Directors' duties and responsibilities Flashcards
(400 cards)
1
Q
Who is responsible for managing the company day to day?
A
the directors
2
Q
What is the relationship between directors and the company?
A
agency
3
Q
To whom are the directors accountable?
A
the company itself
4
Q
Who owns the company?
A
the shareholders
5
Q
What decisions do shareholders have input into?
A
certain key decisions
6
Q
Do directors owe duties to the shareholders directly?
A
No
7
Q
What type of decisions require shareholder authority for directors to take action?
A
certain actions
8
Q
Who owns the company?
A
Shareholders
9
Q
How do shareholders control key decisions?
A
through shareholder resolutions
10
Q
Is it common for directors and shareholders to be the same people?
A
Yes
11
Q
What type of decisions are reserved for shareholder approval under CA 2006?
A
important decisions
12
Q
Under MA 3 who is usually free to make decisions for the company?
A
the board
13
Q
Who can directors employ on behalf of the company?
A
individuals other than directors on long term contracts
14
Q
Who decides the pay of employees?
A
the directors
15
Q
Who enters into contracts with customers and suppliers?
A
the directors
16
Q
Who buys and sells company property?
A
the directors
17
Q
How do directors raise funds?
A
by borrowing from banks
18
Q
Who authorises company assets as security?
A
the directors
19
Q
Who is responsible for company accounts?
A
the directors
20
Q
Who supplies information to auditors?
A
the directors
21
Q
What does MA 5 allow the Board to do?
A
delegate decisions
22
Q
To whom can the Board delegate decisions?
A
a director or a committee
23
Q
Why are directors actions and powers restricted and regulated?
A
to prevent corrupt practices and ensure benefit for stakeholders
24
Q
Where are key provisions restricting and regulating directors found in CA 2006?
A
Part 10
25
What does Part 10 of CA 2006 include?
directors general duties
26
What type of actions can be taken against directors for wrongs?
civil and criminal
27
Under what act can directors be prosecuted for fraud?
Fraud Act 2006
28
Under what act can directors be prosecuted for theft?
Theft Act 1968
29
Under what act can directors be prosecuted for insider dealing?
Criminal Justice Act 1993
30
Under what act can directors be prosecuted for money laundering?
Proceeds of Crime Act 2002
31
Is the term director defined in CA 2006?
No
32
What does Section 250 CA 2006 say about the term director?
includes any person occupying the position
33
What are the categories of director at law?
de jure de facto shadow
34
What are the categories of director in practice?
executive non executive
35
What type of directors may a companys articles provide for?
alternate
36
What type of director has been validly appointed at law?
de jure
37
What is the minimum number of directors for a private limited company under s 154 CA 2006?
at least one
38
What is the minimum number of directors for a public limited company under s 154 CA 2006?
at least two
39
Can a company be appointed as a director?
Yes
40
What is the minimum number of directors who must be a natural person under s 155(1) CA 2006?
at least one
41
Does CA 2006 prescribe a maximum number of directors?
No
42
Do Model Articles prescribe a maximum number of directors?
No
43
What is the minimum age to be appointed a director under s 157 CA 2006?
16 years old
44
What does new section 159A CA 2006 prohibit from 4 March 2024?
appointment of disqualified directors without court permission
45
What type of director assumes to act but has not been validly appointed?
de facto
46
Do fiduciary duties apply to de facto directors?
Yes
47
What type of director tries to exert influence without formal appointment?
shadow
48
What does Section 251(1) CA 2006 define a shadow director as?
person whose directions or instructions directors are accustomed to act
49
Are professional advisers usually shadow directors under Section 251(2) CA 2006?
No
50
What is the purpose of shadow director legislation?
subject those acting as directors to duties
51
Do most CA 2006 and Insolvency Act duties apply to shadow directors?
Yes
52
Does CA 2006 differentiate between executive and non-executive directors?
