BLP (12)
Terms
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- What is the general rule on what resolutions need to be filed at Companies House?
- All SRs and any ORs to affect the constitution of the company.
- What duties should the directors take into account when taking decisions on the party of the company?
- 7 duties outline in ss. 171 - 177
- What directors' duty is likely to cause most debate.
- s. 172 - promoting the success of the company.
- What concept underpins s. 172?
- The concept of enlightened shareholder value. Directors should have regard to stakeholder factors.
- Who does a director owe his duties to?
- The company. S. 172 factors should be taken into consideration, however, they are not determinative.
- When talking about 'an interest' in relation to directors duties, are we talking about 'connected persons'?
- No. We are using the ordinary meaning of 'an interest'.
- If it is perfectly obvious to the other directors that the individual director has an interest, should the director declare his or her interest nonetheless?
- Yes. Directors should declare regardless.
- From a procedural point of view, what should directors do if interested in a proposed transaction or arrangement?
- Declare interest in a proposed transaction at board meeting, or in writing, or by general notice.
- What is the effect on voting if a member has an interest in a transaction or arrangement?
- Prevent the director from voting or counting in the quorum or vote on that particular matters (MA 14(1))
- Can a company's articles be amended so as to allow directors with an interest to vote and be included for the purpose of quorum at BMs?
- Yes it can
- Who can enforce directors duties?
- The company
- What are the legal consequences of a breach of duty?
- s. 178 - common law remedies
- What do we need to do to work out what common law remedies apply?
- Consider whether the duties are fiduciary or non-fiduciary.
- What is the only non-fiduciary duty owed by a director?
- Only one - s. 174 (Duty to exercise reasonable skill and care).
- What remedies are available for fiduciary duties?
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- Damages
- Transaction voidable
- Injunctive relief available - What remedy is available for the only non-fiduciary duty and what is this?
- Damages only (s. 174 - Duty to exercise reasonable skill and care).
- What provision details how a breach of a director's duty could be ratified?
- s. 239 CA 06
- Should any votes by a member not be taken into account when determining whether a company should ratify a director's breach?
- Yes, votes cast by the director (if a member also) and the votes of any member connected with that director are to be disregarded.
- What kind of resolution is required for the purpose of ratifying a director's breach of duty?
- OR
- Can unlawful acts be ratified?
- No
- What section of the Companies Act covers substantial property transactions?
- s. 190 CA 06
- What kind of resolution is required for the purpose of approving a substantial property transactions?
- OR
- What is the first thing to determine regarding whether a transaction is a substantial property transaction?
- What sub-section of s. 190 are you in? Is the director buying something from the company or is the company buying something from the director?
- What section do we need to look at to consider whether an item is a SUBSTANTIAL non-cash asset?
- s. 191 CA 06
- What is and is not a substantial cash asset?
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£5,000 or less - Not substantial
More than £100,000 - Is substantial - If an asset is between £5,000 and £100,000, what do you need to work out?
- Need to work out if the value exceeds 10% of the company's asset value?
- In relation to groups of companies, what is important to remember re substantial property transactions?
- No approval under s. 190 is required if the company is the wholly owned subsidiary of another body corporate.
- When might the approval of members of a holding company be required?
- Where the director (or connected person) is a director of the company's holding company (s. 190(2)).
- What sections in the Companies Act cover what or who is connected to a director?
- Ss. 252 - 254
- When might a company be considered connected?
- Where the directors and the persons connected with the director 'are interested in at least 20% of the share capital' of the connected company.
- What section deals with connected corporate companies?
- s. 254 CA 06
- Do directors need to think about declaring an interest under s. 177 as well as obtaining approval under s. 190 (substantial property transactions)?
- Yes, certainly.
- What are the civil consequences of failing to comply with s. 190?
- s. 195(2) voidable at the instance of the company unless this is no longer possible, e.g. if wine has been drunk or if third party rights have been acquired. Individuals involved could be required to account for loss.
- What are the consequences of not complying with section 190 (substantial property transactions). This is covered in s. 195. (there are 2 consequences and 1 option).
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1 Transaction voidable
2 Directors, connected person and other directors liable
3 Shareholder approval after transaction but must be in a reasonable time. - What provisions detail how long a long-term service contract should be displayed for?
- s. 188(5)(b) - 15 days - think short notice can only shorten by one day.
- When you are dealing with a transfer of property, what will the impact be on a company's balance sheet. So for example, the transfer of property for cash?
-
Overall the net assets will stay the same. Fixed assets decrease but cash increases
Cash decreases but fixed assets increase. - In relation to long-term service contracts, what is a post meeting matter?
- Retain a copy of the service contract at the registered office for inspection (s.228(2)(a)) or such other place as has been notified to the registrar (s. 228(4)).
- What provision of the Model Articles provides that directors cannot count in quorum or in the vote for the purpose of a resolution in which they are interested?
- MA 14(1)