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Directors, Types of directors - Coggle Diagram

- - - - all companies must have 1 director
        
        every company needs 1 natural person director (human being) who is 16 or older
        
        other directors can be corporate director, natural or combo
        if corp doirector, company will send individual (corp rep) to board meetings to discharge its functions as a director
        
        plcs need 2 directors
    - - runs companys board meetings
        additional power= casting vote (MA13) --> if the vote is a tie, the chair can use their casting vote to ensure that res is passed by simple majority (over 50%).
        
        if the chair does not want the res to be passed, they dont need to use their casting vote if they dont want to- this mens no majority reached so res not passed
  - - - first director(s) will take office on the certificate of incorporation
        being issued, and will be those individuals named in the statement of proposed officers
        on form IN01.
        
        Following incorporation, directors will be appointed in accordance with the
        company’s articles
    - - cant become a D if disqualified.
        MA18- person will cease to be D if bankruptcy order made against them or doctors written opinion they are physically/mentally incapable for more than 3 months
    - - when new D appointed, must notify Companies House within 14 days of appointment, filing AP01 form (individual)/ AP02 form (corporate director), entering D on register of directors and directors residential address
      - due to limited liability, company must:
        
        keep reg of directors, containing particulars (ds dob and address and companys reg office) can be kept on central reg
        
        keep reg of directors residential addresses for individual directors only. can be kept on central reg
        
        CH form CH01 and CH02- notify change in particulars
        
        forms AP01/AP02 notify CH of appointment. forms TM01/TM02 notify CH of resignation/removal of d
    - - resignation
        
        D/ company (power of attorney) complete form TM01/TM02
        
        notify CH
      - removal of D
        
        SH remove by ordinary res at GM.
        
        special notice requires for res to remove director
        
        ordinary res not effective unless notice of intention to pass it has been given to the company at least 28 days before GM
        
        once company receives special notice, it must inform D in q and if can, give SH notice at same time/form as for GM
        
        GM is where D can argue they should not be removed
        
        before the GM, will seek advice and prepare for hm
        
        often be SHs who called for GM, but can be directors.
        
        if D's want to propsoe oridnary res, jsut need to prepare formal notice of intention to propose ordinary res to keep at registered office. then inform director in q straight away 'forthwith'.
        
        if board of Ds unwilling to call GM, SH requisition GM
        
        special provisions in company articles or shareholder agreements
        
        bushell v fath- D in q has greater voting rights if also a SH
        
        where all SH are directors, provision in shareholders agreement, obliging them to vote against removal of their fellow shareholders from office as D..
        
        D in question would have claim for breach of shareholders agreement if a SH votes in favour of removal
    - - where SH is also D (e.g. in smaller private companies).
        
        in board meetings, must act as D and promote success of company without personal interest.
        
        in general meetings, act as SH and vote to promote own interests
  - - - HOWEVER- long-term service contracts (guaranteed term of more than 2 years) must be approved by SH in oridnary res
        -it is the guaranteed term element that needs authorisation not the length of contract
        
        not a long-term service contract if it company has power to terminate it with notice of 2 years or less
        
        if company enter into service contract for long-term service contract without SH approval, guaranteed term element of contract is void but rest of contract enforceable
  - - - exceptions (not a breach):
        (a) Acting in Accordance with an Agreement Entered into by the Company e.g. financing agreement
        (b) Acting in a Way Authorized by the Company’s Constitution i.e company articles allow certain SH to appoint D and then D allowed to vote in line with those SH decisions
    - - no breach if:
        
        situation cannot be regarded as likely to give rise to conflict of interest
        
        board resolution authorises the breach/potential breach
        
        the D will not count in qurorum for vote to authorise infringement. if they vote, it will not be counted even if MA 14 has been excluded (allowing them to count in initially)
    - - exceptions- where D does not have to declare:
        
        D not aware of interest
        
        other directors already aware
        
        concerns terms of Ds service contract
      - must be a transaction WITH the company for this duty to be breached. --> means that cannot have a breach of s.175 too
      - declaration of interest in existing transaction- s.182
        
        D does not need to declare again if already done so under s.177 (proposed)
        
        declaration must be made at meeting of the directors of by notice sent to all other Ds or by general notice of interest at board meetintg
        
        same exceptions as s.177 but extra - interest cannot be reasonably regarded as liekly to give rise to conflict of interest
        
        criminal offence- fine
        c.f. cvil mater if s.177 breached
  - - - account of profits
        
        equitable compensations (loss suffered by company)
        
        recission of any contract entered into as result of breach
        
        injunction (to prevent further breaches)
        
        restoration of property transferred due to breach
        
        common law damages - for s.174 reasonable skill etc
    - - SH can ratify breach of Ds duty by oridnary resolution..
        
        the D in question will not count in GMs quorum or be an eligible member for written res
      - if breach is ratified, the D did not breach their duty at all and will escape liability
    - - wrongful trading
        
        To make a claim against a director for wrongful trading, the following conditions must be met:
        a) Company’s Insolvency: The company has entered insolvent liquidation or administration, meaning it cannot pay its debts, and its liabilities exceed its assets.
        b) Director’s Knowledge:
        Before the winding-up or administration, the director knew or ought to have concluded there was no reasonable chance of the company avoiding insolvency.
        This knowledge includes both actual knowledge and what a director should reasonably have known based on their position and the company’s financial state.
        c) Director’s Position at the Time: The person was a director at the time when wrongful trading occurred, directly making them responsible for decisions during this period.
        
        defence available for directors accused of wrongful trading. To avoid liability, a director must demonstrate they took “every step with a view to minimising potential losses to creditors”.
        2 part test
        
        objective standard- consider directors role and what is expected of director carrying out their role
        
        subjective tes- knowledge, skill and experience of part D
      - fraudulent trading
        
        which is a more serious offence than wrongful trading due to the required intent to defraud creditors. harder to prove
        **1. Intent to Defraud
        
        Liability for Those “Knowingly Party” to Fraudulent Activities
        
        Initiation by Liquidator or Administrator**
        
        criminal conviction
        
        liquidators commonly bring cliams for WT and FT- same facts
      - misfeasance
        
        breach of any fiduciary or other duty by directors.
        Under s 212 IA 1986, during
        the course of the winding up of the company, directors may be ordered to contribute to the
        company’s assets by way of compensation in respect of the misfeasance. They may also be
        ordered to repay, restore or account for any money or property or any part of it that has been
        misapplied in breach of duty