No
53
Do the duties under CA 2006 apply to both executive and non-executive directors?
Yes
54
What is an executive director also appointed to?
executive office
55
What type of work do executive directors generally do?
majority or all time on company business
56
What roles might executive directors hold?
Finance Director Managing Director Marketing Director
57
Is a non-executive director an employee of the company?
No
58
What is the general role of non-executive directors?
provide independent guidance protect shareholder interests
59
What type of director takes the place of an absent director?
alternate
60
Who is usually an alternate director?
fellow director or someone board approved
61
What powers does an alternate director have?
voting powers of the absent director
62
Do Model Articles provide for alternate directors?
No
63
Why is the use of alternate directors becoming rare?
telephone meetings and written resolutions
64
Do the duties of directors apply to alternate directors?
Yes
65
What are the main duties of a company secretary?
keep books produce minutes ensure filings
66
Is it part of a company secretarys role to take decisions for the company?
No
67
Were all companies required to have a company secretary in the past?
Yes
68
Is a private company required to have a company secretary under s 270(1) CA 2006?
No unless articles require
69
Who can act if a private company does not have a secretary under s 270(3)(b) CA 2006?
directors or authorised person
70
Is a public company required to have a company secretary under s 271 CA 2006?
Yes
71
What part of CA 2006 applies to companies with a secretary?
Part 12
72
What must a public company secretary have?
requisite knowledge and experience
73
What are examples of qualifications for a public company secretary under s 273(2) CA 2006?
solicitor or chartered accountant
74
Who appoints the company secretary?
the directors
75
What are directors responsible for checking regarding the secretary?
qualifications under the provisions
76
Who is responsible for the day-to-day management of the company?
Directors
77
Who are directors agents of?
the company
78
What are directors validly appointed as called?
de jure directors
79
What types can de jure directors be?
executive or non-executive
80
Who else can act as a director without valid appointment?
de facto shadow alternate
81
Are private companies required to have a company secretary?
No
82
Are public companies required to have a company secretary?
Yes
83
What governs all different types of director?
principles of CA 2006
84
What governs the procedure for appointing directors?
the Articles of the company
85
How may companies with MA appoint a director by shareholder action MA 17(1)(a)?
ordinary resolution
86
How may companies with MA appoint a director by director action MA 17(1)(b)?
decision of the directors
87
Is it usual for the board to appoint new directors under MA17(1)(b)?
Yes
88
What should always be checked before advising on director appointments?
the Articles of a company
89
What type of contract should an executive director have?
written contract of employment service contract
90
What does a service contract set out?
terms and conditions of employment
91
Is there an automatic entitlement for directors to be paid?
No
92
Who determines director remuneration?
the board
93
What must a company keep for inspection by members regarding directors contracts s 228 CA 2006?
directors service contracts or memoranda
94
Who determines the terms of a directors service contract including pay under Art 19 MA?
the board
95
Whose approval is generally needed for a directors service agreement?
resolution of the board of directors
96
Whose approval is required for long-term service contracts under s 188 CA 2006?
shareholder approval
97
How many separate roles can one individual hold in a company?
three
98
What does CA 2006 require to be disclosed about a companys directors?
certain details
99
What registers must every company maintain?
register of its directors and register of its secretary
100
Where should these registers be kept?
at its registered office
101
What must each company notify the Registrar of Companies of?
changes relating to its directors or secretary
102
What forms are used for notifying changes of directors?
AP01
103
What particulars must be registered for directors under ss 163(1) and 164 CA 2006?
name service address country of residence nationality occupation date of birth
104
What particulars must be registered for secretaries under ss 277(1) and 278(1) CA 2006?
name address
105
Who can inspect the information at Companies House?
the public
106
Are there exceptions to public inspection of director information?
