Corporate Governance and Compliance

Question 1

Who can be a director

Answer 1

16 yrs + not bankrupt or disqualified

Question 2

Types of director

Answer 2

Executive = officer + employer
NED = officer
Shadow = most Ds follow direction
De Facto = acts as D but not validly appointed

Question 3

Director duties

Answer 3

s171: Act within powers (proper purpose + in accordance with constitution)
s172: Promote success of company for benefit of members as whole (honestly beleive acting in company’s best interests)
s173: Exercise independent judgement (must use own judgement)
s174: Exercise reasonable skill and care
s175: Avoid direct or indirect conflict unless pre-authorised by Ds
s176: No payments by reason of position or to influence decision making
s177: Declare direct or indirect interest in a proposed transaction

Question 4

Consequences of breach of DD

Answer 4

Derivative claim: Action by SH on behalf of company for breach. Remedy to company
Disqualification
Compensate for loss / account of profit

or, shareholders ratify by OR (but D cannot vote as SH)

Question 5

Requisition GM

Answer 5

5% or more voting rights
Ds should hold BM within 21 days and call GM (to occur 28 days later). If Ds do not call, SH can call on ordinary notice from day 22 onward

Question 6

Derivative claim

Answer 6

Claim by SH on behalf of company against D for breach of duty. Remedy awarded to company

Question 7

Unfair prejudice

Answer 7

Claim by a SH against company when company affairs are conducted in a manner prejudicial to their interests
- excessive renumeration
- non-payment of dividend
- removal as DD if legitimate expectation (quasi-partnership)

REMEDY: company or SHs buy back shares. any other order court sees fit (just and equitable winding up)

Question 8

Valid GM notice

Answer 8

Date, time, place
Right to appoint proxy
General nature (+ exact wording of SRs)

14 clear days between notice and GM (dont count day received adn day of meeting) - if posted or emailed, deemed received 48 hours after sending (17 days)

Question 9

Valid WR

Answer 9

exact wording of resolutions
how to signify agreement
Lapse date (midnight of 28th day)

Question 10

voting on written resolution / poll vote

Answer 10

One vote per share owned

Question 11

Long term service contract

Answer 11

SH approval by OR + coontract memo if:
Guaranteed fixed term over 2 years

If no SH approval: contract valid but fixed term is not. Company can terminate on reasonable notice.

Question 12

SH approval for loans, quasi loan, credit transaction, guarantee

Answer 12

SH approval required if:
ltd not associated: loan or guarnatee to D of co or hold co
plc or associatied: loan, guarantee, quasi loan and credit transaction to D, CP of co or hold co

Circulate memo with: nature, amount, purpose, company liability

UNLESS
- loan or quasi loan £10k or less
- credit transaction £15k or less
- £50k loan for business purposes
- wholly owned subsidiary

Question 13

SPT approvals

Answer 13

SH OR if:
- D or CP of co or hold co buys or sells substantial non-cash asset
(i.e. over £100k or over £5k and 10% NAV)

NO MEMO

Question 14

Removing a director

Answer 14

Special notice to the company 28 clear days before GM of intention to remove
Company must notify D and give D chance to make written representations
Ds not obliged to call GM for removal (so advisable to concurrently serve s303 notice to call GM)

Question 15

Ways to strengthen position as director

Answer 15

• weighted voting rights
• fixed term service contract
• shareholder agreement