Week 6 (w/c 6th Nov) - Meetings, Resolutions, Accounts and Audit

Question 1

How can a director be removed during their term?

Answer 1

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

Question 2

what other ways can a directorship cease?

Answer 2

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 3

how si the directors remineration decided if they are removed?

Answer 3

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 4

what is a company’s secratary?

Answer 4

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 5

Who can be a company secretary of a public company?

Answer 5

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

Question 6

what are the four types of company meeting?

Answer 6

the four types of company meeting are:

Board meeting (directors only)

Annual general meeting

General meeting

Class meeting

Question 7

What are decisions made by shareholders called?

Answer 7

some decisions need to be made by the shareholders these decisions are called resolutions

Question 8

What is quorum at a board meeting? what number is it?

Answer 8

Quorum at a board meeting is the minimum number of directors in attendance required for decisions to be made

Model articles fix quorum at 2 (Section 11), but can be set to higher number

Question 9

what is the chairman of the board?

Answer 9

The Chairman of the board is:

Responsible for providing an agenda and facilitating the meeting

Often will have the casting vote if there is a deadlock

Isn’t necessarily the MD, sometimes beneficial to be somebody else

Usually will be one vote per director, but articles may state otherwise

Directors and auditors have right to inspect minutes of meeting

Question 10

What must be true for a resolution to be valid?

Answer 10

Only valid when meetings have been adhered to properly, in terms of:

Notice period to shareholders

Quorum

Voting procedures

Question 11

What is an AGM?

Answer 11

Annual General Meeting (AGM)

Public companies must have an AGM, private companies can have one but isn’t obligatory

For public companies must hold their AGM within 6 months after the financial year-end (CA 2006, s 336)

Officers of public companies can be prosecuted for failing to hold an AGM

Question 12

What happens at an AGM?

Answer 12

The board reports on the events that have occurred in the company over the last 12 months, with any future prospects

Shareholders can put any questions to the board and vote on certain matters

The annual report/accounts need to be approved by the shareholders

Shareholders approve any officer and auditor appointments or re-appointments

The board declares the dividends offered to shareholders

Question 13

When can a general meeting be called?

Answer 13

A general meeting can be called:
By the directors at any time (CA 2006, s 302)

When there has been a serious loss of capital in the company (CA 2006, s 656)

By shareholders that have at least 5% of the share capital/voting rights (they can also propose resolutions) – CA 2006, s 303

By the auditors if they plan to resign (CA 2006, s 518)

By the court if the directors are unable to call a meeting

Question 14

What are class meetings?

Answer 14

Class meetings May exist when a company has more than one class of shareholders (Class A, Class B etc.)

May be necessary to call a meeting when the agenda (and the attendance) is restricted to shareholders holding a particular class of shares

For example, if the company needs to discuss the rights of preference shareholders

Question 15

are resolutions passed valid with the incorrect notice of the meeting?

Answer 15

Resolutions passed at meetings will only be valid if the correct notice of the meeting and the resolution has been given (CA 2006, s 301)

Question 16

can shareholders attend a meeting in proxy?

Answer 16

Shareholders can decide whether to attend or appoint a proxy

Question 17

How must a notice of the meeting be communicated?

Answer 17

notice of the meeting must be in writing (either hard or electronic copy)

Question 18

What is the notice period for a general meeting?

Answer 18

the notice period for a general meeting is 14 days

Question 19

What is the notice period for an AGM of a public company?

Answer 19

the notice period for an AGM of a public company is 21 days

Question 20

What is the special notice for certain resolutions?

Answer 20

he special notice for certain resolutions like removing a director or auditor is 28 days.

Question 21

can you have a shorter ntoice of a meeting ?

Answer 21

Shorter notice is allowed if agreed by 90% of the shareholders/ voting rights

Remember, shareholders who have > 5% of the share capital have the right to circulate a written statement (max 1000 words) before the meeting/resolution

Question 22

Who normally proposes resolutions?