Yes very limited
107
Who can inspect the register at a companys registered office without charge?
any member of the company
108
Who can inspect the register at a companys registered office on payment of a fee?
any other person
109
What does CA 2006 allow directors and secretaries more of?
confidentiality
110
What address is generally available to the public for directors?
service address
111
What can a service address be?
directors residential address or companys registered office
112
Will residential addresses already public be removed automatically?
No
113
What address must individual directors still provide under s 165 CA 2006?
residential address
114
Where is the directors residential address kept?
separate secure register
115
Is the separate register of directors residential addresses open to public inspection?
No
116
What section of CA 2006 relates to disclosure of directors remuneration?
Section 412
117
What information about directors remuneration needs to be in annual accounts?
salaries bonuses pensions loss of office compensation
118
What else does Section 412 CA 2006 require disclosure of?
payments to connected persons or controlled bodies
119
What does Section 413 CA 2006 relate to?
advances credits and guarantees for directors
120
Who does Section 413 CA 2006 apply to?
person who was a director during the financial year
121
What is the ultimate sanction shareholders have against a director?
ability to remove from office
122
Under what circumstances might shareholders want to remove a director?
poor performance personality clash strategy difference
123
Under what section of CA 2006 may shareholders remove a director by ordinary resolution?
Section 168(1)
124
What type of notice is required for a removal resolution under s 168(2) CA 2006?
special notice 28 days
125
Can the Board remove a director generally?
No
126
Who is allowed to vote on their own removal resolution as a shareholder?
directors who are also shareholders
127
How may a director simply leave office?
resignation by notice
128
Where is resignation by notice provided for in MA?
MA 18(f)
129
Is a board resolution accepting resignation obligatory?
No
130
Under MA 18 when does a person cease to be a director?
disqualification individual voluntary arrangement bankruptcy incapacity
131
What act is the key legislation regarding director disqualification?
Company Directors Disqualification Act 1986
132
What can a disqualification order prevent a person from doing?
being a director liquidator receiver involvement in company management
133
What is the purpose of a disqualification order?
protect the public
134
What are grounds for disqualification?
fraudulent or wrongful trading persistent breaches
135
What is the maximum period of disqualification?
15 years
136
What is it if a disqualified director participates in management without court leave?
criminal offence
137
What do model articles for public companies require regarding directors?
retirement and reappointment every three years
138
How often are directors of listed companies subject to re-election?
annually
139
What must a company do when a director leaves office?
update register of directors notify Companies House
140
What form is used to notify Companies House of a director leaving?
Form TM01
141
Who governs director appointments and service contracts generally?
companys articles
142
Who generally decides on appointments and service contract terms?
the board
143
What type of service contracts require shareholder approval?
long-term service contracts
144
What must companies inform Companies House of regarding directors?
appointments and departures
145
What must companies keep a register of?
their directors
146
What personal details of directors must be provided to Companies House?
name service address residence nationality occupation birth date
147
Can directors residential addresses be kept private?
Yes
148
What information about director payments needs disclosing in annual accounts?
certain financial payments
149
How can directors be removed from office by shareholders?
ordinary resolution
150
What are other ways directors may leave office?
resignation disqualification rotation automatic termination
151
Who manages the company on a day-to-day basis MA 3?
the directors
152
To whom are directors subject to extensive duties?
shareholders and creditors
153
When making a decision what must a director always consider?
all their duties
154
Where were directors duties developed before CA 2006?
common law and equity
155
Where were directors duties codified?
CA 2006 ss 171-177
156
How should the statutory general duties be interpreted and applied s 170(4) CA 2006?
as common law rules and equitable principles
157
To whom are the general duties of directors owed?
the company
158
Who would be the claimant in proceedings for breach of duty?
the company
159
Whose protection do directors duties shift to in financial difficulty?
the creditors
160
Do the statutory duties apply to all types of directors?
Yes
161
What section of CA 2006 covers duty to act within powers?
Section 171
162
What section of CA 2006 covers duty to promote success of the company?
Section 172
163
What section of CA 2006 covers duty to exercise independent judgment?
