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Recruitment, appointment, re-appointment and rotation - Coggle Diagram
Recruitment, appointment, re-appointment and rotation
Qualification
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The company's Articles may contain additional eligibility criteria such as a requirement to hold a minimum number of shares or a particular professional qulaification
It is very common for the directors of a residents management company to be required to be property owners or tenants of the particular development
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Provide the two CA2006 eligibility criteria together with any additional company or industry specific criteria are met, anyone may be appointed to the office of director provided they are not specifically prohibited
Prohibited persons
A bankrupt person, if a director becomes bankrupt after appointment, they must immediately resign unless leave to continue is given by the Courts
A person who has had a disqualification order made against them may not act as a company director unless leave has been given by the Courts
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The director of an insolvent company cannot, without the leave of the court, be appointed as a director of a company with a prohibited name
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Recruitment
Where an additional director is required either to fill a vacancy or as an additional director the board or the nominations commitee will draw up a job specification and candidate profile
In drawing up the specification, care must be taken to ensure that these meet the requirements of the Equality Act 2010
Although boards are able to encourage or enable applications form a particular sector to address any board diversity imbalance, selection of the successful applications must be judged on individual merit and positive discrimination is not permitted
Regulatory approval
In some indsutries, appointment of directors is subject to regulatory approval or conditions
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Induction
In order for directors to contribute in discussions, it is important that all newly appointed directors receive induction and briefings
Individual induction arrangements and briefing materials should be prepared as appropriate covering three broad topics, internal policies and procedures, external legislation and codes of practice and industry/company specific information
Particuarly important for those who might not have been a director previously or to an external appointee not familiar with the company, induction and briefings are important for experienced directors as although many policies will have the same overall aim, the detail will vary from company to company
For listed companies, reference should be made to the Governance Code and related guidance which set out recommendations concerning director induction
The CS should ensure that all prospective appointees are fully aware of the responsibilities, duties and potential liabilities of being a director
It is often the duty of the CS, under direction from the chair to arrange induction materials and site visits for new directors. This means that the CS needs to have a good understanding of how the business operates and who will be the most appropriate employee to meet the new director
Tailored induction must be provided to all new appointee and it should not be assumed that a newly appointed director is already familar with their duties and responsibilities simply due to their being a director of another company, whether listed or not
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Directors addresses
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The service address can be their usual residential address but if it is not, details of their usual residential address must be provided on Form AP01 on appointment or any subsequent change in their usual residential address on Form CH01
Companies House routinely verify the address details supplied agains the Post Office database and will reject any that appear to be an office address
Accommodation addresses and PO Box number cannot be used, as clearly these are not residneitail addresses
The Registrar does not place the residential address information on the public file unless it has reason to believe that mail addressed to the service address is being returned, not being actioned or not being forwarded to the individual concerned
Number of directors
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The Articles may stipulate a higher minimum number of directors, if the number of directors falls below this number, the remaining directors have the power to fill a casual vacancy or to convene a GM only for the purpose of allowing the members to appoint additional directors
If it not realised that the number of directors has fallen below the minimum number, once the number has been restored it is recommended that the board ratify the decisions made while there were insufficient directors
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Disputed appointments
Under a process introduced in 2016, Ca2006 s.1095 enables a director to dispute their appointment or amend details filed in respect of their appointment and make application to the Registrar for the appointment to be struck out
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The Registrar will enquire of the company to ascertain whether consent was given or not and where consent cannot be proved the appointees details will be removed from the record
Contracts of employment
A directors employment or service contract that cannot be terminatied other than for breach of contract on less than two years notice must be approved by the members in general meeting (Ca2006 s.188) this acts as a safeguard for shareholders to ensure that directors do not become too entrenched on boards and that in the event of termination, any termination payments are not excessive
Members approval may be given by an ordinary resolution passed at a general meeting, provided that a written memorandum setting out the terms of the proposed agreement or a copy of the service contract is available for inspection by members of the company at the registered office for a period of not less than 15 days prior to the date of the meeting
Companies are required at all time to keep copies of directors service contracts available for inspection by members (CA2006 s.228)
Listed companies are encouraged to have service agreements with the directors with a notice period of not more than one year (GC)