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Questions and Answers
Decision making power within a company is entirely held by its employees.
Decision making power within a company is entirely held by its employees.
False
The Articles of Association can dictate the distribution of decision making power in a company.
The Articles of Association can dictate the distribution of decision making power in a company.
True
Companies can only make decisions through their shareholders and cannot delegate authority to directors.
Companies can only make decisions through their shareholders and cannot delegate authority to directors.
False
The Companies Act 2006 provides legal recognition of decision making powers within companies.
The Companies Act 2006 provides legal recognition of decision making powers within companies.
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The 'corporate veil' refers to the distinction between the personal actions of members and the actions of the company as a legal entity.
The 'corporate veil' refers to the distinction between the personal actions of members and the actions of the company as a legal entity.
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The board of directors has no authority over the management of the company’s business according to MA 3.
The board of directors has no authority over the management of the company’s business according to MA 3.
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A special resolution requires a simple majority of shareholders to pass.
A special resolution requires a simple majority of shareholders to pass.
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If a company has two members with equal shareholding, one member alone could pass either an ordinary or a special resolution.
If a company has two members with equal shareholding, one member alone could pass either an ordinary or a special resolution.
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Board resolutions can be made by a simple majority of directors according to the Model Articles.
Board resolutions can be made by a simple majority of directors according to the Model Articles.
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A shareholders' resolution can retroactively invalidate actions taken by directors prior to its passing.
A shareholders' resolution can retroactively invalidate actions taken by directors prior to its passing.
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Altering the articles of a company can only be accomplished through an ordinary resolution.
Altering the articles of a company can only be accomplished through an ordinary resolution.
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According to the principles established in case law, a company’s articles of association can be disregarded if a majority of shareholders agree to do so.
According to the principles established in case law, a company’s articles of association can be disregarded if a majority of shareholders agree to do so.
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Dragons typically acquire at least 30% of a company’s shares to influence decision-making.
Dragons typically acquire at least 30% of a company’s shares to influence decision-making.
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Shareholders must approve changes to the Model Articles, but directors can alter them without shareholder consent.
Shareholders must approve changes to the Model Articles, but directors can alter them without shareholder consent.
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In the Imperial Hydropathic Hotel Co. case, the rule was established that articles limiting the powers of the general meeting require formal amendment before they can be ignored.
In the Imperial Hydropathic Hotel Co. case, the rule was established that articles limiting the powers of the general meeting require formal amendment before they can be ignored.
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A general meeting resolution can authorize directors to exceed the remuneration limits set in the articles of association without prior amendment.
A general meeting resolution can authorize directors to exceed the remuneration limits set in the articles of association without prior amendment.
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Directors are considered mere agents of the shareholders, able to follow majority directions.
Directors are considered mere agents of the shareholders, able to follow majority directions.
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The Automatic Self-Cleansing Filter Syndicate Co. Ltd case confirmed that members can compel the board to sell company assets by passing an ordinary resolution.
The Automatic Self-Cleansing Filter Syndicate Co. Ltd case confirmed that members can compel the board to sell company assets by passing an ordinary resolution.
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The articles of association of Nia Ltd allow a group of shareholders with 60% ownership to sell assets worth 1.5 million without seeking the required 75% approval.
The articles of association of Nia Ltd allow a group of shareholders with 60% ownership to sell assets worth 1.5 million without seeking the required 75% approval.
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In John Shaw & Sons case, the court ruled that shareholders could direct the board not to pursue legal action against debtors.
In John Shaw & Sons case, the court ruled that shareholders could direct the board not to pursue legal action against debtors.
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The general body of shareholders can directly overrule decisions made by the board of directors using an ordinary resolution.
The general body of shareholders can directly overrule decisions made by the board of directors using an ordinary resolution.
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In the event of a deadlock, the shareholders have the authority to exercise the powers of the board of directors.
In the event of a deadlock, the shareholders have the authority to exercise the powers of the board of directors.
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A quorum for a board meeting can be satisfied even if only one director is present, assuming the article allows it.
A quorum for a board meeting can be satisfied even if only one director is present, assuming the article allows it.