Section 173
164
What section of CA 2006 covers duty to exercise reasonable care skill and diligence?
Section 174
165
What section of CA 2006 covers duty to avoid conflicts of interest?
Section 175
166
What section of CA 2006 covers duty not to accept benefits from third parties?
Section 176
167
What section of CA 2006 covers duty to declare interest in proposed transaction?
Section 177
168
Are directors subject to duties under other legislation than CA 2006?
Yes
169
What other act contains obligations for directors?
Insolvency Act 1986
170
How many separate duties does Section 171 CA 2006 effectively set out?
two
171
What is the first duty under Section 171 CA 2006?
duty to act within the companys constitution
172
Where is the companys constitution defined s 257 CA 2006?
companys articles and shareholder resolutions
173
What is a breach of the duty to act within the constitution?
acting without authority
174
What is the second duty under Section 171 CA 2006?
duty to exercise powers for the purposes conferred
175
For what purposes must directors not use their powers?
improper purposes personal gain
176
What duty under CA 2006 has been the subject of much debate?
duty to promote the success of the company
177
What previous common law duty does Section 172 CA 2006 codify?
duty to act in the best interests of the company
178
What does Section 172 CA 2006 stipulate a director must do?
act in good faith to promote companys success for members benefit as a whole
179
What should success normally mean for commercial companies according to the Government?
long-term increase in value
180
Is the list of matters to be considered under Section 172 CA 2006 exhaustive?
No
181
To whom is the duty under Section 172 CA 2006 owed?
the company
182
What are directors required to have regard to when exercising the Section 172 duty?
a range of non-exhaustive matters
183
What is one matter to consider under s 172(1) CA 2006?
likely long-term consequences of any decision
184
What is another matter to consider under s 172(1) CA 2006?
employees interests
185
What is a further matter to consider under s 172(1) CA 2006?
need to foster relationships with suppliers customers and others
186
What is an additional matter to consider under s 172(1) CA 2006?
impact on community and environment
187
What is another matter to consider under s 172(1) CA 2006?
desirability of maintaining high business conduct standards
188
What is a final matter to consider under s 172(1) CA 2006?
need to act fairly between members
189
What concept describes the middle way between shareholder primacy and wider stakeholder interests?
enlightened shareholder value
190
What did some fear the new duty under s 172 CA 2006 might lead to?
increased litigation
191
What approach are many companies taking to comply with s 172 CA 2006?
noting consideration in board minutes
192
What type of decisions particularly warrant noting s 172 consideration?
significant commercial decisions
193
What appears to be the courts view on compliance with s 172 CA 2006?
backing the common sense approach
194
What are certain companies required to make in their accounts from January 2019 regarding s 172?
a s 172 statement
195
What type of companies include those required to make a s 172 statement?
all public listed companies
196
What principle does the duty to exercise independent judgment codify?
directors must exercise powers independently
197
Under what circumstances is the duty to exercise independent judgment not infringed s 173(2)?
acting under a company agreement or constitution
198
Can directors rely on advice from others?
Yes
199
What must directors still make even when relying on advice?
their own judgments
200
What must directors be mindful of when acting under s 173?
individual nature of this duty
201
What must directors not do regarding others views?
blindly follow without considering company interests
202
How is the level of care skill and diligence assessed?
objectively and subjectively
203
What is the objective element of the duty under s 174?
level expected of a reasonably diligent person in that role
204
What is the subjective element of the duty under s 174?
directors own general knowledge skill and experience
205
What is the minimum standard expected of a director under s 174?
objectively expected of a director in that position
206
Can the minimum standard under s 174 be raised?
Yes if director has special knowledge
207
To whom are directors duties generally owed?
the company
208
Whose protection do duties shift to in insolvency?
creditors
209
Do duties under ss 171-177 apply to all directors?
