Company Law Essay Help : Directors

Cases referred to in this section
Dunston v Imperial Gas Light Co (1831) 3 B & Ad 125
R v Brockley [1994] 1 BCLC 606, [1994] BCC 131, CA
Hutton v West Cork Rly Co (1883) 23 ChD 654 CA
Re Lundy Granite Co Ltd, Lewis's Case (1872) 26 LT 673
Boschoek Pty Co Ltd v Fuke [1906] 1 Ch 148

The company's affairs are conducted by directors, who may be called directors or some other name such as trustees, members of the council or governors. All companies registered on or after 1 November 1929 (other than a private company) must have at least two directors. Every private company, whenever registered, must have at least one director (and the sole director may not also be the company secretary - Companies Act 1985 s 283(4)(b)). In cases where a company may have only one director, a limited company may be appointed to perform the duties and exercise the powers usually performed and exercised by individuals appointed as directors.

The first directors of the company are those named in the statement which has to be delivered on the formation of the company, signed by or on behalf of the subscribers of the memorandum and containing a consent signed by each of the persons so named as directors to act in that capacity. The first directors are often also named in the articles of association, which usually prescribe a maximum and minimum number of directors, but such an appointment is void, unless they are named as directors in the statement.

The power to appoint directors, other than first directors or directors to fill casual vacancies, is usually exercisable only by shareholders in general meeting; and it is not competent for the directors to enter into contracts restricting the right of the company to appoint its own directors. The directors are usually invested with the power of appointing additional directors.

A person who is an undischarged bankrupt or in respect of which a bankruptcy restrictions order is in place cannot act as a director - if he does, or if he directly or indirectly takes part in the promotion, formation or management of a company without the permission of the court, he is liable on conviction on indictment to imprisonment for a term not exceeding two years or a fine, or to both, or on summary conviction to imprisonment for a term not exceeding six months or a fine not exceeding the statutory maximum, or to both (Company Directors Disqualification Act 1986 ss 11(1), 13 (s 11(1) as substituted). The offence is one of strict liability (R v Brockley [1994] 1 BCLC 606, [1994] BCC 131, CA).

In England and Wales, the permission of the court must not be so given unless notice of intention to apply for it has been served on the official receiver; and it is the duty of the official receiver, if he is of the opinion that it is contrary to the public interest that such application should be granted, to attend on the hearing of the application and oppose it.

A person who acts in contravention of these provisions will also be personally responsible for all the relevant debts of the company incurred whilst he was involved in its management.

In the absence of a clause in the memorandum of association or in the articles of association providing for their being paid for their services (Dunston v Imperial Gas Light Co (1831) 3 B & Ad 125), directors are not entitled to be paid any remuneration, nor may they recover anything on a quantum meruit basis (Hutton v West Cork Rly Co (1883) 23 ChD 654 at 671, CA, per Bowen LJ).

The remuneration of directors may be fixed by the articles of association, or the articles may provide that the remuneration is to be fixed by the company in general meeting or in any other manner. If fixed by the articles of association, it is subject to alteration by special resolution (Boschoek Pty Co Ltd v Fuke [1906] 1 Ch 148). Remuneration is payable although no profits are made unless stated otherwise (Re Lundy Granite Co Ltd, Lewis's Case (1872) 26 LT 673).

The Company's articles of association usually contain full provisions as to the retirement and removal of directors.

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