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Register your business UK including directors powers, etc

Author: Amal Nair
by Amal Nair
Posted: Oct 26, 2018

To search about regulations on Directors including Power, Duration, Benefits and Disqualification of Directors and then register your business UK

You might ask this question how to open a limited company in UK but once a company is established there are other regulations that must be followed, like regulations on directors, or how to become a director etc. Before wishing for becoming a director at any firm, you should have know how about the life of a Director! A director is responsible for the management of any field in a company. This might sound easy but believe me it isn’t… After register your business UK, a company may appoint number of directors chosen from a group of managers. Director has to answer the CEO or vice president if anything goes wrong or the progress of the area under him is too sluggish. A director has to take decisions of his department and check the progress of team every day.

Who guides the company in the actions it takes?

Would you work honestly if no body kept a check on you? Well, I guess I wouldn’t! Similarly, the companies have to obey certain rules that are accepted commonly to work fairly. A solution is the Model articles, a very commonly accepted set of laws for companies in UK. All the companies are by default following these rules except for those that adopt any other form of rules. They not only tell you how to open a limited company in UK but also how to run it!

Articles of Model Articles dealing with directors:

Article 3 of the Model article says that the director is subjected to the articles. Director is responsible for supervision of the company. The director may enjoy the edge to use all of the company’s authorities.

The board of directors involves all the directors in a company. An interesting statement that is given by Article 5 is that the board can choose a director to be lucky enough to use the collective power of the board on behalf of the board in some or all the matters.

Now, let’s discuss about Statutory laws. They are the laws jotted down by legislature. Companies Act mentions statutory laws for directors in part 10.

Article 17 for Ltd and Article 20 for plc state define that appointment of director can be done by a board resolution as well as by ordinary resolution. Interestingly, the removal of a director requires an ordinary resolution. (Companies Act s.168)

Actions of a Sane or an Insane Director… Follow them:

Any action performed by a director is termed correct despite of the fact that the selection was unfair, or he was unable to vote, failed to qualify or otherwise had seemed to be a director (Companies Act s.161). You might be thinking that may be how to open a limited company in UK is not as easy to answer as it seems!

But someone did oppose above regulation! In the case of Morris v. Kanssen, Lord Simmons said that there is a distinction between a director who has been appointed but have a pathetic directorship and a director who never had an appointment but is well reputed. In the former case, the third parties should be capable of relying on the actions where as in the latter case, no appointment happened at all. Hence, Companies Act s.161 is found to be unapplicable.

How long do the companies bear a Director?

A good or a bad Director, you can just stay in office for not more than 2 years. (Companies Act s.188) Interestingly, Directors are officers of the company and not the employees. But a good director can get an extension if ordinary resolution of the members asks for it.

Do the directors enjoy special benefits?

Remuneration is a return for the service. In form of salary, allowances or benefits, a director can relish it! Officially Director is an officer of the company, so under Company Law, he is not given any remuneration. But, the board can approve it for the directors.

Let’s look at some cases:

In Guinness v. Sanders, a committee was selected by the board to handle a take-charge bid. Astonishingly, the committee gave £5 million to a director on the committee for his work. But, this was considered invalid by the House of Lords, as only the board has the right to give special benefits. Poor director had to return the whole amount.

In Re Halt Grange, an ex-director who was no longer working for the company had no longer the right to receive special payments. She too had to return them. So, remuneration should be given to a director who is serving the company at that time. Another director, who was in office, was receiving the remunerations for his services. The amount was greater than the market value of his services, extra amount was returned. It is clear that special payments cannot be greater in value than the market value of director’s services.

How Can a Director be removed?

If not a fair Director, you can be kicked out of the office! The actions of the director should be in company’s interests. A director has to report about his actions legally. The director has to make sure that the goals of the company are not compromised. So, he has to live up to the expectations of the shareholders and the board. If a director fails to do so, he can be removed.

What if the members dislike the Director?

Directors…. Beware of the members! They can remove you if you fail to perform your job fairly. As the Companies Act s.168 says, the members can use their power for the removal of a director by simply passing an ordinary resolution that does not withstand any other agreement.

Bushell v. Faith gave special rights for voting to the director i.e. the director had extra votes per share on any vote if the voting was being done for his removal. Strangely, House of Lords termed it valid although through this the director could not be removed unless he himself wanted to get removed.

If the board dislikes the Director:

The board can play an evil role in the Director’s life as well. It has the authority to remove a director by giving a unanimous written request. But, this is not allowed in Model Articles.

Disqualified Directors

An unfit Director can be disqualified for the management of the company through Company Directors Disqualification Act 1986 ss.6 and 8.

S.2 states that a director will be disqualified if he is found guilty of any harmful act in terms of running the company. And s.10 disqualifies the director if he partakes in any fraud trading.

Williams finds the directors’ disqualification act 1986 as not very helpful in guarding creditors from the unjust actions taken by the directors. Many cases pursued by the secretary of state are because of not paying the taxes and by late filing of accounts.

Worthington believes that Directs Disqualification Act is a worthy solution for handling managerial inability and deceit. Seems like, the thoughts of Williams and Worthington are just. Disqualification may not return money but it stops repeated attitude of the director that may be unacceptable until the period of disqualification finishes, spanning from 2 to 15 years. Any person holding the positon of director is a director no matter what name is given to the post. So, de facto directories are responsible as the directors.

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Author: Amal Nair

Amal Nair

Member since: Oct 04, 2018
Published articles: 7

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