Yes
210
What law and principles remain relevant in interpreting statutory duties?
common law and equitable fiduciary duties
211
Where are the statutory directors duties set out?
ss 171-177 CA 2006
212
Which duty is central and causes most discussion?
Section 172 CA 2006
213
What section of CA 2006 covers duty to avoid conflicts of interest?
Section 175
214
What section of CA 2006 covers duty not to accept benefits from third parties?
Section 176
215
What section of CA 2006 covers duty to declare interest in proposed transaction?
Section 177
216
How many duties aim to deal with conflicts of interest?
three
217
What does the duty under Section 175 CA 2006 require a director to do?
avoid situations of direct or indirect conflict
218
To what does the duty under Section 175 CA 2006 particularly apply?
exploitation of property information or opportunity
219
Is it an excuse that the company could not have exploited the opportunity itself?
No
220
When is the duty under Section 175 CA 2006 not infringed?
if no reasonable likelihood of conflict or if authorised
221
What are two situations where the Section 175 duty is not infringed?
transaction with the company matter authorised by directors
222
What should a director do if asked to be a director of a competitor?
seek board approval or refuse appointment
223
What does Section 175(3) CA 2006 expressly exclude?
conflicts in relation to transactions with the company
224
What duty applies to conflicts in relation to transactions with the company?
duty of disclosure in Section 177
225
What does Section 176 CA 2006 state about benefits from third parties?
directors must not accept benefits by reason of directorship
226
When is the duty under Section 176 CA 2006 not breached?
if no reasonable likelihood of conflict
227
Can other directors authorise arrangements under Section 176 CA 2006?
No
228
Who might approve a directors proposed action regarding third party benefits?
shareholders
229
Under what section can shareholders ratify a directors action regarding third party benefits?
Section 239
230
What does Section 177 CA 2006 require directors interested in a proposed transaction to do?
declare nature and extent of their interest
231
Does Section 177 CA 2006 cover indirect interests?
Yes
232
What other section requires disclosure of interests in existing transactions?
Section 182 CA 2006
233
What is an example of an indirect interest?
director is shareholder in other contracting company
234
Does the exception in Section 175(3) apply to the example of indirect interest?
Yes
235
When must a director declare their interest in a proposed transaction Section 177(4)?
before the transaction is entered
236
How can a declaration of interest be made?
at a Board Meeting or in writing in advance
237
Can directors give a one-off general notice of their interest?
Yes
238
What is best practice for declaring an interest?
at BM1
239
How must a written notice of interest be sent to other directors Section 184?
electronically if agreed or in paper form
240
Under what section can a director give general notice of ongoing interests?
Section 185
241
When does a director NOT need to make a declaration under Section 177 CA 2006?
not aware of interest no reasonable likelihood of conflict service contract considered
242
What is a director treated as being aware of regarding interests?
matters they ought reasonably to have been aware of
243
What is likely practice regarding declaration even if an exception exists?
continue to declare interests
244
What does MA 14 specify regarding interested directors and voting?
cannot vote or count in quorum
245
What can disapply MA 14(1)?
ordinary resolution
246
When can a conflicted director count in quorum and vote under MA 14(2) and (3)?
disapplied by OR no reasonable likelihood of conflict permitted cause
247
What is an alternative to relying on MA 14 exceptions?
remove MA 14 and replace with express permission
248
To whom do directors owe their duties?
the company
249
Who has a claim against directors for breach of duty?
the company
250
Under what section are the consequences of breach of duty the same as common law or equity?
Section 178 CA 2006
251
Which statutory duty has a remedy of damages for breach?
duty of care skill and diligence Section 174
252
What are remedies for breaches of other general duties?
injunction setting aside restitution restoration damages
253
Can shareholders approve a directors proposed action in advance?
Yes if full disclosure
254
What section states that statutory duties have effect subject to company authority for otherwise breaches?
Section 180(4) CA 2006
255
What is needed for shareholder authorisation to be effective?
full disclosure by directors
256
Under what section can shareholders ratify a directors conduct after breach?
