M2 Companies Act Flashcards
What does the companies Act say about audit committees?
According to section 94 of the companies Act,
- all public and stated owned audit committees and ones required by the MOI must have audit committees
- it must comprise of at least 3 members
- each member must be a director of the company an independent, non-executive director
- the audit committee needs to be appointed by the board within 40 days of vacancy or incorporation
- talks about a list of duties
What are the procedures that must be followed when appointing an Auditor?
What are the requirements of the companies Act to make a loan to a Director?
according to section 45,
- all the conditions and restrictions set out in the MOI need to be satisfied
- the board of directors is satisfied that
* immediately after the financial assistance the, the company would satisfy the solvency and liquidity test
* the financial assistance was fair and reasonable to the company
- the shareholders passed a special resolution in favor of this within the last 2 years
- this is a result of an employee share scheme that satisfies the requirements of section 97
This is all compulsory even if the MOI states otherwise
What are the requirements of the companies Act to give financial assistance for securities?
- all the conditions and restrictions set out in the MOI need to be satisfied
- the board of directors is satisfied that
- immediately after the financial assistance the, the company would satisfy the solvency and liquidity test
- the financial assistance was fair and reasonable to the company
- the shareholders passed a special resolution in favor of this within the last 2 years
- this is a result of an employee share scheme that satisfies the requirements of section 97
This is all compulsory even if the MOI states otherwise
What is required by the companies Act for the company to make a distribution?
According to section 46
- the board of directors has authorized the distribution OR is pursuant to an existing obligation of the company
- it reasonably appears that the company will satisfy the solvency and liquidity test after completing the proposed Distibution
- the board acknowledges that it has applied the solvency and liquidity test and concluded that it passed it
what does the companies Act say about a company buying its own shares or the sub buying the parent’s shares
According to section 48 of the companies Act
- the subsidiary may not acquire more than 10% of the shares within the parent company and those shares may not have any voting rights attached to it
- a company may not acquire the shares of itself if there will be no other ordinary shareholders left
- the court might be able to reverse the transaction
What does the companies act say about the rotation of auditors?
Section 92 of the companies act says the following,
- an auditor cannot serve as the same auditor for more than 5 years
- if they serve as an auditor for 2- 5 years and resign from being the auditor they can’t serve for the next 2 years,
What does the companies act say about the appointment of an auditor?
According to section 90,
- public or state owned companies must appoint an auditor or if their MOI says so
- the person needs to be
* someone unrelated to the company, (a list of people there)
* a registered auditor
* must be considered independent in thr opinion of the audit committee
- needs to be appointed within 40 days upon incorporation or if a vacancy arises
- auditor can get automatically re appointed
What does the companies Act say about the resignations and vacancies of an auditor?
According section 91,
- the board must propose to the audit committee, the name of at least one registered auditor, within 15 days of the vacancy occurring
- then they can continue with the appointment if the audit committee does not respond within 5 days
- certain things happen when the composition of the auditor firm’s board changes
What does the companies Act say about the rights of an auditor?
According to section 93 of the companies Act,
- they have right of access at all times to the accounting records and all documents of the company
- and the same applies to their subsidiaries
- can attend all general shareholder meetings, receive all notices, and be heard
- can Sue a company if they restrict rights in a certain way (look it up)
- they can’t be appointed of they have a conflict of interest
What does the companies Act say about a breach in confidence of information?
According to section 213,
- they are committing an offense if they disclose any information acquired by carrying out a function described in this Act
What does the companies Act say about directors who have a financial interest in a decision being made by the company?
According to section 75,
- must disclose the matter and it’s general nature before the matter is discussed at the meeting
- must disclose to the meeting any material information relating to the matter that is known by the director
- may disclose any insights if requested to do so by the other directors
- if present at the meeting, must leave the meeting immediately after making the disclosure
- must not take part in the consideration of the matter
- while absent, be regarded as present for required directors for meeting but absent for required for resolution
- must not execute any document on behalf of the entity relating to that matter unless requested do so by the board
- a decision like this can still be valid in certain conditions
* if disclosure was made like above OR
* disclosure wasn’t made but the decision has subsequently been ratified
* has been declared to be valid by the court
Word: DDDPNAEV
What does the companies Act say about the conduct of directors?
According to section 76,
- a director must not use his position as a director to gain personal advantage
- communicate information that he believes is important information to the board unless he thinks its generally available to the public
- must act with the following
* in good faith
* best interests of the company
* degree of skill and care
* not doing the above, breaches these things
* not following section 75 also breaches these things
Word: PCGBD
What does the companies Act say about the liability of directors?
According to section 77,
- if they breach duties described in s76 or s75 or other, they are liable for the damages they caused
What does the companies Act say about directors having a decision without a meeting?
According to section 74, it can happen with written consents, provided that each member of the board has received a notice
