Directors' powers

Directors have such powers as are conferred on them by the articles of the company. Most
companies have articles based on either the Model Articles (companies registered post 1.10.2009,
or Table A (for companies registered before). Note also that most articles allow the directors
collectively to delegate powers to individual directors.

 Directors powers under the articles

 Powers reserved for the members
 Directors' powers that need members' consent
 Delegation to individual directors

Directors' powers under the articles

both the Model Articles and Table A have provisions

Model Articles:

Directors' general authority

3. Subject to the articles, the directors are responsible for the management of the company's
business, for which purpose they may exercise all the powers of the company.

Table A: Most companies with articles of association which date pre-Oct 2009 have the following
provisions of Table A:

Powers of directors
70. Subject to the provisions of the Act, the memorandum and the articles and to any directions
given by special resolution, the business of the company shall be managed by the directors who
may exercise all the powers of the company.... The powers given by this regulation shall not be
limited by any special power given to the directors by the articles and a meeting of directors at which
a quorum is present may exercise all powers exercisable by the directors.

In other words, the directors have the power to deal with any particular matter unless the Act, the
articles or a (previously passed) special resolution says to the contrary.

Decisions which must be made by a resolution of the members

Most companies do not have special articles and most have not passed special resolutions to restrict
the directors' powers, so the reality is that in most companies the directors can make any decision
unless the Act says it needs a resolution in general meeting is required. The following is a list of the
more commonplace decisions which must be made by the general meeting (and the type of
resolution required):
Change company's name (special resolution): CA 2006, sec77
Amend or adopt new articles (special resolution): CA 2006, sec29
Wind up the company (type of resolution depends on the circumstances) Insolvency Act, 1986,
sec84

Directors' decisions that need members' consent

The following decisions should be made by the directors but usually also require a resolution of the
shareholders:

Some loans to directors (see related topic: Loans to directors).

Directors' fixed term service contracts for more than 2 years (see related topic: Are directors entitled
to be paid?).
Substantial property transactions in which directors have a personal interest (see related
topic:Conflicts of interest).
Issue shares (see related topic: Issuing shares).

Some things, such as the appointment of additional directors, can be done by the board or the
general meeting. If the directors are actually or potentially in breach of their fiduciary duties, a
resolution in general meeting, properly passed, may be used to authorise a transaction or give the
company's consent to a profit or interest of the director.Serious potential liabilities can arise if the
directors do not obtain the approval of the general meeting when this is required.

Delegation to individual directors

The powers noted above are given to the directors collectively. Neither the Model Articles nor Table
A power on any individual director. For this, the board must delegate power to the director
concerned. Both the Model Articles and Table A permit this.

The Model Articles provide that:

5. (1) Subject to the articles, the directors may delegate any of the powers which are conferred on
them under the articles-
(a) to such person or committee;
(b) by such means (including by power of attorney);
(c) to such an extent;
(d) in relation to such matters or territories; and
(e) on such terms and conditions;
as they think fit.

Table A provisions
71. The directors may, by power of attorney or otherwise, appoint any person to be the agent of the
company for such purposes and on such conditions as they determine, including authority for the
agent to delegate all or any of his powers.

72. The directors may delegate any of their powers to any committee consisting of one or more
directors. They may also delegate to any managing director or any director holding any other
executive office such of their powers as they consider desirable to be exercised by him. Any such
delegation may be made subject to any conditions the directors may impose, and either collaterally
with or to the exclusion of their own powers and may be revoked or altered. Subject to any such
conditions, the proceedings of a committee with two or more members shall be governed by the
articles regulating the proceedings of directors so far as they are capable of applying.

84. Subject to the provisions of the Act, the directors may appoint one or more of their number to the
office of managing director or to any other executive office under the company and may enter into an
agreement or arrangement with any director for his employment by the company or for the provision
by him of any services outside the scope of the ordinary duties of a director. Any such appointment,
agreement or arrangement may be made upon such terms as the directors determine and they may
remunerate any such director for his services as they think fit. Any appointment of a director to an
executive office shall terminate if he ceases to be a director but without prejudice to any claim to
damages for breach of the contract of service between the director and the company. A managing
director and a director holding any other executive office shall not be subject to retirement by
rotation.

A company with these provisions in its articles should resolve at a board meeting to confer
appropriate powers on the various executive directors, together with any limitations on the powers so
conferred (e.g. financial limits, areas of competence, etc.) and see that these are clearly minuted.
Such resolutions will confer actual authority on the directors concerned. If a director exceeds his or
her actual authority when dealing with those outside the company, the acts will still bind the
company if the director was acting within his or her apparent or ostensible authority: Freeman &
Lockyer v. Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480, CA; Hely-Hutchinson v.
Brayhead Ltd [1968] 1 QB 549, CA.

Detailed consideration of the agency rules as they apply to directors (often referred to as the rule in
Turquand's case: Royal British Bank v. Turquand (1856) E & B 327, 119 ER 886) is beyond the
scope of this database.