Section 239(2) CA 2006
257
What type of resolution is usually needed for ratification?
ordinary resolution
258
Whose votes are disregarded when ratifying a directors breach Section 239(4) CA 2006?
directors votes and connected persons votes
259
Can unlawful acts be ratified?
No
260
Can breaches of fiduciary duty in insolvency be ratified?
No
261
What is Section 175 CA 2006 duty about?
avoiding conflicts of interest
262
When does Section 175 not apply?
transaction with the company
263
What does Section 177 CA 2006 duty relate to?
declaring interest in a proposed transaction
264
Does the duty to avoid conflict apply to interests in proposed transactions?
No
265
What might Section 177 CA 2006 trigger?
effects of MA14
266
What are the consequences for breaches of duty based on?
common law
267
Can shareholders approve or ratify directors conduct in certain circumstances?
Yes
268
What type of transactions with directors are regulated by CA 2006?
certain transactions
269
What is required for these regulated transactions to be valid?
shareholder approval
270
What is the first type of regulated transaction discussed?
directors long-term service contracts
271
What are the relevant sections for long-term service contracts?
ss 188 to 189 CA 2006
272
What is the second type of regulated transaction?
substantial property transactions
273
What are the relevant sections for substantial property transactions?
ss 190 to 196 CA 2006
274
What is the third type of regulated transaction?
loans quasi-loans credit transactions
275
What are the relevant sections for loans etc?
ss 197 to 214 CA 2006
276
What risk exists in these transactions with directors?
conflict between directors and shareholders interests
277
What duties would directors breach without shareholder approval for these transactions?
general duties under ss 171 to 177 CA 2006
278
What type of shareholder approval is needed for long-term service contracts s 188(2)(a)?
ordinary resolution
279
What is the duration of a guaranteed period requiring shareholder approval?
in excess of two years
280
What are the two scenarios for a guaranteed term exceeding two years s 188(3)(a)?
company cannot terminate or only in specific circumstances director controls continuation
281
What is the third scenario for a guaranteed term exceeding two years s 188(3)(b)?
period of notice by the company
282
Does the aggregate of certain periods count towards the two-year limit?
Yes
283
Whose approval might also be needed if the director is on the holding companys board s 188(2)(b)?
holding companys shareholders
284
What are the consequences of non-compliance with s 188 CA 2006 s 189?
provision void contract terminable on reasonable notice
285
What was the aggregate notice period in the s 188(3) example?
18 months plus nine months
286
Did the contract in the s 188(3) example require ordinary resolution approval?
Yes
287
Under what circumstance is shareholder approval not required s 188(6)(b)?
wholly owned subsidiary
288
Who owned 100 percent of Subsidiary Ltd in the example?
HoldCo Plc
289
Did Subsidiary Ltd need shareholder approval for its directors long-term contract in the example?
No
290
Is a director required to disclose their interest in their service contract under s 177(6)(c)?
No
291
Is it likely directors will still declare their interest in service contracts?
Yes for board minutes
292
What are interested directors not permitted to do regarding board resolutions on their contract MA 14(1)?
vote or count in the quorum
293
What must a company keep for members inspection regarding directors contracts s 228 CA 2006?
copy or memorandum of terms
294
Where must these contracts or memoranda be kept?
registered office or specified place
295
For how long must these contracts or memoranda be available?
at least one year from termination or expiry
296
Does the inspection right depend on the length of the service contract?
No
297
Do members have a right to inspect these documents?
Yes without charge or request a copy on fee
298
Where is a memorandum of the proposed contract made available for a GM approval s 188(5)(b)?
registered office and at the meeting
299
What is the minimum notice period for a GM to approve a long-term contract?
15 days even for short notice
300
Is there a 15-day notice requirement for written resolutions approving long-term contracts?
