Flashcards in Directors Deck (16):
Remedy for breach of S174 CA?
Damages only (S is not a fiduciary duty)
Remedy for statutory duties other than S174?
Set aside transaction
Account for profits
Remedy for breach under CDDA '86?
Termination of service contract and disqualification. Max 15 years
What type of action can SH bring when D has breached statutory duty?
Derivation action under S260
Re British American Corporation (1903)
Under S177 CA (disclose interest in PROPOSED transaction)
When a director of company A, who is also a shareholder of company B, he/she will be deemed to be indirectly interested in any transaction that takes place between company A and company B
Declaring notice of interest
S184, if disclosed in writing (i.e. not at board meeting) should be sent in electronic or paper form to all Ds.
S185 - can give general notice if will always be considered in a particular company or connected person.
Just because disclose interest - does not mean you do not have to comply with other statutory duties
Model Article 14
Cannot vote or count in the quorum where D is interested in the actual or proposed transaction (unless exception applies)
2) Director service contracts
S188 - need ordinary resolution where length of contract is or may be more than 2 years
S228 - must keep copy of service contract for 1 year after termination / expiry
3) Substantial property transactions
S190 - includes buying or selling
Will be void unless resolution no longer possible, company has been indemnified or voiding affects a good faith purchaser's rights
Can be affirmed by SH within reasonable period (S196)
Regardless of whether avoided, D is still liable to account for gain / loss.
Defence if took all reasonable steps or had no knowledge surrounding contravention
4) Loans to directors
OR by shareholders required before transactions take place
Important distinction between private companies VS public companies / associated private companies
4) Guaranteeing / providing security for loan to director
I.e. company is guarantor for loan D takes from bank, or directly provides security to bank for loan on behalf of D
Meaning of 'associated company'?
S256 - either direct subsidiary of company or both under joint control with parent company (sister company)
Exceptions to no loans to director rules?
S204 - expenditure on company business (incl. to perform role of D)
S205 - defending legal proceedings
S207 - minor transactions
loans up to 10k
credit transactions up to 15k or what is reasonable and ordinary course
S209 - where company's ordinary business includes making loans or quasi loans
Can later be affirmed by SH
Approval NOT required where company is a wholly owned subsidiary
Defence to no loans to director rules?
Took all reasonable steps to prevent
Had no knowledge of circumstances surrounding contravention
Does the S175 duty to avoid conflicts of interests apply to loans / substantial property transactions?
No under S175(3)
But S177 & S182 still do apply
MUST remember to disclose interest to board in procedure plan