Director – long-term service contract:
Shareholder approval will be needed if a director’s service contract exceeds 2 years,
(if the service contract is under 2 years it only requires director’s approval – s188 & MA 3 – But if it is over two years then by ordinary resolution
by shareholders – s188.)
Outline of approval:
BOARD MEETING:
Notice any director can all the BM under MA 9 – reasonable notice – Re homer.
Quorum to hold a valid BM – need two directors present – MA 11(2) – Check special articles.
Directors with an interest s177 – must declare but under s177(6)(c) there is an exception to having to declare when it regards
a director’s service contract – but good to declare anyway. THEN… MA 14: if ‘x’s has an interest then they cannot vote & count
in the quorum – check special articles.
Agenda vote to call a GM agree to the resolution shareholders must agree on – s283(6) / discuss director’s contract and
terms and create a draft for the shareholders to inspect.
Voting unanimous or simple majority which requires over 50% voting in favour to pass resolution MA 7.
Admin close the meeting as there is a requirement under s188(5) that a memorandum is created setting out the contract
terms which must be available for 15 days at the company’s registered office for shareholders to inspect, ending with the day of
the GM. MA 15 states a written record of every decision must be kept for 10 years and under s248 board mins must be kept for
10 years.
GENERAL MEETING:
Notice directors will call GM’s – s302. Given to all shareholders and directors – s310 and auditors – s502. Notice period is 14
clear days – s307(1) (+ extra 48 hours + see GM plan for Notice details such as time/proxy……). Short Notice: the shortest
notice will be 15 days to allow for inspection of service contract. A GM can be held on shorter notice if enough shareholders
agree to this A majority of the shareholders which together must hold at least 90% of the voting shares– s307(5) & (6).
Quorum Two shareholders present – s318(2). Could also do a WR – service contract attached when the resolution is
circulated.
Agenda approving director service contract
Voting ordinary resolution – s188 – needs over 50% to pass resolution. By hand or Poll – see GM plan for details if
appropriate to go through this.
Admin write up mins and keep resolutions for 10 years – s355.
BOARD MEETING 2:
Notice / quorum / voting ‘see above’.
Could make declaration against but 177(6)(c) applies again.
Agenda enter into the contract.
Admin draw up BM mins and keep resolutions for 10 years – s248. Retain a copy of the service contract for inspection at
Registered office – s228. File form AP01 to notify companies house within 14 days of the appointment.
Director – short term service contract:
When a director is receiving a service contract for less than two years – no approval is needed from shareholders, and it can be
granted by the directors – s188 and MA 3.
Outline of approval:
BOARD MEETING:
Notice any director can all the BM under MA 9 – reasonable notice – Re homer.
Quorum to hold a valid BM – need two directors present – MA 11(2) – Check special articles.
Directors with an interest s177 – must declare but under s177(6)(c) there is an exception to having to declare when it
regards a director’s service contract – but good to declare anyway. THEN… MA 14: if ‘x’s has an interest then they cannot vote
& count in the quorum – check special articles.
Agenda discuss and agree upon director’s contract.
Voting unanimous or simple majority which requires over 50% voting in favour to pass resolution MA 7.
Admin draw up BM mins and keep resolutions for 10 years – s248. Retain a copy of the service contract for inspection at
Registered office – s228. File form AP01 to notify companies house within 14 days of the appointment.
, Types of directors:
Executive directors: a director and will have a service contract with the company making them an employee giving them a
salary. They must agree to work for the company MA 19. Usually, the director of this kind will have a title such as ‘Finance
Director.
Non-Executive directors: do not participate in day-to-day activities of the business. They can and will attend BM’s and
vote. They are not employees of the company and would not have a contract of employment/ service contract.
Shadow director: gives instructions / directors to directors on the business and the directors usually follow these
instructions – s251. They are not formally appointed. There is still a lot of the CA needing to be complied with (s190-196
and 171-177)
Appointing a director:
Every private company must have at least one director – s154(1). The procedure for appointing is covered in the articles.
Appointing the first director:
The first directors of a company will be named in the company’s statement of proposed officers.
