority at a general meeting

Question 12

For public companies how are directors appointed?

Answer 12

For public companies, appointment of directors is to be voted on individually at general meeting (CA2006, s160)

Normally for public companies, the appointment is for a set number of years

Then there is a vote to re-appoint at the next AGM

Question 13

can a director enter into a contract on behalf of the company?

Answer 13

When a director(s) enters into a contract on behalf of the company, it will be binding on the company

Authority can be explicit or implied (eg. An MD)

Directors may also have apparent authority

Question 14

What happens when a director breaches their duty?

Answer 14

When a director breaches their duties

Director will be required to make up any losses incurred by the company

Any secret profit gained by a director (e.g. by not disclosing an interest in an arrangement) can be claimed by the company

If more than one of the directors is in breach, the liability is joint and several. So the company can take action against any or all of the directors

Question 15

what does the cdda 1986 cover?

Answer 15

Company Directors Disqualification Act 1986 1986 outlines situations that may result in disqualification, such as:
Conviction of serious offence in relation to company
Fraudulent trading on the winding up of a company
Wrongful trading
Consistently failing to comply with company legislation requirements (filing accounts, returns etc)

If a company became insolvent due to directors actions, can be very subjective whether their actions warrant disqualification

Question 16

hwo can directors be removed?

Answer 16

A director can be removed during their term of office via ordinary resolution at a general meeting (CA, s 168)

If a shareholder wants to propose a removal of a director, needs to give 28 days’ notice before the meeting (special notice)

It is possible to have weighted voting rights which protect directors from removal by ordinary shareholders
See Bushell v Faith (1970)

Question 17

what is vacation of office?

Answer 17

Directorship will also cease if:
The director dies
The director is no longer physically or mentally capable
They have been AWOL from board meetings for a set period of time
The company goes into liquidation

For the above three cases, there still needs to be a positive act to remove that director

Question 18

hwo is a directors remineration decided?

Answer 18

Any remuneration must be allowed either:

by the articles (for fees paid to an NED)

by a contract of service (for salary paid to an ED)

A service contract must be kept by the company for shareholders to inspect

Question 19

What is a companys secretary?

Answer 19

Plcs must have one (s 271), Ltds can have one but not required (s 270)

Could be one of the directors
Responsible for administrative duties

Potentially liable in criminal and civil law for failing to meet any statutory requirements (such as filing company accounts)

Question 20

Who can be a company secretary?

Answer 20

Some who fulfils any one of the following criteria:

Has been a secretary of a plc for at least 3 of the last 5 years

Is a qualified UK lawyer

Is a member of a certain professional body (mostly accounting bodies)

Has relevant experience through being a holder of another office or body