Chapter 2: Company Decision making

• Who makes decisions on behalf of a company?

  Directors and shareholders
• Who is primarily responsible for the day-to-day running of the company?

  The directors
• What is the primary role of shareholders in a company?


  Provide money to allow the business operate
• Where is the directors’ authority to run the company set out?

  MA 3
• Which sections of the CA 2006 relate to changing the articles of association and changing the company name?

  ss 21 and 77
• Once shareholders decide to change the articles, can directors reverse this decision?

  No, they must ensure paperwork is completed
• What is the second category of decision reserved for shareholders?

  Granting permission for certain director contracts
• What risk do certain contracts carry that require shareholder permission?

  Directors benefit personally from the contract
• In the context of shareholder decisions on contracts, what power do the shareholders NOT have?

  Power to enter into contracts themselves
• Who has the power to enter into contracts on the company’s behalf?

  Only the directors
• What types of companies does this chapter primarily focus on?

  Private companies limited by shares
• Who is responsible for making a particular company decision according to the CA 2006?

  Solicitors
• What may happen if the correct authorization for a decision is not obtained?

  The transaction may be voidable
• How do directors make decisions?

  Collectively in board meetings
• What are the decisions made in board meetings called?

  Board resolutions
• Besides the CA 2006, what other document should be considered when assessing the decision-making process?

  The company’s articles
• According to MA 5, can directors delegate their powers?

  Yes, as they see fit
• Under MA 5, who will be allowed to make decisions within their job description?

  Employees
• According to MA 9, what must a director do when calling a board meeting?

  Give notice to the other directors
• According to MA 11, what is the minimum number of directors required for a quorum at a board meeting?

  Two directors
• What constitutes "reasonable" notice for a board meeting?

  Depends on the facts
• What three things must the notice of a board meeting include according to MA 9(3)?

  Time, date, and place
• If directors will not meet in the same place, what must the notice state?

  The method of communication
• What is the purpose of requiring a quorum at board meetings?

  Reduces risk of rash decisions
• What does it mean if a board meeting has the required quorum?

  The meeting is quorate
• According to s 177 CA 2006, what must a director do if they have a personal interest in a proposed transaction?

  Declare the nature and extent
• According to MA14, when may a director not count in the quorum or vote?

  Interested in a proposed transaction
• Why is a director prevented from voting on a resolution they have a personal interest in?

  To promote the success of company
• If a director is prevented from voting by MA 14, can they count in the quorum for other resolutions?

  Yes, for other resolutions
• What potential bias should the board be aware of from a director?

  Their personal interest
• Where are the exceptions to the obligation to declare an interest set out?

  s 177(6)
• When does a director NOT need to declare their interest?

  If other directors already aware of it
• Why is it best practice to declare a personal interest even if an exception might apply?

  To prove they declared the interest
• What cannot be disapplied by the company's articles?

  Obligation to declare a personal interest
• What can a company disapply in its articles, enabling directors to vote when they have a personal interest?

  MA 14
• Why is disapplication of MA 14 common in small companies?

  Few directors mean no valid meeting
• If MA 14 is excluded, do directors still need to declare an interest under s 177?

  Yes, unless exceptions apply
• According to s 282 CA 2006, what is required for an ordinary resolution to be passed?

  Over half of the votes cast
• According to MA 7, how are board resolutions passed?

  By a simple majority
• How is voting typically carried out at board meetings?

  By a show of hands