C05 (11) Company Management

Front 1

A director is any person who is

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effectively in charge of a company,
wholly or substantially.

As per CA 2006, s.250,
the term 'director' includes
any person
occupying the position of director,
by whatever name called.

Front 2

All companies must have directors.

Every public company must have

Back 2

at least two directors.

Front 3

All companies must have directors.

Every private company must have

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at least one director.

Front 4

Executive directors and

non-executive directors are terms which express

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the different roles which

individual directors can play.

A Managing Director is largely an
extended example of the executive director.

Front 5

The first directors are those
named as such in the statement which must be filed when the company is formed.

Subsequent directors,
like the following,
are normally appointed by the members:

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Temporary or additional directors
(appointed by board to fill a casual vacancy or add to the board,
until confirmed by shareholders at AGM)

Alternate directors
(Nominated by an individual director, perhaps who will be absent, to act in their place, if the rest of the board resolves to accept)

Life directors
(Hold office indefinitely but can be removed. If appointed from outset, must be on Form G10; if not, approval needed from shareholders)

De facto directors
(Not formally appointed but carry out all the duties of and
make decisions as a director - shadow directors are main type)

Front 6

A board is the

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agent of the company,
and
individual directors have no power
to contract on behalf of the company.

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The retirement of directors can be

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by rotation and by notice.

Front 8

Retirement by rotation:

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If Table A applies then

all of the directors must retire at the

first annual general meeting
of the shareholders.
The directors can then offer themselves for re-election.

After this,

one-third must retire each year but, again, can be re-elected at the AGM.

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Retirement by notice:

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Table A allows a director to give to the company a written notice regarding his intention to retire from his position.

No fixed length of notice is required,
but a reasonable time may be required
by any service contract
which the director has with the company.

Front 10

The
Company Directors' Disqualification Act 1986
contains provisions under which
directors may be disqualified by the courts.

Directors may be disqualified if:

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> they are convicted of an

indictable offence
in connection with company matters

> they have been a director of a compay
which has gone into insolvent liquidation
and the court feel they are largely to blame

> they have persistently been
in breach of the CA regarding
filing accounts with the Registrar,
sending in the annual return,
filing resolutions with the Registrar, etc.

> they are undischarged bankrupt

> they have been guilty of fraudulent trading

> they have been found liable for
wrongful trading

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It is a criminal offence for a person to continue as a director after

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being disqualified by some statutory provision.

A properly qualified director who acts on the
orders of one whom he knows to be disqualified can also be personally liable.

Front 12

The shareholders of a company
can remove a director or directors
—at any time—
by

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an ordinary resolution at a general meeting.

A simple majority of votes cast
at the meeting is sufficient.

Front 13

The CA 1985 requires all companies to
keep a register of directors
at its registered office.

That register must contain certain
prescribed particulars of its directors,
such as:

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name,
residential address
and others.

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There are some things which,
under the CAs,
can only be done by a
resolution of shareholders:

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Changes to the company's
- name,
- objects,
- nominal capital, or
- Articles

Removal of a director under s.168

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Exercise of directors' powers
must generally be by

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the board, acting
collectively at board meetings.

Unless there has been delegation,
individual directors have no authority.

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The duties of a director are:

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A director must show
reasonable care and skill.

A director must not take
an unauthorised benefit for himself
from his position as director.

He has to account to the company
for any wrongful benefit which he takes.

Front 17

The CA 2006 sections 170–181
set out the
seven general duties of directors.

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1. To act within their powers
2. To promote the success of the company
3. To exercise independent judgement
4. To exercise reasonable
care, skill and diligence
5. To avoid conflicts of interest
6. To not accept benefits from third parties
7. To declare an interest in a
proposed transaction or arrangement

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Directors (and the company secretary)
owe their duties to the company,
not to

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individual shareholders.

Therefore, it is
only in exceptional circumstances
that a director can be
liable to legal action by members.

Certainly, negligent directors whose conduct causes the value of the shares to fall are
not liable to pay damages to the shareholders.

Generally, directors will only become
personally liable to a shareholder if they make a contract between themselves and the
shareholder which is separate from the
directors' duties to the company.

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In accordance to Foss v. Harbottle:

If it is alleged that
a wrong has been done to the company,

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the company is the proper claimant.
The decision whether to sue or not is a
management decision and should, therefore, be taken by the directors.

If the act complained of may be ratified by the shareholders in general meeting then the shareholders should not be permitted to
cause the company to sue.

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A few exceptions have developed to the rule in Foss v. Harbottle (1843).

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In certain situations a minority shareholder
can seek a remedy for the company
for a wrong done to the company.

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Under CA 2006 s.994
any member may apply to the court
on the ground that
the company's affairs are being, or have been,
conducted in a manner which is

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unfairly prejudicial to the
interests of its members generally,
or to some section of them, including himself,

or that any actual or proposed act or omission would be so prejudicial.

The court 'may make such order as it thinks
fit for giving relief in respect of the matters complained of'.

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Under Insolvency Act 1986, s.122(g)
a shareholder may apply to the court for a
winding up order if

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they can demonstrate that it is
just and equitable to wind up the company.

The shareholder(s) must show that
the company is solvent and that they
have 'sufficient interest' in the winding up.

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A company secretary of a public company must fulfil either one of the following qualifications:

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They must have served as secretary or
assistant or deputy secretary of their
present company since 1980.

They must have served as secretary of another public company for three of the last five years.

They must be professionally qualified as an
accountant or lawyer.

They must be 'a person, who, by virtue of ... having held any other position
or their being a member of any other body,
appears to the directors to be
capable of discharging those functions'

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There are no qualification requirements
for secretaries of

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private companies.

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The company secretary is
the chief administrative officer of the company and has wide responsibilities.

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They need to be present at all meetings of shareholders and of the board of directors.

They are responsible for
keeping proper minutes and for
issuing notices to members and others.

They are responsible for the many
registers which a company must keep.

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The register (of directors)
which a company must
keep at its registered office
must also include
details of the company's secretary.

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The register (of directors)
which a company must
keep at its registered office
must also include
details of the company's secretary.