Directors of a firm are vested with certain powers by the corporate legislation and the firm's articles
of association. These generally include power to (1) act as the firm's agents, (2) have full access to
the firm's accounts, (3) cause the firm to enter into valid contracts, (4) pledge the firm's assets, (5)
borrow and give security, and (6) determine terms and conditions under which the firm's shares are
issued, transferred, and forfeited.

Read more: http://www.businessdictionary.com/definition/powers-of-dire

ctors.html

Cumulative Voting
Cumulative voting is a type of voting system that helps strengthen the ability of minority shareholders to elect a
director. This method allows shareholders to cast all of their votes for a single nominee for the board of directors
when the company has multiple openings on its board. In contrast, in "regular" or "statutory" voting, shareholders
may not give more than one vote per share to any single nominee. For example, if the election is for four directors
and you hold 500 shares (with one vote per share), under the regular method you could vote a maximum of 500
shares for each one candidate (giving you 2,000 votes total—500 votes per each of the four candidates). With
cumulative voting, you are afforded the 2,000 votes from the start and could choose to vote all 2,000 votes for one
candidate, 1,000 each to two candidates, or otherwise divide your votes whichever way you wanted.

Cumulative Voting
Also found in: Dictionary, Financial, Wikipedia.

Cumulative Voting
A method of election of the board of directors used by corporations whereby a stockholder maycast as m
any votes for directors as he or she has shares of stock, multiplied by the number ofdirectors to be electe
d.

A plan used for the election of members to the lower house of the Illinois legislature by whichvoters, each
of whom is given three votes, may cast all of the votes for one candidate or allocatethem among two or th
ree candidates.

The purpose of cumulative voting is to facilitate the representation of minority stockholders on theboard. T
he stockholder may cast all of his or her votes for one or more, but not all, of the directorson the ballot, wh
ich therefore promotes representation of small shareholders. Cumulative voting ismandatory under the co
rporate laws of some states and is allowed in most states.
West's Encyclopedia of American Law, edition 2. Copyright 2008 The Gale Group, Inc. All rights reserved.

cumulative voting
n. in corporations, a system of voting by shareholders for directors in which the shareholder canmultiply hi
s voting shares by the number of candidates and vote them all for one person for director.This is intended
to give minority shareholders a chance to elect at least one director whom theyfavor. For example, there
are five directors to be elected, and 10,000 shares issued, a shareholderwith 1,000 shares could vote 5,0
00 for his candidate rather than being limited to 1,000 for each offive candidates, always outvoted by shar
eholders with 1,001 or more shares.

Quorum at general meetings

 Statutory provisions
 Model articles provisions
 Table A provisions
 Alternative provisions

Statutory provisions (Companies Act 2006)

Sec318 Quorum at meetings

(1) In the case of a company limited by shares or guarantee and having only one member, one
qualifying person present at a meeting is a quorum.
(2) In any other case, subject to the provisions of the company's articles, two qualifying persons
present at a meeting are a quorum, unless-
(a) each is a qualifying person only because he is authorised under section 323 to act as the
representative of a corporation in relation to the meeting, and they are representatives of the same
corporation; or
(b) each is a qualifying person only because he is appointed as proxy of a member in relation to the
meeting, and they are proxies of the same member.
(3) For the purposes of this section a "qualifying person" means-
(a) an individual who is a member of the company,
(b) a person authorised under section 323 (representation of corporations at meetings) to act as the
representative of a corporation in relation to the meeting, or
(c) a person appointed as proxy of a member in relation to the meeting.

Notice that these rules are subject to the provisions of the company's articles.

Model Articles provisions

Quorum for general meetings

38. No business other than the appointment of the chairman of the meeting is to be transacted at a
general meeting if the persons attending it do not constitute a quorum.

Table A provisions
Art. 40. No business shall be transacted at any meeting unless a quorum is present. Two persons
entitled to vote upon the business to be transacted, each being a member or a proxy for a member
or a duly authorised representative of a corporation, shall be a quorum.

Art. 41. If such a quorum is not present within half an hour from the time appointed for the meeting,
or if during a meeting such a quorum ceases to be present, the meeting shall stand adjourned to the
same day in the next week at the same time and place or to such time and place as the directors
may determine.

Alternative provisions

Many companies state a higher quorum for their meetings. This may be particularly important where
articles are drafted to ensure the ability of certain parties to attend any meeting.

Some company's articles add the following provisions:

(a) If a quorum is not present within half an hour from the time appointed for the start of a general
meeting the meeting shall be adjourned to the same day in the next week at the same time and
place, or to such other day and at such other time and place as the directors may determine; and if
at the adjourned general meeting a quorum is not present within half an hour from the time
appointed for its start, such adjourned general meeting shall be dissolved.

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A quorum is the minimum number of members of a group or committee

required to be in attendance in order for that group to be able to take official
action. Groups that often have quorum requirements include legislative
bodies, corporate boards of directors, and corporate shareholder meetings.

Illustrative caselaw

See, e.g. New Process Steel, L.P. v. N.L.R.B., 130 S.Ct. 2635 (2010).