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The Duomatic principle allows for informal decisions as long as all registered members give their assent.
The Duomatic principle allows for informal decisions as long as all registered members give their assent.
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Shareholders can use the Duomatic principle even if one registered member is deceased but still listed.
Shareholders can use the Duomatic principle even if one registered member is deceased but still listed.
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Directors can make decisions for the company without any limitations as long as they abide by the articles.
Directors can make decisions for the company without any limitations as long as they abide by the articles.
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The case of Barron v Potter established that shareholders can always summon a general meeting to resolve board disputes.
The case of Barron v Potter established that shareholders can always summon a general meeting to resolve board disputes.
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If the board of directors is evenly split on a critical decision, they must immediately call a general meeting of shareholders to resolve it.
If the board of directors is evenly split on a critical decision, they must immediately call a general meeting of shareholders to resolve it.
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A special resolution can be used to direct the directors to take specific actions as outlined in MA 4.
A special resolution can be used to direct the directors to take specific actions as outlined in MA 4.
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The articles of association can always be altered without any limitations set by existing laws or regulations.
The articles of association can always be altered without any limitations set by existing laws or regulations.
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What limits the decision-making authority of the board of directors in a company?
What limits the decision-making authority of the board of directors in a company?
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Which of the following entities is NOT recognized as having the power to make decisions on behalf of a company?
Which of the following entities is NOT recognized as having the power to make decisions on behalf of a company?
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According to the Companies (Model Articles) Regulations 2008, who holds the responsibility for the management of the company’s business?
According to the Companies (Model Articles) Regulations 2008, who holds the responsibility for the management of the company’s business?
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Which document primarily governs the distribution of decision-making power within a company?
Which document primarily governs the distribution of decision-making power within a company?
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What mechanism allows shareholders to direct the actions of the board of directors?
What mechanism allows shareholders to direct the actions of the board of directors?
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What term describes the legal separation between a company's actions and the personal actions of its members?
What term describes the legal separation between a company's actions and the personal actions of its members?
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What must occur before a company can disregard limitations on members' powers stated in its articles of association?
What must occur before a company can disregard limitations on members' powers stated in its articles of association?
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In which of the following situations would a resolution passed at a general meeting be invalid?
In which of the following situations would a resolution passed at a general meeting be invalid?
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What does the case of Automatic Self-Cleansing Filter Syndicate Co. Ltd v Cuninghame exemplify?
What does the case of Automatic Self-Cleansing Filter Syndicate Co. Ltd v Cuninghame exemplify?
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What principle did the case of Imperial Hydropathic Hotel Co v Hampson reinforce regarding articles of association?
What principle did the case of Imperial Hydropathic Hotel Co v Hampson reinforce regarding articles of association?
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According to the content, who are not considered agents of the shareholders in a corporate structure?
According to the content, who are not considered agents of the shareholders in a corporate structure?
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What is the outcome when shareholders attempt to compel directors to act against established articles without an amendment?
What is the outcome when shareholders attempt to compel directors to act against established articles without an amendment?
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What legal status does the company hold in relation to its shareholders and directors?
What legal status does the company hold in relation to its shareholders and directors?
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When can shareholders overrule a board's decision regarding director appointments?
When can shareholders overrule a board's decision regarding director appointments?
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What is the minimum percentage of shareholder votes required for a special resolution to pass?
What is the minimum percentage of shareholder votes required for a special resolution to pass?
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Which of the following statements accurately reflects the requirements for an ordinary resolution to pass?
Which of the following statements accurately reflects the requirements for an ordinary resolution to pass?
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What is a common issue that requires member approval by special resolution?
What is a common issue that requires member approval by special resolution?
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What is the minimum number of shareholders needed to pass an ordinary resolution in a scenario where a company has five shareholders?
What is the minimum number of shareholders needed to pass an ordinary resolution in a scenario where a company has five shareholders?
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How can a company alter its Model Articles according to its specific needs?
How can a company alter its Model Articles according to its specific needs?
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What major challenge arises if a company requires unanimous decisions from its board of directors?
