What are director's duties in the Companies Act 2006 ?
- Directors’ duties are now codified in law. The statutory fiduciary duties owed to the company include the duty:
- to act within powers (s.171); a director must act in accordance with the company’s constitution
- to promote the success of the company (s.172); this must be for the benefit of the members as a whole
- to exercise independent judgement (s.173); there is no breach if a director acts as authorised by the company’s constitution
- to exercise reasonable care, skill and diligence (s.174); the general knowledge, skill and experience that may be reasonably expected of a director
- to avoid conflicts of interest (s.175); this means avoiding a situation in which a director has a direct or indirect interest that conflicts with the interest of the company
- not to accept benefits from third parties (s.176); and
- to declare interest in proposed transaction or arrangements (s.177).
What kind of accounts does a company need to keep ?
All companies are required legally to keep proper records for income, expenditure, assets, and liabilities.
What is “Wrongful trading” ?
Importantly, the legal definition of wrongful trading includes not just actions by directors but failures to act , increasing or not reducing creditor losses.
The underlying legal test is whether it can be shown that before the winding-up began the director or shdow director knew or ought to have concluded that there was no reasonable prospect of the company avoiding liquidation but knowing this continued to rade. If proven, this can result in personal liability.
Is shareholder approval needed to issue shares ?
There have been important changes in this reagrd since, from 1 October 2009, directors with day to day control of a private company with only one class of share, no longer need specific authority from shareholders for issuing shares. To deal with this situation, it is now important that a company’s articles are amended so as to provide that shareholder approval is necessary.
Can shareholders make a decision without a meeting ?
Subject to certain exceptions, shareholders in a private company can make decisions by using written resolutions instead of holding meetings. The procedure is contained in the Companies Act 2006. There are exceptions to the general rule in that a director or auditor cannot be removed except at a meeting.
What percent of votes are required to pass a written resolution ?
If an ordinary resolution the percentage required will be a simple majority of the total voting rights of the shareholders. For a special resolution the percentage has to be 75 per cent or more of the total voting rights of all shareholders, which contrasts with meetings, where the same percentages apply but relate to percentages of the votes cast at the meeting.
A director has requested a board meeting - do we have to hold one ?
The answer is this depends on the articles. Standard articles of association provide that a director can call a board meeting, at any time, and this is commonly altered.
What are the key percentages of shares which are significant for company control ?
Generally, the importants percentages are :-
• 75 per cent gives power to pass any resolution at a general meeting of shareholders, including a special resolution.
• Over 50 per cent will enable an ordinary resolution to be passed.
• Over 25 per cent provides the ability to block a special resolution.
• A 5 per cent shareholding or more gives the ability to require the company to call a general meeting.
The above percentages apply whether a single shareholder has the relevant sharees or where shareholders act together.
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