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Directors (Appointment of directors (The first director of any company is…
Directors
Appointment of directors
The first director of any company is the director named in a statement signed by all the subscribers and delivered with the memorandum and articles of association of the company to the Registrar of Companies when the company is to be incorporated (formed)
The appointment of the first director is then confirmed at the inaugural (first) meeting of the board of directors of the company
The rules governing the appointment of directors of a company are set out in its articles so it is essential that they are reviewed to see whether there are any specific requirements or limitations that need to be adhered to
Article 17 of the model articles state that any person who is willing to act as a director and is permitted by law to do so, may be appointed to be a director by ordinary resolution of the shareholders or by a decision of the directors
CA2006 provides that a person may not be appointed as a director of a company unless they have attained the age of 16 years
Future and subsequent directors are usually appointed to the board of directors by the passing of an ordinary resolution at a directors meeting. They can be co-opted during the year or else nominated by the nominations committee, if the company is listed
The appointment of any new director that has been co-opted onto the board is usually confirmed at the next general meeting of the company by the shareholders of the company
Section 160(1) of CA2006 requires that for a public company, separate resolutions are required for each director's appointment, unless a resolution to appoint two or more persons by single resolution has been agreed by the meeting without any vote cast against it
New directors will have already indicated their willingness to be appointed as a director and signed a letter of acceptance to be appointed as a director of the company. In some jurisdictions, this written confirmation from the new director is a legal requirement whereas in other it is just best practice
Following the appointment of a new director, the company secretary will be authorised to update the register of directors and to advise the Company Registrar of the appointment of the new director. It may also be necessary to advise third party agents of the company as to the appointment such as bankers, investment managers etc
De facto directors
A director who has not been formally appointed as a director but appears to fulfil the role of a director
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Is someone who has not been properly appointed and notified to the Companies Registrar as a director but who nevertheless acts as a director and holds themselves out to third parties as a director
Sometimes, but not always, they will have the word director as part of a job title
Will usually carry out all the duties of a director and can make the decisions of a director, sign company documents and be treated as a director
It is the role of the individual rather than the title used that determines whether an individual is a director or not
The de facto director is also subject to the same legal duties, responsibilities and potential liabilities as de cure directors and will be treated as such by the courts in the case of a dispute
Shadow director
A person in accordance with whose directions or instructions the directors of a company are accustomed to act
For a person to be regarded as a shadow director, the directors must, as a body, be acting on their decision or instructions and must be accustomed to do so
The term shadow director may include outside persons or corporate bodies who often for legitimate commercial reasons, influence the directors' actions or otherwise control the company. A controlling creditor or shareholder may be regarded as a shadow director where the provisions of s.251 of CA2006 apply
A shadow director is not formally appointed by the company however they are deemed to have the same duties, liabilities and obligations as a formally appointed director
CA2006 sets out that a person is not to be regarded as a shadow director by reason only that the directors act on advice given by them in a professional capacity, for example taxation of legal capacity
Section 251 of CA2006 provides that a body corporate is not to be regarded as a shadow director of any of its subsidiary companies for the purposes of
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De jure directors
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A director who is formally and legally appointed to the board in accordance with the articles of association of the company and gives written consent to hold the office of a director
Enjoy full rights of a director but can be held individually and collectively (with other directors) liable for the acts and/or negligence of the company
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A director occupies a position of trust to the company and must therefore act in good faith and should not seek to profit personally from their position as a director
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Section 250 of CA2006 defines a director as 'any person occupying the position of director by whatever name called'. This would be determined by reference to facts such as the nature of the duties performed by the person and they authority they exercise within the company
The directors are responsible for the management of the company's business. They owe a fiduciary duty to the company
Anyone deemed to be a director will be subject to the privileges and liabilities which attach to a director
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Re UKLI Ltd Secretary of State for Business, Innovation and Skills v Chohan (2013)
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