MA 17 gives two ways in which a director can be appointed:
o By the directors – which is easier as it can be done at a BM
o By shareholders – ordinary resolution MA 17 - this may be appropriate when the current directors of the
company are not shareholders so that the shareholders have the chance to vote on the new director.
Under s167 – the company must make a statement on behalf to the new director indicating their consent – this is
addressed in a Form IN01 for the first directors.
The director will automatically become a director when the company is incorporated – s16(6)(a)
The appointment of the director and the Form will need to be filed with Companies House and CH will send
information to the director on directors’ duties and roles – s1079B.
Procedure requires BM – GM -BM.
Appointing subsequent directors:
MA 17 gives two ways in which a director can be appointed:
o By the directors – which is easier as it can be done at a BM
o By shareholders – ordinary resolution – MA 17- this may be appropriate when the current directors of the
company are not shareholders so that the shareholders have the chance to vote on the new director.
If, at the same time of appointing a new director, there is also a removal of a director, the general meeting notice
requirement is that ‘special notice’ of that resolution is given to the shareholders for the GM – s168(2)
The company must make a statement on behalf of the director of their willingness to act as a director. The Form
which requires this statement is an AP01 (for a human director and AP02 is a company).
The appointment must then be filed with Companies House along with the AP01 within 14 days of the appointment
having been made.
Additionally, the register of Directors & register of director’s addresses must be updated (to reflect appointment
and possible removal)
Companies House will send information to the director on directors’ duties and roles – s1079B.
Requires only a BM.
Authority of Directors
Actual authority:
actual authority is where the company gives the agent – director – specific prior consent to the actions.
Expressly or impliedly given
Will bind the company to contract if a director acted with actual authority.
If the director exceeds actual authority – they will not bind the company, but they may be personally liable to breaches to
the third party
Apparent authority:
Apparent authority is when the agent – director – acts without the company’s prior consent but it still binds the company
to the contract with the third party
Apparent authority will arise when there has been a representation to the third person by the company that the director
is acting with authority – it cannot arise purely by the directors’ actions, only the company’s representation
Shareholder approval will be needed if a director’s service contract exceeds 2 years,
(if the service contract is under 2 years it only requires director’s approval – s188 & MA 3 – But if it is over two years then by ordinary resolution
by shareholders – s188.)
Outline of approval:
BOARD MEETING:
Notice any director can all the BM under MA 9 – reasonable notice – Re homer.
Quorum to hold a valid BM – need two directors present – MA 11(2) – Check special articles.
Directors with an interest s177 – must declare but under s177(6)(c) there is an exception to having to declare when it regards
a director’s service contract – but good to declare anyway. THEN… MA 14: if ‘x’s has an interest then they cannot vote & count
in the quorum – check special articles.
Agenda vote to call a GM agree to the resolution shareholders must agree on – s283(6) / discuss director’s contract and
terms and create a draft for the shareholders to inspect.
Voting unanimous or simple majority which requires over 50% voting in favour to pass resolution MA 7.
Admin close the meeting as there is a requirement under s188(5) that a memorandum is created setting out the contract
terms which must be available for 15 days at the company’s registered office for shareholders to inspect, ending with the day of
the GM. MA 15 states a written record of every decision must be kept for 10 years and under s248 board mins must be kept for
10 years.
GENERAL MEETING:
Notice directors will call GM’s – s302. Given to all shareholders and directors – s310 and auditors – s502. Notice period is 14
clear days – s307(1) (+ extra 48 hours + see GM plan for Notice details such as time/proxy……). Short Notice: the shortest
notice will be 15 days to allow for inspection of service contract. A GM can be held on shorter notice if enough shareholders
agree to this A majority of the shareholders which together must hold at least 90% of the voting shares– s307(5) & (6).
Quorum Two shareholders present – s318(2). Could also do a WR – service contract attached when the resolution is
circulated.
Agenda approving director service contract
Voting ordinary resolution – s188 – needs over 50% to pass resolution. By hand or Poll – see GM plan for details if
appropriate to go through this.
Admin write up mins and keep resolutions for 10 years – s355.
