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Flashcards in Companies: Ownership and Management Deck (32):

What are the 7 types of director? madencs

- de facto
- shadow
- alternate
- executive
- non-executive
- chairman
- managing director


What is a de facto director?

- acts as director although not validly appointed as one
- become liable as director due to conduct


What is a shadow director?

- someone who provides directions or instructions that the other directors act on
- not a shadow director if advice is in a professional capacity


What is an alternate director?

- appointed by a director to attend and vote at board meetings
- may be another director or outsider


What is an executive director?

- full time employee involved in management
- specific role, e.g. finance director


What is an non-executive director?

- part time
- outside expertise
- exerts control over executive directors
- not an employee


What is a managing director?

- day to day management of company's business


What is a chairman?

- ensures procedure in meetings is followed
- usually a non-executive director


Appointment procedure for a director?

- by existing directors or by ordinary resolution
- plc directors individually voted
- actions valid regardless of defective appointment
- registrar notified in 14 days


Why might a director leave office?

- death or company wind up
- removal (ordinary resolution with special notice)
- resignation
- requirement by articles
- disqualification


Why might the model articles provide that a director leaves office?

- prohibited by law
- bankruptcy
- composition with creditors in regards to debt
- doctor/court says unfit
- gives notice of resignation


Why might a director be disqualified?

- under Company Directors Disqualification Act
- breach of this criminal offence, can lead to lifting of veil meaning director personally liable
- up to 5 years or 15 years


What are the types of authority for a director?

- express
- implied
- ostensible


What are the duties of a director set out in the companies act?

- to act within powers
- to promote success of company
- to exercise independent judgement
- to exercise reasonable care and diligence
- to avoid conflicts of interest
- not to accept benefits from third parties
- to declare interest in a proposed transaction or arrangement


Describe how a director should act within their powers

- act in accordance with company's constitution and only use powers for the purpose they were given
- if not transaction is void unless approved


Describe how a director should promote the success of the company

- act in good faith to promote success of companies and members


Describe how a director should exercise independent judgement

Duty not infringed by director acting:
- in accordance with agreement entered with company or
- in a way authorised by companies constitution


Describe how a director should exercise reasonable care and diligence

- act with skill, knowledge etc expected from a director
- act with skill they actually have


Describe how a director should avoid conflicts of interest

- should be avoided
- if it has been authorised by directors then it is ok
- cannot authorise this themselves


What are the consequences of a breach of duties?

- may have to make good on losses
- company may recover property transferred due to breach
- injunction may be granted to stop breach


What is fraudulent trading?

- trading with intention to defraud
- criminal offence and civil liability (if insolvent)


What is wrongful trading?

- trading knowing insolvency unavoidable
- judged on reasonably diligent directors
- civil liability only


What are the rights of the members?

- receive copy of annual accounts
- require directors to call general meeting
- appoint a proxy


What are the powers of members?

To approve:
- service contracts >=2 years
- substantial property transactions (over £100,000 or over £5,000 + 10% assets)
- loans to directors
- payments on loss of office


What must a member prove when bringing a derivative action on behalf of the company in respect of negligence, breach of duty or breach of trust by a director?

- they are acting in good faith on behalf of the company
- if not court will grant right to bring the claim


What must a member prove when bringing a claim for unfairly prejudicial conduct?

- actions of company were negatively affecting rights of members
- court may grant remedy as they see fit


When will the court grant an action for just and equitable winding up?

- if no other remedy possible


What are the 3 types of meeting?

- annual general meeting
- general meeting
- class meeting


When is each meeting held?

- plc's, yearly within 6 months of y/e
- when requested. plc's when serious loss of capital
- meeting of holders of class of shares


How much notice is required for each meeting?

- 21 days
- 14 days unless 90% agree less
- 14 days


What is discussed in each meeting?

- normal business - approving accounts, declaring dividends, appointing directors/auditors
- business set by requestor
- discuss variation in class rights


What are the 3 types of resolution and when are they used?

1) Special - >=75% - when articles state they should be used
2) Ordinary - >50% - when special not required by articles
3) Written (ltd only) - same % as GM - any decision apart from removing auditor/director