2. The directors Flashcards
What is the process for recruitment, appointment and rotation process of directors?
On incorporation: On consent to act, particulars of the first directors are to be entered into IN01
Subsequently: On consent to act, as per the articles: Resolution of directors, then file AP01 within 14 days of date of appointment.
Before the meeting to consider the candidates, the cosec to circulate:
- Info on director (CV)
- Summary of remuneration
- Summary of rem policy
- A draft of service contract
- Copies of regulatory notices/press releases that will be issued upon d’s appointment.
Once candidate is chosen,
- Obtain consent to be appointed as a director
- Board resolution (either at meeting or by written resolution).
What is required:
1. Consent to act
2. Director resolution
3. AP01/AP02
4. Update registers
5. Bank mandate, specimen of signature to be sent to the bank
6. provide with details of minimum shareholding
7. Notify insurers
8. Request to disclose interests (such as contracts between the co,
customer or suppliers.
9. Induction
10. Traded co: A RIS to be notified of the appointment by the end of business day following the decision to appoint the director
What are the responsibilities of directors
171 Act within Powers (Articles and legislation)
172 Promote success of the company for the benefit of its members as a whole Wates principles state that the board of large companies need to complete a S.172 statement which covers their regard to: Long term consequences of decisions Employees Suppliers Customers Company’s reputation Members
173 Independent Judgement
174 Care, skill and diligence
i.e when delegating authority
175 Conflict of interest
Avoiding conflict situations and register any potential conflict of interest
176 Third party (don’t accept benefits)
Avoid accepting bribes and remain impartial
177 Disclose interest in proposed transactions
What can be said about the Retirement, removal and disqualification?
Vacation of office When the director: Dies Becomes bankrupt Disqualified by Court Under further articles (e.g. resignation by director, attainment of a certain age, absent from too many meetings (for a specified period -usually 6 months-without official leave of absence), Under minimum shareholding requirement, mental disorder)
Removal
Members can by ordinary resolution by special notice remove a director
Has to be a meeting of the directors rather than by written resolution
Cannot be overruled by the articles
Director should be given an opportunity to make any representations in writing to the company which is to be circulated to the members in advance of the meeting
Legal advice should be sought by the company before actioning
Retirement by rotation
If there is any provisions in the articles – Model articles for plc (reg.21) provides that 1/3 must retire every year
CGC recommends directors of listed companies offer themselves for re-election every year.
Disqualification: Disqualified automatically as a result of a specific event (CDDA1986) or by court because they are deemed unfit. Disqualification can happen under CDDA1986 due to: Unfit Convicted Breach of statutory duty Fraudulent or wrongful trading On public interests
Disqualification is actioned by: Disqualification order (court) Disqualification undertaking (SoS agrees with the director that the director cannot be a director and court proceedings are avoided)
Competition undertaking (if he breached competition law, CMA agrees with director that he can no longer be a director and court proceedings are avoided)
Why is Succession planning important?
To ensure orderly succession and to maintain a balance of skills, experience, diversity, independence
• Directors’ and officers’ indemnification and liability
Directors and officers Indemnification and liability insurance
Directors/officers can be indemnified by the company to protect them from all of the above that they can be liable for.
Defends against costs and damages brought on by proceedings from third parties.
What can be said about cooption
Legislative and other developments
Cooption
When the director is appointed between the AGM.
What is Alternate director?
Acts on behalf of an appointed director in his absence. The model articles allows the appointment of an alternate director. No remuneration and outsiders are approved by the rest of the board. They are registered at CH under AP01 if they are not already a director/member of the board.
What is de-facto director?
Person not formally appointed but is still liable as per S.250, and hold themselves out to be a director.
What is a shadow director
Not formally appointed to the board but is still liable under S.250. The board relies on their advice. The board regularly takes action on the advice of this person. Advisor attending board meeting may be deemed shadow directors.
What is a corporate director?
Where a company is appointed as a director of another company. There has to be a natural person appointed as director. Being phased out by S.156a
What is the difference between executive and non-executive director
Exec:
Employed by the company
Service contract
Day to day management
Non-Exec:
Not employed by the company
Strategic overview of the company
Independent
Who cannot be a director?
Auditor of the company Under 16s A disqualified person under CDDA1986 A Bankrupt person Director of insolvent company
Not meeting specific criteria under the articles of the Company
What information is needed for Register of Directors?
Name Service address (Residential address goes into the Register of Usual Residential Addresses, and onto the AP01) Date of birth Nationality Business occupation
What criteria is in breach of NEDs’ independence?
Employee in last 5yrs Relationship with company in 3 yrs Received remuneration apart from directors’ fee Family ties Cross-directorships Represents a significant shareholder Appointed for longer than 9yrs
