Chapter 2: Company Decision making, the company's officers and shareholders

Question 1

What are directors responsible for?

Answer 1

The day to day running of a company

Question 2

What are shareholders responsible for?

Answer 2

Providing money to allow business to operate and some decisions that a company can make

Question 3

Are shareholders involved in a great number of decisions?

Answer 3

No, shareholders are only involved in a limited number of decisions

Question 4

Is the decision to change articles of association a decision that shareholders alone can make?

Answer 4

Yes

Question 5

Is the decision to change the name of a company a decision that shareholders alone can make?

Answer 5

Yes

Question 6

Can a company buy a property from a director?

Answer 6

Yes, but shareholder permission would likely be required

Question 7

How do directors make decisions?

Answer 7

Collectively in board meetings. The decisions made are called board resolutions

Question 8

When a director calls a board meeting, what notice must they give?

Answer 8

Reasonable notice.

Must include time, date, place of meeting and method of communication.

Question 9

What is a quorum?

Answer 9

The minimum number of directors who must be present in a board meeting in order for meeting to be valid

Question 10

What is the quorum of directors that must be present at all times during a board meeting?

Answer 10

Two directors

Question 11

What is a quorate?

Answer 11

Term used to describe quorum being present

Question 12

When can a director not count in a quorum or vote?

Answer 12

If they have an interest in the actual or proposed transaction

Question 12

When does a director not need to declare a personal interest in a proposed company transaction?

Answer 12

If it cannot be reasonably regarded as likely to give rise to a conflict or if other directors are already aware of it

Question 13

Can the obligation to declare a personal interest be disapplied by the company’s articles?

Answer 13

No

Question 14

Can the rule preventing a director from counting in a quorum or voting be disapplied

Answer 14

Yes, a company can disapply the rule to enable directors to count in the quorum and vote even when they have a personal interest in the subject of the resolution

The obligation to declare a personal interest cannot be disapplied

Question 15

How many people must vote for a board resolution to be passed?

Answer 15

Board resolutions are passed by a simple majority

Question 16

How many votes does a director have?

Answer 16

One vote

However, if the board has appointed one of its directors to act as chair of the board, they will have the casting vote in the event of a tie

Question 17

Some company decisions are reserved for shareholders. What are the two different types of shareholders’ resolution?

Answer 17

1. Ordinary resolutions
2. Special resolution

Question 18

How many votes are required for an ordinary resolution to be passed?

Answer 18

Over half of the votes cast must be in favour of the resolution

Question 19

How many votes are required for a special resolution to be passed?

Answer 19

75% or more of votes cast must be in favour of the resolution

Question 20

Who calls a shareholders’ general meeting?

Answer 20

The board of directors.

The board will call a general meeting when they want shareholders to pass a shareholders’ resolution or when the shareholders have requested that the board call a meeting in order for them to pass a resolution

Question 21

Directors must give notice of general shareholders’ meetings. How do they do this and what information should be included?

Answer 21

Notice must be given to every shareholder, every director and to the auditor.

Time, date and place of meeting, general nature of business to be dealt with at meeting, if a special resolution is proposed - the exact wording, ability to send proxy to attend

Question 22

What is the minimum notice period for a shareholders’ general meeting?

Answer 22

14 clear days - the day that notice is deemed received by the shareholders and the day of the general meeting are not included.

E.g. If notice given Monday 1 March, the earliest a meeting could be held is Tuesday 16 March

Question 23

How soon can a shareholders’ general meeting be held if notice is given by post or email on Monday 1 March?

Answer 23

Thursday 18 March

This is because 14 clear days notice must be given AND if notice posted or emailed it is not deemed as being received until 48 hours after posting or sending

Question 24

What is the quorum of a general shareholders' meeting?

Answer 24

Two. However, if the company has one shareholder, the quorum is one

Question 25

In a general shareholders' meeting, how many votes will each shareholder have?

Answer 25

Voting will be on a show of hands and each shareholder has one vote

Question 26

In shareholders' meetings, can a shareholder still count in a quorum and vote if they have a personal interest in the matter?

Answer 26

Yes

Question 27

What is a poll vote?

Answer 27

Where shareholders vote in a general meeting on the basis of one vote for each share that they own

Question 28

If a poll vote is called after shareholders have already voted on a show of hands, the outcome of which vote will apply?

Answer 28

If the outcome of the poll vote is different, it will override the vote on a show of hands

Question 29

Can a shareholders' meeting be held at short notice?

Answer 29

Yes, provided that there is consent from a majority number of the company's shareholders who, between them, hold 90 or more of the company's voting shares

Question 30

If shareholders propose to pass a resolution by way of written resolution, how much time must they allow shareholders to vote?

Answer 30

The lapse date is 28 days and the method of circulation is irrelevant. E.g. Written resolution posted on 1 July, lapse date will be 28 July (circulation date counts as day 1)

Question 31

How many votes are needed to pass an ordinary *written* resolution?

Answer 31

Over half of the votes of ALL of the company's eligible members

Question 32

How many votes are needed to pass a special *written* resolution?

Answer 32

75% or more of all the votes of ALL of the company's eligible members

Question 33

How many votes does a shareholder have in written resolutions?

Answer 33

Each shareholder has one vote for each share they own (contrast with general meetings)

Question 34

Usually the board will decide whether to call a general meeting or circulate a written resolution. When can a shareholder request a company circulates a written resolution and/or call a general meeting?

Answer 34

If the shareholder or shareholders have 5% or more of the voting rights in the company, they are entitled to require the company to circulate a written resolution

Question 35

If shareholders exercise the right to request to call a general meeting, how long do the directors have to comply?

Answer 35

The directors must call the meeting within 21 days of the request

Question 36

Which documents must be retained by a company but need not be sent to Companies House?

Answer 36

* Register of members * Register of directors * Board minutes * Minutes from general meetings * Record of outcome of any written resolutions for 10 yrs