Answer 22

Normally proposed by directors, though shareholders can propose with enough voting power

Notice of every resolution must be given to every shareholder in writing (hard or electronic)

Each resolution proposed is voted on separately

Question 23

What is an ordinary resolution? how is it passed?

Answer 23

Ordinary resolution – passed by simple majority (CA 2006, s282) i.e. greater than 50% of votes cast at the meeting

Can either be by poll or by show of hands – this can make a difference to the vote
Usually used for uncontroversial proposals

Question 24

what is a special resolution?

Answer 24

Special resolution – passed by a majority of no less than 75% of votes cast (CA 2006, s 283)

A copy of every special resolution passed must be filed at CH

Question 25

What is a written resolution?

Answer 25

Written resolution (CA2006 s288) is only available for private companies

Can be used for all resolutions, ordinary or special, except for removing an auditor before the end of term

Model articles state members have 28 days to vote, but can be altered

Need majority of total voting rights – not just those who voted

Question 26

What can a minority shareholder do if wronged by a company?

Answer 26

Can start a statutory derivative claim against a director (CA 2006, ss 260-264)

Can apply to a court for an order than the company has been unfairly prejudicial to (some of) its members (CA 2006, s 994)

Last resort, could apply to have company wound up

Question 27

What is derivative actions?

Answer 27

Known as derivative because the shareholder’s right to sue is not personal to them but derives from the company’s right to sue

i.e. it is the company that has been wronged

The shareholder brings the action on behalf of the company

Any compensation awarded will go to the company

Question 28

what is Unfairly prejudicial conduct ?

Answer 28

Unfairly prejudicial conduct (CA 2006, s 994)

A shareholder may bring a petition to court on grounds of unfair prejudice

This is where the shareholder feels that the company:

Has unfairly prejudiced all of the shareholders, or…

A section of shareholders which includes them

The shareholder has to show that the conduct was unfair and prejudicial

The shareholder may be awarded compensation

Question 29

how often do public and private companies need to sumbit their accounts?

Answer 29

Public companies – 6 months after financial y/e

Private companies – 9 months after financial y/e

Question 30

What accounts do private companies need to sumbit to companies house? what about dormant companies?

Answer 30

Private companies of a smaller class may be exempt from filing their full accounts at CH and only need to file shorter (or abbreviated accounts)

Dormant (i.e. non-trading) companies only need to submit form to CH confirming status and balance sheet

Question 31

What happens when you are a mico entity?

Answer 31

If you are a micro-entity:

Only the balance sheet with “minimum accounting terms” needs to be filed at CH

Also, you can produce a simpler set of accounts for HMRC

Question 32

what it means being a smaller class company?

Answer 32

If you are a small company:

The balance sheet from your full accounts, along with all notes & signed by a director, needs to be filed at CH

These are called the abbreviated accounts

The full accounts should be sent to HMRC with the Corporation Tax computation

Also, small groups are exempt from preparing consolidated group accounts

Question 33

what doe sit mean to be a medium sized company?

Answer 33

If you are a medium-sized company:

The abbreviated accounts that need to be sent to CH will contain a lot more information than a small company

But you may omit certain information in the Business Review (e.g. non-financial KPIs)

Also, an slightly abbreviated income statement can be prepared.

Question 34

how long should private companies keep their records for?

Answer 34

For private companies, minimum of three years from the date they were made

Question 35

how long should public companies keep there records for?

Answer 35

For public companies, this increases to six years

Question 36

what is an audit?

Answer 36

“An audit is the examination of the financial report of an organisation - as presented in the annual report - by someone independent of that organisation”

Question 37

what is an auditor?

Answer 37

The auditor is an independent contractor appointed to check that the company accounts are accurate and properly prepared, and to report this to the shareholders

The accounts will either be prepared in-house or will be prepared by a separate accounting firm

Question 38

does the auditor have to be a member of what?

Answer 38

The auditor:

Has to be a member of a recognised accountancy body (ACCA, ICAEW etc.)