BOARD MEETING 2:
Notice / quorum / voting ‘see above’.
Could make declaration against but 177(6)(c) applies again.
Agenda enter into the contract.
Admin draw up BM mins and keep resolutions for 10 years – s248. Retain a copy of the service contract for inspection at
Registered office – s228. File form AP01 to notify companies house within 14 days of the appointment.
Director – short term service contract:
When a director is receiving a service contract for less than two years – no approval is needed from shareholders, and it can be
granted by the directors – s188 and MA 3.
Outline of approval:
BOARD MEETING:
Notice any director can all the BM under MA 9 – reasonable notice – Re homer.
Quorum to hold a valid BM – need two directors present – MA 11(2) – Check special articles.
Directors with an interest s177 – must declare but under s177(6)(c) there is an exception to having to declare when it
regards a director’s service contract – but good to declare anyway. THEN… MA 14: if ‘x’s has an interest then they cannot vote
& count in the quorum – check special articles.
Agenda discuss and agree upon director’s contract.
Voting unanimous or simple majority which requires over 50% voting in favour to pass resolution MA 7.
Admin draw up BM mins and keep resolutions for 10 years – s248. Retain a copy of the service contract for inspection at
Registered office – s228. File form AP01 to notify companies house within 14 days of the appointment.
, Types of directors:
Executive directors: a director and will have a service contract with the company making them an employee giving them a
salary. They must agree to work for the company MA 19. Usually, the director of this kind will have a title such as ‘Finance
Director.
Non-Executive directors: do not participate in day-to-day activities of the business. They can and will attend BM’s and
vote. They are not employees of the company and would not have a contract of employment/ service contract.
Shadow director: gives instructions / directors to directors on the business and the directors usually follow these
instructions – s251. They are not formally appointed. There is still a lot of the CA needing to be complied with (s190-196
and 171-177)
Appointing a director:
Every private company must have at least one director – s154(1). The procedure for appointing is covered in the articles.
Appointing the first director:
The first directors of a company will be named in the company’s statement of proposed officers.
MA 17 gives two ways in which a director can be appointed:
o By the directors – which is easier as it can be done at a BM
o By shareholders – ordinary resolution MA 17 - this may be appropriate when the current directors of the
company are not shareholders so that the shareholders have the chance to vote on the new director.
Under s167 – the company must make a statement on behalf to the new director indicating their consent – this is
addressed in a Form IN01 for the first directors.
The director will automatically become a director when the company is incorporated – s16(6)(a)
The appointment of the director and the Form will need to be filed with Companies House and CH will send
information to the director on directors’ duties and roles – s1079B.
Procedure requires BM – GM -BM.
Appointing subsequent directors:
MA 17 gives two ways in which a director can be appointed:
o By the directors – which is easier as it can be done at a BM
o By shareholders – ordinary resolution – MA 17- this may be appropriate when the current directors of the
company are not shareholders so that the shareholders have the chance to vote on the new director.
If, at the same time of appointing a new director, there is also a removal of a director, the general meeting notice
requirement is that ‘special notice’ of that resolution is given to the shareholders for the GM – s168(2)
The company must make a statement on behalf of the director of their willingness to act as a director. The Form
which requires this statement is an AP01 (for a human director and AP02 is a company).
The appointment must then be filed with Companies House along with the AP01 within 14 days of the appointment
having been made.
Additionally, the register of Directors & register of director’s addresses must be updated (to reflect appointment
and possible removal)
Companies House will send information to the director on directors’ duties and roles – s1079B.
Requires only a BM.
Authority of Directors
Actual authority:
actual authority is where the company gives the agent – director – specific prior consent to the actions.
Expressly or impliedly given
Will bind the company to contract if a director acted with actual authority.
If the director exceeds actual authority – they will not bind the company, but they may be personally liable to breaches to
the third party
Apparent authority:
Apparent authority is when the agent – director – acts without the company’s prior consent but it still binds the company
to the contract with the third party
Apparent authority will arise when there has been a representation to the third person by the company that the director
is acting with authority – it cannot arise purely by the directors’ actions, only the company’s representation