No
301
Where must the memorandum be sent for a written resolution approval s 188(5)(a)?
to every eligible member
302
What type of shareholder approval is needed for long-term service contracts?
ordinary resolution
303
What defines the guaranteed term requiring approval?
company cannot easily terminate or long notice period
304
What happens to a non-approved term?
it is void
305
What happens to the contract if a term is void?
deemed terminable on reasonable notice
306
Whose approval is not needed for a wholly owned subsidiarys directors contract?
members of the subsidiary
307
Whose approval might be needed in addition to the companys shareholders?
holding companys shareholders
308
What type of transactions does Section 190 CA 2006 govern?
substantial property transactions
309
Who is involved in these substantial property transactions?
director holding company director connected person
310
What is being acquired or disposed of in these transactions?
substantial non-cash asset
311
With whom are these transactions occurring?
to or from the company
312
What type of shareholder approval is required for these transactions?
ordinary resolution
313
When must shareholder approval be given?
before or after conditional on approval
314
What does Non-Cash Asset mean under s 1163 CA 2006?
any property other than cash
315
What is the lower threshold for an asset to be substantial s 191 CA 2006?
more than five thousand pounds and over ten percent net asset value
316
What is the higher threshold for an asset to be substantial s 191 CA 2006?
more than one hundred thousand pounds
317
How is net asset value determined for a substantial asset test?
most recent statutory accounts
318
How is net asset value determined if no accounts prepared?
amount of called up share capital
319
Where is the definition of persons connected with a director found?
ss 252 to 254 CA 2006
320
Who is considered a connected person family member?
spouse civil partner parents children step-children
321
Are brothers sisters grandparents grandchildren uncles aunts connected persons?
No
322
What type of entity is connected if a director holds 20 percent or more shares?
bodies corporate companies
323
Is a business partner of a director a connected person?
Yes
324
Are trustees of a trust benefiting a director connected?
Yes
325
What was the value of the property in the XYZ Ltd example?
one hundred and nine thousand pounds
326
Who was the buyer in the XYZ Ltd example?
wife of a director
327
What was XYZ Ltds net asset value?
two million pounds
328
Was the transaction in the XYZ Ltd example a substantial property transaction?
Yes
329
Why was it substantial even though not over 10 percent of net assets?
value exceeded one hundred thousand pounds
330
Whose approval might the holding company also need s 190(2)?
holding companys shareholders
331
When is approval not required by the members s 190(4)(b)?
wholly owned subsidiary
332
Where are limited exceptions to the approval requirement listed?
s 192 CA 2006
333
Is a director selling shares back to the company usually an SPT?
No
334
Under what section is a non-approved SPT voidable s 195(2)?
at the instance of the company
335
When is a non-approved SPT not voidable?
restitution impossible company indemnified third party rights affected
336
Who is liable to account for profits and indemnify the company s 195(3)?
directors involved connected persons
337
What allows shareholders to confirm a non-approved SPT s 196?
affirmation by ordinary resolution
338
Within what timeframe must affirmation occur?
reasonable period
339
What happens if the transaction is affirmed?
cannot be avoided under s 195
340
What defence exists for a director connected person s 195(6)?
took all reasonable steps for compliance
341
What defence exists for a connected person or authorising director s 195(7)?
no knowledge of contravention
342
What must a director disclose under s 177(1) CA 2006?
nature and extent of their interest
343
Is formal declaration always needed if other directors are aware s 177(6)(b)?
arguably no
344
Is it likely directors will still declare interests?
Yes for board minutes
345
What are interested directors not permitted to do under MA 14(1)?
vote or count in quorum
346
What type of resolution is needed for SPT shareholder approval?
ordinary resolution
347
When is shareholder approval needed for SPTs?
acquisition or disposal of substantial non-cash asset
348
What makes an asset substantial?
over five thousand and ten percent net assets or over one hundred thousand
349
Whose approval might be additionally needed for SPTs?
holding companys shareholders
350
When is shareholder approval not needed for SPTs?
wholly owned subsidiary
351
What sections of CA 2006 cover loans to directors?
ss 197 to 214
352
What type of shareholder approval is usually needed for company loans to directors?
ordinary resolution
353
How many different types of transaction are restricted in this part of CA 2006?
four
354
What is the first type of restricted transaction?
