BUSINESS LAW AND PRACTICE
Shareholding Powers: 5% : circulate written resolutions and statements, request a
general meeting
10% : request a poll vote (or director, 2+ ppl, chair)
> 25% : block special resolutions
50% : block ordinary resolutions
>50% : pass ordinary resolutions
75% : pass special resolutions
Director's duties: ● S.171 - duty to act within powers
○ In accordance company’s constitution and
○ Exercise powers for which they are conferred
● S.172 - promote success of company
○ Factors
■ Long-term consequences
■ Employees' interests
■ Business relationships (suppliers,
customers, others)
■ Community and environmental impact
■ Company’s reputation and standards
■ Fairness between members
○ subjective
● S.173 - act with independence
○ Not breached if:
■ (a) it’s under a valid agreement, or
■ (b) authorised by the company’s
constitution
● S.174 - act with reasonable care, skill and diligence
○ Objective
○ 1) general knowledge, skill, experience of a
reasonably diligent director
○ 2) knowledge, skill, experience of director with
that specific skillset (high standard)
○ Consequence → damages (negligence)
● S.175 - avoid conflict of interest
○ Non-company transaction
○ To avoid breach → authorise before
● S.176 - not accept benefits from third parties
○ Exc. → if unlikely to give rise to conflict
● S.177 - declare interest in proposed transaction
○ 4 exceptions
■ All directors are aware
■ The director is unaware of interest
■ Unlikely to give rise to conflict
■ Concerns director’s service contract
● Consequences of breach
, ○ · account for any profits,
○ · return any property, and
○ · pay damages,
○ · rescission of contract,
○ · injunction.
● S.182 - declare interest in existing transaction
○ 4 exceptions.
○ Criminal offence → fine
Shareholder's rights:
Minority Shareholders Protection: ● Unfair prejudice petitions (objective test, expensive)
● Negotiated settlement
● Derivative claims
Special Resolutions: ● Reserved for actions that would affect the shareholders
e.g. changing articles; changing
● Company name; reducing share capital; winding up the
company.
● Disapply pre-emption rights.
Ordinary Resolution: ● Removing directors:
○ Must be at GM (no WR)
○ Members send special notice (GM to be held in
28 days)
○ If directors refuse to call → Members send
request to call GM (must be called within 21 days)
○ After calling meeting GM held within 28 days
● All below are voidable if not approved
● SPT
○ F - from/to (director/person connected
[parent/kid/grandparent/step not bro, 20% of other
company)
○ A - arrangement with company
○ N - non-cash asset
○ S - substantial value (>£100k or over £5k + >10%
net asset value)
● Loan to director/connected person
○ M - minor transaction (<£10k)
○ E - expenditure on company business (<£50k)
○ R - regulatory proceedings defence costs
○ L - legal proceedings defence costs
● Director’s service contract (>2yrs)
● Payment for loss of office (>£200 not legally entitled)
● Memo with terms must be at office 15 days before GM
Shareholding Powers: 5% : circulate written resolutions and statements, request a
general meeting
10% : request a poll vote (or director, 2+ ppl, chair)
> 25% : block special resolutions
50% : block ordinary resolutions
>50% : pass ordinary resolutions
75% : pass special resolutions
Director's duties: ● S.171 - duty to act within powers
○ In accordance company’s constitution and
○ Exercise powers for which they are conferred
● S.172 - promote success of company
○ Factors
■ Long-term consequences
■ Employees' interests
■ Business relationships (suppliers,
customers, others)
■ Community and environmental impact
■ Company’s reputation and standards
■ Fairness between members
○ subjective
● S.173 - act with independence
○ Not breached if:
■ (a) it’s under a valid agreement, or
■ (b) authorised by the company’s
constitution
● S.174 - act with reasonable care, skill and diligence
○ Objective
○ 1) general knowledge, skill, experience of a
reasonably diligent director
○ 2) knowledge, skill, experience of director with
that specific skillset (high standard)
○ Consequence → damages (negligence)
● S.175 - avoid conflict of interest
○ Non-company transaction
○ To avoid breach → authorise before
● S.176 - not accept benefits from third parties
○ Exc. → if unlikely to give rise to conflict
● S.177 - declare interest in proposed transaction
○ 4 exceptions
■ All directors are aware
■ The director is unaware of interest
■ Unlikely to give rise to conflict
■ Concerns director’s service contract
● Consequences of breach
, ○ · account for any profits,
○ · return any property, and
○ · pay damages,
○ · rescission of contract,
○ · injunction.
● S.182 - declare interest in existing transaction
○ 4 exceptions.
○ Criminal offence → fine
Shareholder's rights:
Minority Shareholders Protection: ● Unfair prejudice petitions (objective test, expensive)
● Negotiated settlement
● Derivative claims
Special Resolutions: ● Reserved for actions that would affect the shareholders
e.g. changing articles; changing
● Company name; reducing share capital; winding up the
company.
● Disapply pre-emption rights.
Ordinary Resolution: ● Removing directors:
○ Must be at GM (no WR)
○ Members send special notice (GM to be held in
28 days)
○ If directors refuse to call → Members send
request to call GM (must be called within 21 days)
○ After calling meeting GM held within 28 days
● All below are voidable if not approved
● SPT
○ F - from/to (director/person connected
[parent/kid/grandparent/step not bro, 20% of other
company)
○ A - arrangement with company
○ N - non-cash asset
○ S - substantial value (>£100k or over £5k + >10%
net asset value)
● Loan to director/connected person
○ M - minor transaction (<£10k)
○ E - expenditure on company business (<£50k)
○ R - regulatory proceedings defence costs
○ L - legal proceedings defence costs
● Director’s service contract (>2yrs)
● Payment for loss of office (>£200 not legally entitled)
● Memo with terms must be at office 15 days before GM
