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The appointment of directors - Coggle Diagram
The appointment of directors
Statute states that certain persons are not eligible to act as a director
When s.156A comes into force, a legal person will not be able to act as a director unless regulations provide for exceptions
A person under the age of 16 cannot act as direcor
A company's statuary auditor cannot act as director
A person subject to a disqualification order undertaking
An undischarged bankrupt cannot act as director
The appointment process
A company's first directors will be appointed upon the company's incorporation
The appointment of directors is a matter for the company's articles
If the company's articles say nothing about the appointment of directors, the model articles will apply and provide that a director can be appointed by an ordinary resolution or by a decision of the directors
If a company has excluded the model articles, then the power to appoint a director is exercised by the members passing an ordinary resolution
Concersn exist that the appointment process lacks independence especially as in most companies the board can appoint a drector
Provision 17 recommends that the board should establish a nomination committee whose role is to lead the process for appointments, ensure plans are in place for orderly succession to both the board and senior management positions and oversee the development of a diverse pipeline for succession
Register of Directors
Every company must keep a register of directors which contains specified particulars regarding each director
When a new director is appointed, the company must notify CH of the appointment within 14 days
The notice to CH must contain
a statement of the particulars relating to the director
a statement by the company that the director has consented to act as a director
The register can be inspected by any member without charge and by any other person upon payment of a fee
A private company may elect to keep the required information on the public register maintained by CH
Defective appointments
It is possible that a directors appointment may not be conducted in accordance with the articles
S.161 provides that the acts of a person acting as a director are valid notwithstanding that it is afterwards discovered
There was a defect in their appointment
They were disqualified from holding office
They had ceased t hold office
They were not entitled to vote on the matter
S.161 will not apply in 3 situations
Where the person had not acted in good faith
Where the person seeking to rely on s.161 knew at the time of the appointment of the defect and of the legal effect of the defect
Where there was no purported appointment in the first place