Other
Directors Duties Condensed Notes
• Achieved a high distinction in the BPP LPC (86%) • Intuitively colour-coded layout • Condensed and optimised for efficient revision • Suitable for BPP and ULaw LPC students
[Show more]
Content preview
Chapter 7 – The Roles, Responsibilities and Requirements of DirectorsSGS 11 and 12 – The Roles, Responsibilities and Requirements of Directors
Directors’ Statutory Duties
Directors’ owe their duties to the company rather than to individual shareholders
171 Duty to act within powers
172 Duty to promote the success of the company, having regard to –
Long-term consequences of any decision
Interest of company’s employees
Need to foster business relationships with suppliers, customers and others
Impact on the community and the environment
Desirability to maintain a reputation for high standards of business conduct
Need to act fairly between members
173 Duty to exercise independent judgement
174 Duty to exercise reasonable care, skill and diligence
175 Duty to avoid conflicts of interest, conflict does not arise –
In a transaction or arrangement between the director and the company (s.175(3))
If it cannot reasonably be regarded as likely to give rise to a conflict (s.175(4)(a))
If the potential conflict is authorised by the directors (excluding the conflicted director) (s.175(4)(b))
If the transaction requires shareholder approval, and approval is properly obtained (s.180(2))
176 Duty not to accept benefits from third parties, there is no breach –
If the benefit cannot reasonably be regarded as likely to give rise to a conflict (s.176(4))
If the transaction requires shareholder approval, and approval is properly obtained (s.180(2))
177 Duty to declare interest in proposed transaction or arrangement
Breach of all duties is a ground for –
Termination of service contract
Disqualification as a director under Company Directors Disqualification Act (CDDA) 1986
Breach of s.174 duty is enforceable as breach of fiduciary duties, remedies are usually damages
Breach of duties (save as to s.174) has the same consequences as breach of common law or equitable principles, remedies include –
Injunctions
Setting aside of the transaction, restitution and account for profits
Restoration of company property held by the director
Damages
Majority of shareholders support action for breach against a director –
Other directors will bring a claim on behalf of the company
Majority of shareholders can remove non-cooperative directors from the board
Minority of shareholders support action for breach against a director –
Shareholders exercise their right to bring a derivative claim (s.260) (a claim on behalf of the company)
Disclosure
Identity Directors Secretaries
Maintain a register of directors (s.162(1)) s.275(1)
Keep register of directors at registered office (s.162(3)(a)) s.275(3)(a)
Notify Companies House of changes (s.162(4)) s.275(4)
Particulars to be kept on the register of directors (s.163(1) and 164) – s.277(1) and 278(1)
Service address (residential or company’s registered address)
Any member can inspect register of directors without charge (s.162(5)) s.275(5)
Any other person can inspect register of directors for a fee (s.162(5)) s.275(5)
Information kept at Companies House is available for public inspection (s.1085(1))
Forms
Form AP01 – notify appointments
Form TM01 – notify resignation or removal
Form CH01 – notify change of details
1
, Chapter 7 – The Roles, Responsibilities and Requirements of Directors
SGS 11 and 12 – The Roles, Responsibilities and Requirements of Directors
Annual accounts A copy of the annual accounts must be sent to every member of a company (s.423(1))
Disclose in the company’s annual accounts (s.412, Small Companies and Groups (Accounts and Directors’
Report) Regulation 2008 and Large and Medium-sized Companies and Groups (Accounts and Reports)
Regulations 2008) –
Directors’ salaries, bonus payments and pension entitlements;
Compensation paid to directors and past directors for loss of office; and
Payments made to a connected person of a director
Disclose in the company’s annual accounts (s.413) –
Advances and credit given by a company to its directors;
Guarantees entered into by a company on behalf of its directors
Transactions or Proposed transactions or arrangements (s.177)
arrangements An interest disclosed under s.177, no longer has to be disclosed under s.182
What A direct or indirect interest in a proposed transaction or arrangement (s.177(1))
Must specify the nature and extent of the interest (s.177(1))
Examples of direct interests –
Entering into a service contract with the company
Examples of indirect interests –
Contract with a company in which he is also a member (Re British American Corp.)
An interest through a spouse or relative
Director does not have to be party to the transaction
NB: disclosure does not absolve the need to comply with other statutory duties
When Declaration must be made before the company enters into the transaction (s.177(4))
Further declaration must be made if the original becomes inaccurate or incomplete (s.177(3))
NB: check articles for any additional requirements (e.g. ‘at the earliest opportunity’)
Exclusions A director is not required to make a declaration (s.177(5) and (6)) –
He is not aware of the interest or transaction in question
Interest cannot reasonably be regarded as likely to give rise to a conflict
Other directors know or ought to have known about the conflict
Conflict arises from his service contract
NB: disclosure is easy to comply with, disclose in any event even if the above applies
How 1. At a board meeting (s.177(2)(a))
2. Written notice (s.177(2)(b)(i) and 184)
o Must be sent to all directors electronically (if agreed) or in paper (s.184)
3. General notice (s.177(2)(b)(ii) and 185)
o Notice that he is always to be considered interested in any transaction with
a specified company or firm (s.185(2)(a)) or person (s.185(2)(b))
o Must state nature and extent of interest (s.185(3))
Breach Consequences of breach of common law or equitable principles (see above)
MA 14 An interested director cannot vote or count in a quorum (MA 14(1)), unless (MA 14(3)) –
Shareholders disapplies MA 14(1) by ordinary resolution;
Interest cannot reasonably be regarded as likely to give rise to a conflict; or
Conflict arises from a permitted cause under MA 14(4)
NB: alternatively, MA 14 can be removed permanently by amendment of articles (s.21(1))
Existing transactions or arrangements (s.182)
An interest disclosed under s.182, no longer has to be disclosed under s.177
What A direct or indirect interest in a transaction that has been entered into (s.182(1))
Must specify the nature and extent of the interest (s.182(1))
When Declaration must be made ‘as soon as is reasonably practicable’ (s.182(4))
Further declaration must be made if the original becomes inaccurate or incomplete (s.182(3))
How 1. At a board meeting (s.182(2)(a))
2. Written notice (s.182(2)(b) and 184)
o Must be sent to all directors electronically (if agreed) or in paper (s.184)
3. General notice (s.182(2)(c) and 185)
o Notice that he is always to be considered interested in any transaction with
2
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller hadrianleung. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for £2.99. You're not tied to anything after your purchase.
Can Stuvia be trusted?
4.6 stars on Google & Trustpilot (+1000 reviews)
79373 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy revision notes and other study material for 14 years now