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BLP > Directors and Shareholders > Flashcards

Directors and Shareholders Flashcards

1
Q

What are the 6 types of directors?

A

De jure
De Facto
Shadow
Exectutive and Non Exec
Nominee
Alternative

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2
Q

What is a De Jure Director?

A

Formally appointed and registered as such the Companies House

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3
Q

What is a De Facto?

A

Someone who has not been formally appointed and registered with Companies House but carries out all the duties of and behaves as a director

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4
Q

What is a Shadow?

A

Someone who is not a de jure director but regularly influences the acts of the company’s director. The board listens to their instructions.

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5
Q

Would an advisor fall into the category of a shadow director?

A

No

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6
Q

What is an executive director?

A

Responsible for the day-to-day running of the business

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7
Q

What is a non-executive director?

A

Usually consultants. Take on a more supervisory role, overseeing the activities of the executive directors.

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8
Q

What is an alternative director?

A

Appointed to attend and vote at the board meeting when the director is unable to attend

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9
Q

What is a nominee director?

A

Appointed to the board to represent the interests of a particular stakeholder.

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10
Q

What is the role of a director in a company?

A

Run the firm on behalf of the shareholders.

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11
Q

Can the role of the directors be limited?

A

Yes within the articles of association

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12
Q

Do the shareholders have an element of control over the directors?

A

Yes, the model articles state the shareholders by special resolution direct the directors to take, or refrain from taking specified action.

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13
Q

When would a shareholder be required to make a decision regarding the company?

A

Where there is alteration to the constitution of the company or where directors have a financial interest in the transation

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14
Q

What is apparent authority within a company?

A

Authority a third party reasonably believes the director has based on communication from the company. Usually arises from past dealings.

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15
Q

What is actual authority?

A

Can be expressly granted to a director in the articles of a resolution. Usually authority is delegated over specific matters to a certain director

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16
Q

Does a director have the power to bind the company?

A

Not usually, except when the directors act as a board

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17
Q

What are the 8 directors duties in a company?

A

Basic fiduciary duty.
Duty to act within powers.
Duty to promote the success of the company.
Duty to exercise reasonable care, skill, and diligence.
Duty to exercise independent judgement.
Duty to avoid conflicts of interest.
Duty not to accept benefits from third parties.

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18
Q

What is the basic fiduciary duty of a director of a company?

A

A common law duty to act in good faith and in the best interests of the company as a whole

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19
Q

How can a director protect themselves against liability from third parties?

A

The company can indemnify the directors based on their positions within the company except with respect to criminal or regulatory fines

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20
Q

If a director retires, do they still owe a fiduciary duty to the firm?

A

yes

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21
Q

What are directors required to consider when deciding what is in the best interests of the company?

A
  • Likely consequence of the decision in the long term
  • Interests of the company’s employees
  • Need to foster the company’s business relationships
    with the other stakeholders
  • The impact of the company’s operations on the
    community and the environment
  • The desirability of the company maintaining a
    reputation for high standards of business conduct
  • The need to act fairly as between members of the
    company
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22
Q

What does the Companies Act require the directors to consider when the company is on the bring of insolvency?

A

The interests of the company’s creditors. The interests of the shareholders is displaced.

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23
Q

What is the duty to exercise reasonable care, skill and diligence?

A

That would be exercised by a reasonably diligent person with:

General knowledge, skill and experience that may be reasonably be expected of a person carrying out the functions carried out by the director in relation to the company. (objective test)

and

The general knowledge, skill and experience the director in question actually has (subjective)

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24
Q

What is the duty to exercise independent judgment?

A

A director should act independently without subordinating their powers to the will of others

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25
Q

Can a director with the external interest vote on the decision of conflict?

A

No

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25
Q

Can a company make a loan to a director?

A

Yes if approved by members of the company

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26
Q

Who can call a board meeting?

A

Any director

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27
Q

What is the process of calling a board meeting?

A

Any director must give reasonable notice for a board meeting or authorise the company secretary to give notice. It does not have to be in writing. MA 9

28
Q

What must the contents of a notice to call a board meeting contain?

A

Proposed date time and location

29
Q

Who must the notice of a board meeting be given?

A

Every director unless they have waived their entitlement to the meeting

30
Q

Can a board meeting take place electronically?

A

Phone, video skype etc. YES

31
Q

How are decisions at a board meeting made?

A

A majority vote

32
Q

If there is a deadlock in a board meeting of the directors, what is the remedy?

A

Chairman has the casting vote

33
Q

What is the quorum for a valid board meeting?

A

As per MA 11, 2 directors.

34
Q

When would a director not be counted towards to quorum?

A

When they have a personal interest

35
Q

How can written resolutions be passed?

A

Each shareholder has one vote for each share
that they own (ss 282(2) and 283(2) CA 2006).
Over 50% for ordinary and 75% for special resolution (changing company’s name)

36
Q

Can a director be removed by written resolution?

A

no

37
Q

What notice must be given by a shareholder to propose a resolution to remove a director?

A

Formal notice at least 28 days before a general shareholder’s meeting

38
Q

Is there a requirement for a legal secretary?

A

Yes for a public company but not for a provate company

39
Q

what is the deadline to return the written resolution?

A

Unless the articles state otherwise, the lapse date is 28 days from circulation of the written
resolution (s 297 CA 2006).