What major challenge arises if a company requires unanimous decisions from its board of directors?
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What must shareholders do to alter the powers of the directors as vested by the articles?
What must shareholders do to alter the powers of the directors as vested by the articles?
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In cases of deadlock among the directors, what is the correct course of action for shareholders?
In cases of deadlock among the directors, what is the correct course of action for shareholders?
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Which statement about the Duomatic principle is correct?
Which statement about the Duomatic principle is correct?
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According to the Model Articles, what is true of the quorum for a board meeting?
According to the Model Articles, what is true of the quorum for a board meeting?
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What is a limitation of the Duomatic principle?
What is a limitation of the Duomatic principle?
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What does the term 'quorum' specifically refer to in a company meeting context?
What does the term 'quorum' specifically refer to in a company meeting context?
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In Barron v Potter case, what was the ruling regarding the powers of shareholders?
In Barron v Potter case, what was the ruling regarding the powers of shareholders?
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If shareholders disagree with a board decision, what action can they not take?
If shareholders disagree with a board decision, what action can they not take?
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What must all members agree upon for a decision made under the Duomatic principle to be effective?
What must all members agree upon for a decision made under the Duomatic principle to be effective?
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Under the articles, what is the general expectation of directors in managing company decisions?
Under the articles, what is the general expectation of directors in managing company decisions?
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Study Notes
Company Decision-Making
- Companies are legal entities with separate responsibilities from their members.
- Company decisions are confirmed through actions of directors, officers, employees, or agents.
- Distinguishing between decisions made on behalf of the company (agency) and decisions made by the company is crucial.
Distribution of Decision-Making Power
- Decision-making power is vested in the board of directors and members in general meetings.
- This distribution is primarily determined by the company's articles of association (AA) and the Companies Act 2006.
- Model Articles (MA) provide default rules for distributing decision-making powers.
Board of Directors' Authority (MA 3)
- Directors are responsible for company management, exercising all company powers, subject to articles.
Shareholders' Reserve Power (MA 4)
- Shareholders can direct directors by special resolution, but this does not undo actions taken before the resolution.
Constitutional Distribution of Power
- Company constitutions (AA/MA) primarily determine power distribution.
- Companies have discretion in defining their own power structures.
Limitations on Members' Power
- Members cannot disregard limitations in articles without formal amendment.
- Amendments must be made by special resolution.
Case Law Examples
- Imperial Hydropathic Hotel Co, Blackbool v Hampson (1882): Articles of association must not be disregarded even with a majority vote, requiring formal amendment.
- Boschoek Pty Ltd v Fuke: A company cannot disregard its articles where they set limitations. Members must amend the articles to remove/change limitations.
Unanimous Assent ("Duomatic Principle")
- Unanimous consent of all members (registered holders) can be a valid alternative to formal resolutions.
- All parties must be fully informed and in active agreement, not simply potentially.
- The consent must be determinable objectively.
Restrictions of the Duomatic Principle**
- It only applies if all registered members agree.
- Consent must be real, fully informed, and determinable. Consent cannot be assumed; it must be established.
Types of Resolutions
- Ordinary Resolution (OR): Requires more than 50% of voting shareholders.
- Special Resolution (SR): Requires at least 75% of voting shareholders.
Common issues requiring member approval
- Altering articles.
- Removing directors.
- Changing the company name.
Decision Making: Meetings and Resolutions
- Decisions are often made through formal meetings (board or general) or through informal unanimous consent.
- Key considerations: notice periods, determining appropriate quorum (minimum attendance/participation level), and proper chair processes.
General Meetings (Convening)
- Called by the board or on shareholder requisition.
- Notice requirements (14 days or as per company articles).
- Quorum determined by the articles or default in the Companies Act (2 members).
Director Meetings
- Directors can take decisions through simple majority (unless articles specify otherwise).
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Description
Explore the complexities of company decision-making, including the roles of directors, officers, and shareholders. This quiz covers the distribution of decision-making powers as outlined in the Companies Act 2006 and the Model Articles. Understand how these rules shape corporate governance.