Loans
355
What section defines loans in this context?
197 CA 2006
356
What is the second type of restricted transaction?
Quasi-loans
357
What section defines quasi-loans?
199 CA 2006
358
What is the third type of restricted transaction?
Credit Transactions
359
What section defines credit transactions?
202 CA 2006
360
What is the fourth type of restricted transaction?
Guarantees or provision of security
361
Which types of companies are distinguished for these restrictions?
private companies and public or associated private companies
362
Under s 256 CA 2006 when are companies associated?
one is a subsidiary or both are subsidiaries of same body
363
Which type of company faces less regulation for these transactions?
private companies not associated with a Plc
364
What is the only transaction requiring shareholder approval for non-associated private companies s 197?
loans guarantees or security for directors
365
What additional transactions require approval for public and associated private companies?
quasi loans credit transactions connected persons
366
What is a straightforward lending of money?
a loan
367
What is where a company guarantees a directors loan from a bank?
guarantee or security
368
What is where a company pays a directors debt expecting reimbursement?
quasi-loan
369
What is where a company provides goods on credit to a director?
credit transaction
370
Where are exceptions to the shareholder approval requirement set out?
s 204 to 209 CA 2006
371
What is the maximum expenditure on company business exempt from approval s 204?
fifty thousand pounds
372
Are loans for defending director proceedings exempt s 205?
Yes
373
Are loans for defending regulatory actions exempt s 206?
Yes
374
What is the maximum for minor loan or quasi-loan transactions exempt s 207?
ten thousand pounds
375
What is the maximum for minor credit transactions exempt s 207?
fifteen thousand pounds
376
Are intra group transactions exempt s 208?
Yes
377
Are loans by money lending companies in ordinary business exempt s 209?
Yes
378
Where are the consequences of no shareholder approval set out?
s 213 CA 2006
379
What happens to a non-approved transaction s 213(2)?
voidable at companys instance unless exceptions
380
What are the exceptions to a transaction being voidable?
restitution impossible company indemnified third party rights
381
Who is liable for profits and losses in a non-approved transaction s 213(3)?
directors involved connected persons
382
What allows shareholders to confirm a non-approved transaction s 214?
affirmation by ordinary resolution
383
Within what timeframe must affirmation occur?
reasonable period
384
What is a defence for a director connected person s 213(6)?
took all reasonable steps for compliance
385
What is a defence for a connected person or authorising director s 213(7)?
no knowledge of contravention
386
Whose approval might the holding company also need?
holding companys shareholders
387
Whose approval is not needed for a wholly owned subsidiary?
members of the subsidiary
388
What must a director disclose if interested in these transactions s 177(1)?
nature and extent of their interest
389
Is formal declaration always needed if other directors are aware s 177(6)(b)?
arguably no
390
What are interested directors not permitted to do under MA14(1)?
vote or count in quorum
391
Where must a memorandum of the proposed transaction be available for a GM approval?
registered office and at the meeting
392
What is the minimum notice for a GM to approve these transactions?
fifteen days
393
Where must the memorandum be sent for written resolution approval?
to every eligible member
394
What type of resolution is needed for these transactions generally?
ordinary resolution
395
What is an exemption from shareholder approval for these transactions?
wholly owned subsidiary
396
Where are the details of remedies for breach found?
relevant statutory sections
397
What is the key provision for non-associated private companies?
s 197
398
What additional restrictions apply to public and associated private companies?
s 198 to 202
399
Where must the memorandum be available for inspection for a GM?
registered office and at the meeting
400
Where must the memorandum be sent for a written resolution?
annexed to the resolution and sent to all eligible members
