Company Law - Directors I (Part 1)

The role of the director

Although the company is a separate legal personality, it still requires agents to act on its behalf. As was mentioned in Session 4, members of a company often do not wish to be involved in the day-to-day management. Therefore, this power is delegated to the board of directors.

Directors are in a position of trust and confidence, and wield considerable power. It is necessary to ensure that this power is not abused and so numerous safeguards are build into the company legislation and the articles, restricting and controlling the directors.

The appointment of directors

The first directors will be those persons named as directors on the Form 10. They will automatically become directors on incorporation of the company.

The procedure for appointing subsequent directors will be laid down in the articles of association of the company. Directors can either be appointed by an ordinary resolution of the members in general meeting, or by a resolution of the board of directors.

Where appointment is made by the members, details of the procedure to be followed are set out in arts. 76-79 Table A. This sets out the specific information which must be given to the company and to the members within certain time limits.

The procedure for appointment of a new director by the existing board is simpler. However, under art.79 Table A the newly appointed director holds office only until the next AGM, at which stage he must be re-appointed by the members in order to remain in office.

Once a director has been appointed, he must sign a form (Form 288a) indicating his consent to act as a director.
Number of directors

A private company must have at least one and a public company must have at least two. Under art.64 Table A, there must be at least two directors. If a different minimum number is required (for example, if there is only going to be one director) then a special article should be included to this effect on formation of the company or the existing articles should be amended accordingly.

Managing directors

The managing director is appointed by the other directors to take charge of the running of the company on a daily basis. The power to remove the managing director lies with the other directors.

Executive and non-executive directors

Generally, an executive director is an employee and is involved in the day-to-day management of the company. A non-executive director is not an employee and merely attends board meetings to provide general guidance.

Remuneration of directors

A director may receive payments for services given in the office of director. Art.82 Table A states that a director is entitled to such remuneration as the members decide by ordinary resolution in general meeting. See also the case of Guinness v Saunders.

A director may also receive payment under a contract of service, and this will invariably be the case with executive directors. s.318 Companies Act 1985 states that the director’s contract of service must be available for inspection by the members in general meeting.

Where the contract is for a term in excess of five years, the contract must first be approved by an ordinary resolution of the company in general meeting (s.319 Companies Act 1985).
Related Posts Plugin for WordPress, Blogger...
Need Law Introduction ... click HERE
Private Policy About Us Contact Us Content References

LAW (LLB) NOTES is intended merely as an informational and educational resource and is not intended to offer legal advice, nor does it offer legal advice. The exchange of information, by electronic mail or otherwise, relating in any way to LAW (LLB) NOTES is not intended to create an attorney-client relationship, nor does it create an attorney-client relationship.