40
Q

What powers do shareholders have to request a general meeting or circulate a written resolution?

A

Shareholders holding at least 5% of the voting rights can require the company to circulate a written resolution (s 292 CA 2006) and can ask the directors to call a general meeting (s 303 CA 2006). The company must circulate the resolution and statement to all eligible shareholders within 21 days of the request.

41
Q

What is a poll vote in the context of company meetings?

A

Where each share equals one vote for shareholders in a general meeting

42
Q

Who can demand a poll vote

A

The chair
the directors
2 or more people with the right to vote on that resolution
a person or persons who owns 1/10 or more of the total voting rights of all the shareholders voting

43
Q

For a general meeting to be validly held on short notice:

A

A majority who hold 90% or more of the company’s voting shares must consent. 95% for public companies

44
Q

What rights do shareholders have under s 292 CA 2006 regarding written resolutions?

A

Shareholders holding at least 5% of the voting rights can demand the circulation of a WR. The company’s articles can reduce this to less than 5% but cannot increase it above 5%. They can also require the company to circulate a 1000 word statement on the subject matter.

45
Q

Who should pay for the expenses of a WR?

A

The shareholders who requested the circulation of the resolution must pay the company’s expenses in complying with the request (s 294 CA 2006).

46
Q

What are the filing requirements at Companies House following certain decisions?

A

Companies must notify the Registrar of Companies of certain decisions, like special resolutions. Failure to comply can result in fines. Companies House forms are used for notification, and copies of all special resolutions and some ordinary resolutions must be filed.

47
Q

What internal administrative documents must companies maintain?

A

The register of members and directors, board and general meeting minutes, and records of written resolutions. These must be kept at the company’s registered office or an alternative location for ten years.

48
Q

What are the annual responsibilities of companies regarding accounts and reports?

A

Keep adequate accounting records. Failure to do so is an offence. It is the directors’ responsibility to ensure that accounts are produced for each financial year
(s 394 CA 2006).
Unless a small company the director must prepare a directors’ report for each financial year to accompany the accounts. ‘

49
Q

How must a company file its accounts?

A

The director has to file its accounts every financial year with the Companies House. Deadline - nine months from the end of the accounting reference period for a private company (s 442(2) CA 2006), and six months from the end of the accounting reference period for a public company.

50
Q

What is a confirmation statement?

A

To make sure that the information held at Companies
House, is up-to-date. It is a criminal offence to file the confirmation statement late, or not at all.
Every company must file a confirmation statement, on form CS01, within 14 days from the
company’s confirmation date, which is the anniversary of its incorporation (s 853A CA 2006).

51
Q

What is the main role of a shareholder?

A

Provide financial backing to a company

52
Q

What companies require an auditor?

A

Large private companies. They are appointed via the directors.

53
Q

Who can remove and auditor?

A

Shareholders can remove an auditor at any time through ordinary resolution. They must give special notice.

54
Q

What is required of companies in maintaining the register of members?

A

Every company must keep a register of members and register new shares/transfers as soon as practicable within 2 month. Must be kept in registers office or alternative location for inspection.

55
Q

What rights do shareholders have concerning share certificates?

A

Every share holder has a right to a share certificate - must be issues within two months of allotment

56
Q

When would a person be classed as a person with significant control?

A

Owning or controlling more than 25% of voting rights
Ability to appoint or remove majority of the board of directors
Exercising significant control over the company
Companies must keep a PSC register even if there are no shareholders entered on it

57
Q

What are the PSC companies house forms?

A

PSC01 -new individual
PSC02 - new legal entity
PSC04 - existing shareholder
PSC05 - existing legal entity

58
Q

What rights do shareholders have under the company’s articles of association?

A

Voting rights
Rights to dividends
Rights to take action against sharegolders and company if their membership rights have been infringed

59
Q

What is the significance of shareholders’ agreements and how do they differ from articles of association?

A

Shareholders’ agreements are separate contracts between shareholders that complement the articles of association. They bind only the parties involved

60
Q

Bushell v Faith clauses

A

They give shareholders weighted voting rights (ie more votes than they would normally be entitled to) when the resolution under consideration is a resolution to remove that shareholder from their office as director

61
Q

what is a dividend

A

a return on the shareholders investment

62
Q

What is preference shareholder?

A

They may have a guaranteed right over ordinary shareholders. Typically dividends in exchange for no voting rights at general meetings.

63
Q

what is a cumulative preference share?

A

As long as there are profits the shareholder has to be paid missed dividends from the previous financial years and the current year. fixed %

64
Q

Non cumulative preference share?

A

If a dividend is not paid in a particular year, the shareholder loses the right to that year’s dividend

65
Q

explain a Unfair prejudice petition?

A

Section 994 of the CA 2006 allows any shareholder to apply to the court for an order for
a remedy where they feel that they have been unfairly prejudiced as a shareholder.
Requires a lot of evidence, and main remedy is for shareholders to. buy back shares of unfairly prejudiced shareholder.
Court will apply an objective test

66
Q

What is a derivative claim?

A

Claim instigated by shareholder for a wrong done to a company from the omission or act done by a director.
Must involve negliegence, default, breach of duty/trust by a director.

67
Q

What might a court do if the evidence submitted for a detrivative claim does not show a prima facie case?

A

The court may dismiss the case

68
Q
A

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