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Company Compliance & Administration > Chapter 2 - THE DIRECTORS > Flashcards

Chapter 2 - THE DIRECTORS Flashcards

1
Q

What are the two main types of Company Directors?

A

Executive and Non-Executive

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2
Q

What is the main duty of a Director?

A

Manage a company on behalf of its members

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3
Q

Who has the power to appoint and terminate directors?

A

Members

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4
Q

Can directors appoint additional directors? What extra step is reqd for listed companies?

A

Yes

Listed companies must have appointments validated by members at the next AGM

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5
Q

Does a director have to be called a ‘director’?

A

No - can be any person occuying the position. EG CEO

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6
Q

What is an Executive Director?

A

A member of the executive team / senior management that also sits on the board as a director

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7
Q

Can a company be a director?

A

Yes, not just individuals

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8
Q

What is the basis for appointment of an Executive Director?

A

Formal appointment, separate to employment contract

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9
Q

Where are new directors appointed?

A

At Board meetings

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10
Q

What are the 3 key factors in the role of an NED?

A

Contribute skills and experience otherwise not available within; challenge; provide BALANCE

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11
Q

Do NEDs have a service contract?

A

No; letter of appointment

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12
Q

What must an NED have to ensure they can fulfil their duties, namely providing balance?

A

Independence

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13
Q

Under the Governance Code how many independent NEDs should be on the board?

A

Half of the directors, not including the Chair

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14
Q

What main factors might impair a NED’s independence?

A

Long association with the company (9 years)
Being an employee
Share options
Recent material business interest
Cross-directorships
Represents a significant shareholder

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15
Q

Is a shadow director deemed a director by the Companies Act? (s 251)

A

Yes - whilst not formally appointed, acts as one and therefore deemed to be a director for all purposes. They are as liable as the others.

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16
Q

Is a De Facto director deemed a director by the Companies Act?

A

Yes - even though they are not formally appointed they hold themselves out to be a director

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17
Q

What guidance allows for the appointment of alternate directors?

A

Model Articles - subject to Board approval; but not Articles for private and LBG companies.

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18
Q

Are alterates subject to the same rules?

A

Yes

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19
Q

Do alternates get entered in the register of directors?

A

Yes - form AP01

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20
Q

What are the key differences between an executive director and an NED?

A

Executive directors are employees usually full-time and responsible for implementing company strategy, NEDs are not
employees, usually part-time and responsible for setting corporate goals and strategy

21
Q

Which statutory registers should be updated on the appointment of a director?

A

Register of directors
Register of directors’ residential addresses

22
Q

What information should be obtained from the new director?

A

Full name
Date of birth
Service and residential address (if different)
Nationality
Occupation

23
Q

Who cannot be appointed as a director?

A

Person under the age of 16
A disqualified person
A bankrupt
An auditor or employee of the audit firm
A director of an insolvent company cannot be appointed as a director of a company with a prohibited name without
consent of the court
Anyone not meeting any specific criteria in the Articles

24
Q

What are the seven codified duties of directors?

A

To act within their powers
To promote the success of the company
To exercise independent judgement
To exercise reasonable care, skill and diligence
To avoid conflicts of interest
Not to accept benefits from third parties
To declare interests in any proposed transaction or arrangement

25
Q

Do directors have unfettered authority to exercise the company’s powers?

A

No. Their authority is subject to any provisions in the Articles, their service contract and any authority limits adopted by the board

26
Q

Can directors delegate any of their powers and duties?

A

Yes, to committees of the board

27
Q

How many directors may be appointed?

A

Any number subject to any maximum set out in the Articles. The Model Articles do not provide for a maximum number of
directors.

28
Q

Under what circumstances can a director be disqualified?

A

For unfitness
On conviction
For breach of statutory obligations
For fraudulent or wrongful trading
In the public interest
By voluntary undertaking
On competition grounds

29
Q

Do the remaining directors need to approve the resignation of a director?

A

No

30
Q

How soon must notification of the vacation of office by a director be notified to Companies House?

A

Within 14 days of the director vacating office

31
Q

How many directors should retire at the first AGM of a public company?

A

All

32
Q

Why is succession planning important?

A

To ensure an orderly succession and to maintain the necessary balance of skills, experience, diversity, independence
and balance

33
Q

If a listed board has two executive directors, a chairman and a non-independent NED, how many independent
NEDs must be appointed?

A

Provision 11 of the 2018 UK Corporate Governance Code states that at least half the board, excluding the chair, should
be non-executive directors whom the board considers to be independent. The composition in the question does not meet
Provision 11 as only one out of the four directors are independent. If two more independent NEDs are appointed, the balance would be achieved.

34
Q

Is positive discrimination
permitted to address board diversity imbalance?

A

NO

35
Q

Can any company take out directors’ indemnity insurance?

A

YEs

36
Q

Can a director be indemnified against personal liability to pay fines and damages?

A

No

37
Q

Can the details of any indemnity insurance be kept secret?

A

No, must be available for inspection by members

38
Q

Can a person be co-opted to a board without their consent?

A

No

39
Q

Suggested process for recuitment of Directors

A

Profile from Noms committee to ensure the right skills, experience, balance and independence is achieved

40
Q

What sectors require regulatory approval of directors?

A

Insurance
Fin Services
Solicitors
NHS

41
Q

What duties should a co sec carry out to seek approval for the appointment of a director?

A

Circulate all info to Board
Set out remuneration / shares
Resolution / WR
AGM validation (if required)
Generate LOA / service contract

42
Q

What are the key checklist items for the appointment of a director?

A

Obtain consent (AP01 or AP02)

Resolution to appoint from Board

Request personal info

Within 14 days, enter in register of directors AND residential addresses

Bank mandate (if reqd)

Obtain conflicts of interest

Provide schedule of meeting dates

remuneration preference

Comms/ press release + RIS notifications for traded companies

INDUCTION

43
Q

Three key areas for induction?

A

Internal policies and procedures
External legislation and codes of practice
industry/company specific info

44
Q

How often should directors of public companies be reappointed?

A

By rotation every three years

45
Q

Can a director delegate their duties?

A

No - only powers eg to a committee

46
Q

What documents prescribe the roles/duties/responsibilities/mandates of directors?

A

Board policies
Service contracts / LOA
Articles
Other relevant reg requirements

47
Q

How often should directors of listed companies be reappointed?

A

Every year - Governance Code

48
Q

What events may allow for the vacation of office of a director?

A

death
statute eg bankruptcy
term of appointment
resignation

49
Q

What is the BEIS?

A

Dept for Business, Energy & INdustrial Strategy

Company Compliance & Administration (16 decks)

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