WS4: Directors and the Board

Question 1

How can shareholders stop directors doing something?

Answer 1

Special resolution - they can direct directors to take, or refrain from taking, specified actions.

Question 2

Can directors take decisions against majority of shareholders?

Answer 2

Yes

Question 3

What is a de jure director?

Answer 3

Validly appointed at law

Question 4

How many directors does private company vs public company need?

Answer 4

One for private

Two for public [at least one of which must be a natural person]

Question 5

What is the minimum age of a director?

Answer 5

16

Question 6

What makes someone a de facto director?

Answer 6

An assumption of liability together with being part of the company’s corporate governance structure.

Test: is someone part of the corporate governance structure and undertook decisions which would have normally been taken by a director, as opposed to a manager or a sub-board level.

Question of fact

Question 7

Things to consider when judging if someone is a de facto director:

Answer 7

Were the acts directorial in nature
Context
Cumulative effects of what the individual has done
Did the company consider the person to be a director, hold them out as such, and 3rd parties considered them as such.

Question 8

What is a shadow director?

Answer 8

A person in accordance with whose directors or instructions the directors of the company are accustomed to act.

If an advisor goes too far and is “effectively controlling the company’s affairs” - they will be considered a shadow director

“Lurks in the shadows” and not held out as a director.

Question 9

What do you need to prove to confirm that someone is a shadow director?

Answer 9

Identity of the formally appointed directors of the company

That the person directed formal directors as how to act

Directors did act in accordance with their directions

They were accustomed to act in that manner

NB: Very strong influence does not equate to a shadow director - key thing is being accustomed to act.

Question 10

What is the difference between an executive director and a non-executive director?

Answer 10

Non-executive is also an officer of the company, but is not an employee of the company. Don’t take part in day to day running of the company.