Business Enterprise Law: Organs of the Company

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Questions and Answers

Who has the power to remove a director at any time by ordinary resolution?

The company's employees

The board of directors

The auditor

The shareholders (correct)

What is the main purpose of a shareholders meeting?

To appoint an auditor

To elect a new board of directors

To exercise voting rights in relation to company matters (correct)

To discuss company's financial statements

Who can convene a shareholders meeting?

The auditor or the company secretary

Only the board of directors

The board of directors, any other person specified in the MOI, or the shareholders (correct)

Only the shareholders

What is the minimum percentage of shareholders required to demand a shareholders meeting?

10% Signup and view all the answers

What is the consequence of not following the prescribed formalities for a shareholders meeting?

The meeting is invalid, and any decisions made are not binding Signup and view all the answers

Who are the holders of a company's issued securities who are entitled to exercise voting rights in relation to a matter?

Shareholders Signup and view all the answers

What is the purpose of a class meeting?

To discuss matters related to a specific class of shares Signup and view all the answers

Who has the duty to hold a shareholders meeting if demanded by the required percentage of shareholders?

The board of directors Signup and view all the answers

What is the primary purpose of section 75(4) of the Act?

To enable a director to disclose personal financial interests in advance Signup and view all the answers

Which of the following is NOT a standard of a director's conduct according to section 76?

Duty to prioritize shareholder interests over company interests Signup and view all the answers

Who is considered a related person according to section 2(1) of the Act?

An individual who is married to or lives with a director, or is within two degrees of natural or adopted consanguinity or affinity Signup and view all the answers

What is the consequence of a director failing to disclose a personal financial interest before a board meeting?

The director may disclose afterwards, as per section 75(6) Signup and view all the answers

What is the primary duty of a director according to section 76?

Duty to act in the best interests of the company Signup and view all the answers

What is the purpose of the standards of directors' conduct outlined in section 76?

To promote good governance and accountability among directors Signup and view all the answers

What was the main reason for the directors of Regal to create a new subsidiary, Hastings Amalgamated Cinemas Ltd?

To create a viable sale package Signup and view all the answers

Why did the landlord offer to increase the share capital of Hastings Amalgamated Cinemas Ltd?

Because the directors refused to provide personal guarantees Signup and view all the answers

What was the profit made by the directors per share after selling the business?

Nearly £3 per share Signup and view all the answers

What is the main grounds for the court's decision in Regal (Hastings) Ltd v Gulliver?

Breach of fiduciary duty to the company Signup and view all the answers

What is the condition for directors to account for their actions outside the company, as stated in Regal (Hastings) Ltd v Gulliver?

If their actions resulted in profits for themselves Signup and view all the answers

What is the rule of equity stated in Regal (Hastings) Ltd v Gulliver?

Directors are liable for any profits made using their fiduciary position Signup and view all the answers

What is the main implication of the court's decision in Regal (Hastings) Ltd v Gulliver?

Directors are more liable for their actions outside the company Signup and view all the answers

What is the relevance of the business judgment rule in the context of Regal (Hastings) Ltd v Gulliver?

It is not relevant in this case Signup and view all the answers

Study Notes

Organs of the Company

A company can only perform actions through its shareholders, directors, managers, and employees.
The rights and duties of these groups are usually determined by the Memorandum of Incorporation (MOI) or the Companies Act.

Shareholders and Shareholders Meetings

A shareholder is the holder of a share issued by a company and is entered as such in the company's securities register.
A shareholders meeting is a meeting of holders of a company's issued securities who are entitled to exercise voting rights.
There are two types of shareholders meetings: general meetings (involving all shareholders) and class meetings (involving shareholders of a specific class).

Calling a Shareholders Meeting

A shareholders meeting can be convened by:
- The board of directors
- Any person specified in the Memorandum of Incorporation or rules
- Shareholders with 10% voting rights attaching to shares, by written demand
Failure to comply with prescribed formalities for a meeting could result in an invalid decision.

Directors' Duties

Regal (Hastings) Ltd v Gulliver

Directors must account for activities outside the company if:
- Their actions are related to the company or result from their special knowledge as directors
- Their actions result in profits for themselves
Court held that directors breached their fiduciary duties to the company by not obtaining fully informed consent from shareholders.

Directors' Personal Financial Interests

A director may disclose personal financial interests in advance in writing (s 75(4)).
A director must disclose personal financial interests before a board meeting discussing a matter in which they have an interest (s 75(5)).
If disclosure is not possible before the meeting, the director may disclose afterwards (s 75(6)).

A related person includes:
- A spouse or person in a similar relationship
- A person related by no more than two degrees of natural or adopted consanguinity or affinity
- A juristic person controlled by the individual

Standards of Directors' Conduct

Directors have duties to:
- Not abuse their position or information
- Communicate with the board of directors
- Act in good faith and for a proper purpose
- Act in the best interests of the company
- Act with a certain degree of care, skill, and diligence (s 76)

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Description

This quiz covers the roles and responsibilities of shareholders, company and board meetings, and the board of directors and their duties in a company. Understand the actions that can be performed on behalf of the company.