Lecture 13 - Directors of a Limited Company Flashcards
(45 cards)
Function of directors
To run and manage business on behalf of members
Executive Directors
Normal director running business or part of it. Usually have particular responsibility eg sales/ finance director
Non-executive director
Director with no responsibility or outside independent director
Shadow directors
NOT TYPE OF DIRECTOR. Anyone who performs duties and functions of director is deemed one, and liable accordingly.
Do directors have to be employees?
No - but very often are
Directors appointed (3)
- On company formation
- Ordinary resolution by members
- By the board itself
Who cannot be director? (3)
- Anyone under 16 years old
- Undischarged bankrupt/ person disqualified by Court Order
- Any legal and non-discriminatory Article restrictions
If members unhappy with directors
Can vote them off board. This is how members exercise ownership rights and control.
Service Agreement
Contract of employment for director (if director is employee)
If directorship terminated..
Employment is not automatically terminated too (and vice versa)
Maximum term for fixed term Service Agreements
2 years without consent of shareholders. Can only be longer if Agreement contains provision for termination on reasonable notice, or is approved by members.
Remuneration per Table A and Model Articles
Directors are to be paid whatever company determines by resolution.
Case for remuneration
Half Garage Ltd 1982 > firm went under. Wife’s salary was deemed excessive and unnecessary so was forced to repay, husband wasn’t
Salaries must be…
Approved by members. But Directors often have controlling interest.
Expenses
Properly incurred by director in connection with business are recoverable
Pension payments
Allowable for directors as part of remuneration package
Compensation for loss of office as director
Allowable, but must be approved by members
If compensation paid as contractual entitlement/ damages/ settlement of a claim
No members’ approval required
Chairman (4)
- Must be director
- No obligation to have one > name means nothing
- Often has casting vote
- Usually runs meetings
Company secretary (3)
- Separate function from director
- Public companies must have one
- Legal background
Directors and contracts
Directors enter into contracts as agent for company, not generally personally liable on company contracts
Directors personally liable for contracts when (2)
- They contract to be liable eg guarantor
- Actual authority is exceeded
Case for director’s personal liability in contract
Weeks v Property 1873 > Directors exceeded amount allowed to borrow, personally liable for breach of warranty of authority
Property transactions
Transactions involving directors (or persons closely related) generally prohibited if exceed certain limits unless approved by members. (Property includes almost anything - not just land and buildings)
