The duties of the directors

The directors of a company are responsible for its governance. Their duties are clearly set out and, if they do not carry them out, not only may they be held liable under the law, but they may also be banned from acting as director of any company for a certain period of time.

Read through the duties and then answer the questions.

Except with the prior sanction of the holders of more than 50 per cent of the issued share capital of the Company from time to time the Directors shall procure that the Company shall not:

1. sell, transfer or otherwise dispose of the whole of its undertaking, property or (save in the ordinary course of trading) assets or a part thereof being substantial in relation to its total undertaking, property and assets;

2. issue shares, loan stock, debentures or any other form of security of the Company including for this purpose any issue of redeemable shares;

3. purchase any of its own shares;

4. incur or agree to incur any capital commitments in excess of £100,000;

5. engage or dismiss any person as a Director;

6. increase by more than 20 per cent the remuneration payable to any of its Directors, officers, employees, consultants or agents;

7. dismiss any employee;

8. purchase or sell, take or let on lease or tenancy or otherwise acquire or dispose of any real or leasehold property for any estate or interest;

9. institute any litigation save in respect of the debts owing to it in the ordinary course of business;

10. acquire or dispose or any shares, debentures, debenture stock or other securities in any other company.

Which clause states that the director shall, unless agreed by others, ensure that the company does not:

a - 3 buy its own shares?

b - 5 appoint or fire another director?

c - 8 buy land?

d - 9 bring a case to court except to collect money owed?

e - 6 increase the pay to staff above a certain percentage?

f - 2 issue equities?

g - 4 spend more than a stated amount?

h - 10 buy shares in another company?

i - 1 sell the company or part of it?

j - 7 fire an employee?

Shareholders' Agreement

The Shareholders' Agreement is intended to govern the relationship between a number of shareholders in a company. Although the Articles of Association provides some protection for minority shareholders, it is always possible to change the Articles of Association with a 75 per cent majority. The Shareholders' Agreement works as a second layer of protection, preventing the company from being run in a manner other than has been agreed.

Here are two clauses from a Shareholders' Agreement, setting out the general duties on the shareholders. Complete the texts using the words in the box.

Each of the Shareholders represents to the other that it has taken all necessary other actions to enable him validly to accept and perform the obligations required under the terms of this Agreement and that performance of the provisions of this Agreement will not result in a breach of or constitute a default under any agreement or other contractual restriction binding upon him.

The Shareholders undertake with each other that they shall not without the prior written consent of the other parties while a shareholder in the Company become involved in any business other than that of the Company and that they shall during such period use all reasonable endeavours to promote the interests of the Company and devote to its business such of their respective time and attention and resources as are reasonably required for the efficient and profitable conduct of the business of the Company.

Share capital

Link the phrase on the left to its definition on the right.

When a company is formed, the person or people forming it decide whether its members' liability will be limited by shares. The members must agree to take some, or all, of the shares when the company is registered. The articles of association must show the names of the people who have agreed to own shares and the number of shares each will own. These people are called the subscribers.

The Annual General Meeting (AGM)

Here is a sample form of the notice of invitation to an AGM. Complete the missing information using the words/phrases in the box.

BACO LIMITED

NOTICE IS HEREBY GIVEN that the fifth Annual General Meeting of the Company will be held at BACO House on 15th January 2001 at 2.00 pm for the purpose of carrying on the business as is stated below:

1. To receive the accounts of the Company and the Directors' report for the year ended 30th September 2000.

2. To approve the declaration of a final dividend of £87.32.

3. To reappoint Grabbit and Wrun as auditors of the Company.

4. To reappoint John Bailey and Leslie Cohen as Directors of the Company.

Dated 19th October 2000 By Order of the Board

Jeremy Sunders

Secretary

Registered Office:

BACO House

Tewkesbury Road

Oldhampton

W567YU

Note: A member who is entitled to attend and vote at this meeting is entitled to appoint a proxy to attend and, on a poll, vote instead of him. A proxy need not also be a member of the Company.

The Annual General Meeting is held once a year and all shareholders are invited to attend. In advance of the meeting, an invitation must be sent out.

Bankruptcy

Below are some key terms from the area of bankruptcy and insolvency. Match each word to its definition.

Terms

Definitions

Bankruptcy law provides for the development of a supervised plan that allows a debtor, who is unable to pay his creditors, to resolve his debts through the division of his assets among his creditors. This allows the interests of all creditors to be treated with some measure of equality. Certain bankruptcy proceedings allow a debtor to stay in business and help him pay his debts. An additional purpose of bankruptcy law is to allow certain debtors to be released from their financial obligations after their assets are distributed, even if their debts have not been paid in full.

Arbitration

Arbitration is a procedure for the resolution of disputes on a private basis through the appointment of an arbitrator, an independent, neutral third person who hears and considers the merits of the dispute and renders a final and binding decision called an award.

A Complete the following text about arbitration with words from the box.

The process is similar to the litigation process as it involves adjudication. However, the parties choose their arbitrator and the manner in which the arbitration will proceed. For example, if the dispute is fairly straightforward and does not involve any factual questions, the parties may agree to waive a formal hearing and provide the arbitrator with written submissions and documentation only, called a documents only arbitration. However, in other cases the parties may wish a full hearing. Therefore, the parties create their own adjudicatory forum which is tailor-made to the particular needs of the parties and the nature of the dispute.

The advantages of arbitration over court adjudication can include the following:

▪ Expertise of the decision-maker: The parties can choose an arbitrator who has expert knowledge of the law, business or trade in which the dispute has arisen.

▪ Low cost: Arbitration is not expensive if the process is kept simple.

▪ Speed: Arbitration can be arranged within days, weeks or months.

▪ Duration: Arbitration does not take as long as litigation.

B We have seen the noun 'arbitration' and the verb 'arbitrate'. Now complete the missing words in the table.

Mediation

The most popular form of ADR is mediation. Mediation is a process of dispute resolution focused on effective communication and negotiation skills.

Date: 2015-01-12; view: 5135