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Whether you set up your own company, join a board from outside or reach director level via an internal promotion you will need to be aware of the legal implications that attach to your role as a company director. These are known as directors’ duties, some of which are codified in the Companies Act 2006. However, these codified duties are merely the tip of the legal iceberg of which directors have to be aware. There are numerous other duties ranging from maintaining proper accounts, making returns to the Registrar of Companies, and not trading the company after the point where an insolvent liquidation beckons. The book distils the rules into layman's language by looking at the role of the company director using a question and answer format such as:
"I've just been appointed as a director, what legal formalities do I need to comply with?"
"I want to borrow £20,000 from my company to buy myself a new car. Can I do this and, if so, how?"
“I want to defer my dividend, how do I do this?”
This book is written for company directorsincluding Managing Directors, Financial Directors and Operational Directors. Itwill be useful for sole directors of newly formed or recently set up companiesand also of interest to advisers to company directors, solicitors andaccountants who may wish to offer a copy of the book to their clients.
PeopleWho Cannot Be Directors
TheContract of Employment
Terminationof a Directorship
TheCapitalisation of the Company
Articlesand Shareholder Agreements
WhatDoes the Board Do?
The Role of the Members
Rights of Members
Directors’Dealings with Their Companies
TheCodified Duties of Directors
Other Directors' Duties
This book takes the form of an extended case study which is based on the following
scenario. It is structured around a series of questions which might be asked by
people involved in the running of a company. The book is essentially aimed at the
layman. For this reason technical references in the text are deliberately avoided.
Happy Families (Hairbands) Ltd is a long established family company engaged in
the manufacture of hairbands. It was established twenty-five years ago by Mr and
Mrs Parent who remain still active within the company, although they are now
approaching retirement age and intend to cease work altogether in five years’ time.
The company has a nominal share capital of 5,000 £1 shares of which 4,000 shares
have been issued. Mr and Mrs Parent each holds 1,000 shares within the company
and they are both directors. Two of their unmarried adult children, known within
the company as Mr Son and Miss Daughter, work full time for the company, are
also directors, and again each owns 1,000 shares. Mr Outsider has worked for the
company for five years. He gets on extremely well with the family and has recently
been invited to become the company’s fifth director. On joining the board,
Mr Outsider will buy 1,000 shares in the company for a total price of £10,000.
Mr and Mrs Parent have a third child, known within the company as Mr Third. He
is 19 years old and, having suffered from learning difficulties since birth, is
incapable of participating in the running of Happy Families (Hairbands) Ltd, still
less being a director. He is, however, extremely good at servicing and repairing
small lawnmowers. With the help of Miss Daughter he runs a small business from
a shed located on the premises of Happy Families (Hairbands) Ltd.
Happy Families (Hairbands) Ltd owns the premises from which it trades. The
value of these premises is about £100,000 freehold.
The company name used is a fictional company and is used only as an illustrative
example for the purposes of the Guide.
It is unusual for a foreword of book having two authors to be written merely by one
of them, but it is hoped that the reason will soon become apparent.
When I was asked by Jordan Publishing to write a book addressed to the layman
about directors and their duties, I was delighted. However, while it is not difficult
for a lawyer to write a text which is designed to be read by other lawyers or other
similar professionals such as accountants and company secretaries, it is not quite so
easy when the reader is likely to have no legal background knowledge. After all
lawyers, just like the members of any other trade or profession, have their own
idiosyncratic language, into which it is too easy to lapse.
It did not take me long to realise my shortcomings in this department, and so I
asked my son, Matthew, if he would collaborate with me. I was delighted when he
agreed. He is by training a social scientist and modern historian and by career
something to do with research and development in computers and computer
security (he has tried to explain to me what he does but the language of that
business is beyond me). It has been invaluable to have an intelligent onlooker
constantly asking what was meant by one expression or another and pointing out
that something could be the better expressed if only different language were used,
though corrections to my use of grammar might not have been quite as well
received by me. Any clarity which the text may have must be substantially due to
my son’s help and suggestions and even re-writing. Any errors of law must lie
clearly at my feet.
We must acknowledge the help and encouragement throughout from Mary Kenny
and Kate Hather of Jordan Publishing and also, in the later stages of production,
from Tracy Robinson of Letterpart Ltd. We are also grateful to Mrs Lucy
Campbell for her assistance, particularly with the glossary.
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