WS4: Appointment, removal and disqualification of directors Flashcards
How is a director appointed?
Ordinary resolution of shareholders
Decision of directors [more common]
What form is used to confirm the appointment of a new director?
AP01
The register of directors must also be kept at the registered office
What are the policies for service contracts?
Company must have a copy of all director’s service contracts
No entitlement to remuneration
Shareholders have the right to inspect at seven days’ notice
What is needed if the service contract is / may be longer than 2 years?
Provision required shareholder approval by ordinary resolution
What happens to the service contract if shareholder approval hasn’t been given?
The incorporated term is void, and a term entitling the company to terminate with reasonable notice is implied.
How can directors resign?
They can do so at any time by giving notice. No need for board to accept
When is a director considered to have vacated office?
If person is prohibited from being a director, bankrupt, subject to composition order of creditors, or physically / mentally incapable for over 3 months.
How can a director be removed?
Ordinary resolution of shareholders
What are the rules on the removal of a director?
Ordinary resolution
NO written resolutions
Director in threat of being removed has a right to be heard at the GM and needs 28 clear days notice.
Directors who are also shareholders can vote in capacity as a shareholder.
Bushell v Faith clauses allowed
What is a Bushell v Faith clause
A clause dictating the way an OR is conducted which makes it easier for imperilled director to survive.
Gives weighted voting rights to allow those directors / shareholders power to block resolutions.
How long is a mandatory disqualification order?
2-15 years
How long is a discretionary disqualification order?
10-15 years
When are mandatory disqual. orders made?
- Someone has been director of company when it became insolvent
- Conduct makes them unfit to be director of a company / management of a company.
Idea that idea of limited liability has been abused - gross negligence, or deliberate disregard of creditors interests.
When are discretionary disqual. orders made?
- Conviction of an indictable offence
-Persistent breaches of legislation with notice given to Registrar - Fraudulent trading / wrongful trading
- Disqualification of director
What is the penalty for contravening a disqualification order?
Fine or imprisonment or both
Personally liable for debts of the company incurred during the time that they were acting while disqualifed
SoS can apply to court for a compensation order against a director if creditors have lost out.
SoS might accept a ‘disqualification undertaking’ from anyone that, for a specified period, agrees not to be a director / be involved with companies.
