Flashcards in Companies: Ownership and Management Deck (32):
What are the 7 types of director? madencs
- de facto
- 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)
- requirement by articles
Why might the model articles provide that a director leaves office?
- prohibited by law
- 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?
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?
- 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