ACCA F4: Chapter 9 - Directors

1 Directors - The term ‘director’ includes ‘any person occupying the position of director, by whatever name called’: s250 CA06. There must be at least one director who is a ‘natural person’. In addition, a director must normally be aged at least 16. - The decision as to whether someone is a director is based on their function, not their title.

1 Directors - The model articles allow the board to delegate to the MD any powers they see fit. - The MD has a dual role – member of board and also executive officer. - Freeman & Lockyer (A Firm) v Buckhurst Park Properties (Mangal) Ltd (1964) – the MD has the apparent authority to enter into all contracts of a commercial nature

1 Directors - ‘A person in accordance with whose directions or instructions the directors of a company are accustomed to act’: s251 CA06. - Not a shadow director if advice is given only in a professional capacity.

1 Directors - Likely to be a full-time employee involved in management.

1 Directors - Part-time. - Brings outside expertise to board. - Not an employee. - Exerts control over executive directors.

1 Directors - Chairs meetings of board. - Acts as spokesman for the company. - Has a casting vote.

2 Appointment, disqualification and removal - Appointed in Statement of Proposed Officers - Public companies need a minimum of two; private companies need one. - There is no statutory maximum, but the articles may specify a maximum number.

2 Appointment, disqualification and removal - Usually appointed by the existing directors or by ordinary resolution. - Directors of public companies should generally be voted on individually: s160 CA06. - A director’s actions are valid notwithstanding that his appointment was defective: s161 CA06.

2 Appointment, disqualification and removal - At the first annual general meeting (AGM) all the directors retire and offer theCasual vacancies are filled by the board until the next AGM when the new directors must stand for election.mselves for re-election by ordinary resolution. - At each AGM one-half retire (those most senior). They can be re-elected. - Casual vacancies are filled by the board until the next AGM when the new directors must stand for election.

2 Appointment, disqualification and removal - The company must notify Companies House within 14 days of new appointments and any changes in particulars. It must also enter details in the register of directors

2 Appointment, disqualification and removal - Cannot exceed two years unless they have been approved by the shareholders by ordinary resolution: s188 CA06 - If s188 CA06 is breached the service contract is deemed to state that the company can terminate the contract at any time by giving reasonable notice - The service contract must be kept open for inspection at the company's registered office. - The directors of a quoted company must prepare a directors' remuneration report for each financial year of the company. The report will contain for each person who was a director during the year: a) date of the contract, the unexpired term and the details of any notice periods;
b) any provision for compensation payable upon early termination of the contract; and
c) such details of other provisions in the contract as are necessary to enable members of the company to estimate the liability of the company in the event of early termination of the contract.

2 Appointment, disqualification and removal - Gratuitous payments must be disclosed to all members and approved by ordinary resolution. If not approved, director holds payment on trust for the company.

2 Appointment, disqualification and removal Directors must vacate their office if they become bankrupt or insane.

2 Appointment, disqualification and removal The CDDA 1986 was introduced to prevent the misuse of the limited liability status of companies by directors who would set up a new company to carry on essentially the same business as an old company which had ceased trading with unpaid debts.

2 Appointment, disqualification and removal - A disqualified director cannot be concerned in the management of a company directly or indirectly or act as a liquidator, receiver or promoter