The day-to-day management of a company is typically carried out by the appointed directors. These individuals exercise all powers of the company and make decisions at meetings of the board of the directors.
Shareholders do not necessarily have any direct say in the day-to-day management of the company; however, the interests of the members are safeguarded by the Company Act 2006. Certain corporate decisions are reserved and require approval from the shareholders. It should be noted that these provisions must always be read alongside the company’s own articles of association which may prescribe a different procedure, such as approval from a higher majority or unanimity of eligible shareholders.
Shareholder approval is sought by either of two types of resolution:
- Ordinary Resolution – passed by a simple majority (i.e over 50%) of the members voting in favour; and
- Special Resolution – passed by a majority of not less than 75% of votes.
Below, are a selection of matters the Companies Act 2006 require a private company limited by shares to pass an Ordinary or Special Resolution:
- Approval of a director’s long-term service contract, i.e a contract which guarantees a director’s employment for more than 2 years.
- Approval of loans to directors.
- Ratifying a director’s breach of fiduciary duty, except where the acts were dishonest or where the relevant act was unlawful or unauthorised.
- Removal of directors from office against their will.
- Approval of payments compensating directors for loss of office.
- Approval of ‘substantial property transactions’. This is when a director, or someone connected to them) buys from or sells to the company a non-cash asset, the value of which is either more than £100,000; or more than 10% of the company’s net assets and the asset’s value is more than £5,000.
- Authorise directors to allot shares (unless the company’s articles already empower directors to do so).
- Approving the company to buy-back its own shares.
- Amend the company’s articles of association.
- Change the company’s name.
- Disapply pre-emption rights, i.e the obligation for shareholders selling/transferring their shares to initially offer to all other existing shareholders.
- Reduce the company’s share capital.
- Approve the purchase of the company’s own shares using the company’s own capital, as opposed to distributable profits. The Directors will also need to provide a statement that the company will remain solvent for 12 months following the purchase.
Please note, this guide is for general information only and does not constitute legal advice. If you would like to discuss anything in this article, please get in touch.