Company Compliance and Administration: The Directors

Comprehensive practice flashcards covering types of directors, appointment procedures, legal duties, disqualification, and succession planning according to CA 2006 and the UK Corporate Governance Code.

Director (Section 250 CA 2006)

Any person occupying the position of director, by whatever name called.

Corporate Director

A corporate body or company legally appointed to serve as a director of another company, as permitted by the definition of 'person' in Section 250 of CA 2006.

Executive Director

A senior executive who serves on the Board of Directors and manages the day-to-day operations of the company.

Non-Executive Director (NED)

A director who is not a company employee and does not have executive responsibilities, primarily providing an objective 'check and balance' and specialized expertise to the board.

Letter of Appointment

The document that governs the relationship between a Non-Executive Director and the company, rather than a standard employment service contract.

Shadow Director (Section 251 CA 2006)

An individual who exerts significant control over a company from behind the scenes, whose instructions are regularly followed by the formally appointed directors and employees.

De facto Director

An individual who has not been officially appointed or registered but acts openly and publicly in the capacity of a director.

Alternate Director

A person appointed by an existing director to act on their behalf and attend board meetings during their absence, provided this is authorized by the Articles of Association.

Positive Discrimination

The strictly prohibited practice of favoring a candidate specifically because they possess a protected characteristic under the Equality Act 2010, regardless of comparative merit.

Induction

The process of providing briefings and training to newly appointed directors concerning internal policies, external legislation, and industry-specific trends.

Rotation by One-Third

A requirement in the Model Articles for Public Companies stating that one-third of the total number of directors must retire every year.

Annual Re-election

A recommendation by the UK Corporate Governance Code that all directors of listed companies should stand for re-election every year, rather than the legal 3-year cycle.

Service Address

The required address provided by all directors specifically for receiving official legal notices; it may be different from their residential address.

Natural Person Requirement

The statutory rule under Section 155 of CA 2006 that every company must have at least one individual human being appointed as a director.

Ratification

The power of company members to formally approve a director's act after the fact that would otherwise be considered a breach of duty, negligence, or default.

Form RP06

The document submitted to the Registrar by a director to apply to have their appointment 'struck out' from the public record if it was done without their valid consent.

Service Contract Approval

The legal requirement for an ordinary resolution from members to approve any director's contract with a guaranteed term of more than two years.

Collective Responsibility

The legal principle that directors are responsible as a group for managing the company and can be held jointly liable for board actions or failures to act.

Re City Equitable Fire Insurance Co. Ltd [1925]

A landmark case establishing that directors must exercise the care that an 'ordinarily prudent person' would take in their own affairs, subject to their specific knowledge and experience.

S171 CA 2006: Duty to Act Within Powers

The obligation for directors to follow the company's Articles of Association and use their powers only for the purposes for which they were granted.

S172 CA 2006: Duty to Promote Success

The duty for directors to act in good faith to benefit members as a whole, considering long-term consequences and the interests of employees, suppliers, and the community.

S174 CA 2006: Duty to Exercise Reasonable Care, Skill, and Diligence

A two-tier test involving an objective standard for the role and a subjective standard based on the specific director's actual knowledge and experience.

S175 CA 2006: Duty to Avoid Conflicts of Interest

The requirement for directors to avoid situations where personal interests (direct or indirect) conflict with the interests of the company regarding opportunities, information, or assets.

S177 CA 2006: Duty to Declare Interest

The requirement for directors to disclose the nature and extent of any interest in a proposed company contract or arrangement before it is finalized.

Wrongful Trading

Continuing to trade when there is no reasonable prospect of avoiding insolvent liquidation, which can pierce the corporate veil and lead to personal liability for directors.

Fraudulent Trading

Carrying on company business with the specific intent to defraud creditors.

Special Notice

The requirement for shareholders to give the company at least 28 days' notice before proposing a resolution to remove a director at a General Meeting.

Disqualification Undertaking

A voluntary exit where an individual agrees to a disqualification period with the Secretary of State to avoid formal court proceedings under CDDA 1986.

Hampton-Alexander Review

An initiative that recommended FTSE 350 companies achieve a minimum of 33% female representation on boards by 2020.

D&O Indemnity Insurance

Insurance purchased by companies to protect directors and officers against legal costs and personal liability arising from civil or criminal proceedings.

Co-option

In industry practice, the appointment of a director by the existing Board to fill a casual vacancy between Annual General Meetings.