5 - The Board of Directors

• Section 250 states that "Director" includes any person occupying the position of director, by whatever name called
• Section 155 - a company must have at least one director who is a natural person
• A de jure director is a person who has been validly appointed as a director (in accordance with the articles), whereas a de facto director is a person who acts as a director but has not been validly appointed.
• The Courts have ordered that in order to be a de facto director, the person must:

  1.        Exercise real influence in the corporate governance of the Company

  2.        Undertake functions which could properly be discharged only by a director

  3.        Participate in directing the affairs of the Company and act on an equal footing with the de jure directors
• Section 251 - A shadow director is a person in accordance with whose directors or instructions the directors of the company are accustomed to act
• An executive director is usually a full-time employee of the company and will be involved in the day-to-day management of the company
• A NED is not usually an employee of the company, is part-time (usually around one to two days per month), and their managerial role is much more limited.
• Statute states that the following persons are not eligible to act as directors:

  1.        A person under the age of 16

  2.        A company’s statutory auditor

  3.        A person subject to a disqualification order (criminal offense)

  4.        An undischarged bankrupt cannot act as a director, unless they obtain the leave of the court
• Section 162 - Every company must keep a register of directors
• When a new director is appointed, the company must notify Companies House within 14 days,
• A private company may elect to keep it's register of directors on the public register maintained by Companies House.
• Section 161 (1) provides that acts of a person acting as a director are valid notwithstanding that it is afterwards discovered:

  1.        That there was a defect in their appointment

  2.        That they were disqualified from holding office

  3.        That they had ceased to hold office

  4.        That they were not entitled to vote on the matter in question
• Directors are not entitled to be remunerated, unless authorised to do so
• The following sources can provide authority for Directors’ to receive remuneration:

  ·        The members of the Company can approve

  ·        The Articles of the Company can provide that Directors will be remunerated

  ·        A Director’s Service Contract can provide that they will be remunerated
• For larger companies adopting the UK Corporate Governance Code, "no director should be responsible for determining their own remuneration' and therefore a Remuneration Committee should be eastablished.
• In larger companies, the following are the  most common committees established:

  ·        A remuneration committee

  ·        A nomination committee

  ·        An audit committee
• The four methods that a director can vacate office are:

  ·        Resignation

  ·        Vacation in accordance with the Articles

  ·        Removal

  ·        Disqualification
• Section 168 (1) - “A company may by ordinary resolution at a meeting remove a director  before the expiration period of office, notwithstanding any agreement between it and him”
• Removal under s 168 (1) required the following rules to be adhered to:

  1.        The resolution must take place at a meeting (not written)

  2.        Special notice is required – 28 days

  3.        A copy of the resolution must be sent to the director whose removal is being sought

  4.        The director has the right to protest against removal and may address the meeting
• The Company Directors Disqualifications Act 1986 provides that a person can be disqualified on specified grounds
• A disqualification order is issued by the Court providing that a person be disqualified
• A disqualification undertaking is issued by the Secretary of State (quicker)