The must act within their power[2], exercise independent

The directors, Mr. Kanters and Ms. Moore would like to know whether they could continue with the intended transactions without involving the General Meeting.


Position of Director

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Directors must act based on fiduciaries. They are appointed by shareholders to manage the company. According to the UK Company Act 2006, directors’ duties mostly stated that directors must act in good faith and best interest of the company. In the section 172, directors must promote the success of the company1.


In addition, the statutory ruled that directors must act within their power2, exercise independent judgment3, exercise reasonable care, skill and diligence4. Moreover, it also requires a director to avoid conflicts of interest5, not to accept benefits from third parties6, and must declare interest in proposed transaction or arrangement7.


In the UK jurisdiction, there is a concept of shadow director. A shadow director acts only



1.     On advice given by that person in a professional capacity8,

2.     In accordance with instruction, a direction, guidance or advice given by that person in the exercise of a function conferred by or under an enactment9, and

3.     In accordance with guidance or advice given by that person in that person’s capacity as a Minister of the Crown10.


Position of Shareholder


In the Companies act 2006 does not specific that shareholders should appoint directors. The only relevant statutory requirement is that, in the case of a public company, it is advisable to choose one slate on multiple drives and should not be submitted to shareholders unless agreed unanimously. Similarly, shareholders have the right to remove the director at any time without contrary the provisions in the employment contract. The provisions for the appointment of directors to the board of an unlisted company and any terms of maximum will be incorporated into company’s constitution. The Companies (Model Articles) Ordinance 2008 provides that a director of a listed company is to be appointed through a simple decision or by a director himself. For listed companies, the Listing Rules require the company to comply with the Merger Code or clarify the deviation. The Law stipulates that all directors should, after their appointments, shareholders who are elected at other general meetings, be re-elected within a period of not more than three years. The law empowers shareholders to appoint and remove the company’s auditors, as well as the right to request disagreements about essential accounting issues on the company’s website.


Decision Rights


Under the Corporations Act, the decision right of shareholders is broader than those under the shareholders must approve decisions that affecting the company’s constitutional documents, assets or structural integrity.


Amendment of the articles


The charter and the memorandum (except for the intention to set up the company, are now treated as conditions with regard to the articles of association) can be amended without the approval of the shareholders.


Decisions regarding assets  


Shareholders must approve or give the distribution of the company’s shares. The limited liability company’s capital can be approved at a general meeting to reduce the approval and repurchase approval details should ensure that shareholders control the process as well. Although the entire process of determining and announcing dividends is not legally required, directors and the shareholders generally have common rights over the process. First, it is suggested by directors that a part of distributable profits be distributed with dividends, and then according to the provisions of the Constitution, the shareholders vote on the distribution in the annual meeting within the scope permitted by the law. Since listed shareholders have preventative legal rights, stock rights may not awarded to third parties until stockholders vote to give up their pre-registration rights.


Directors’ service contracts


Shareholder approval is also required for a director’s service contracts for a maximum of probably more than two years, and for listed companies, annual reports of directors’ remuneration, employee share plans and long-term incentive plans are open to all employees and must be approved by shareholders. Most major transactions between the directors and the company require shareholder approval as well.


Decisions regarding structural integrity


Merger or division of a limited liability company must be approved by shareholders. The FSa’s Listing Rules require shareholders to be notified that the effect of approving the transaction is equal to or greater than 25% of the total assets (such as when the assets for sale are valuable) and gross profit (such as contracts of comparable value) or gross capital (the value of acquiring a business). If a company has to choose to take a defensive takeover system, then decide whether to shareholders.


Legal Advice


Based on the given facts, Mr. Kanters and Ms. Moore act in good faith and the best interest of the company. They do not breach the duty of act of the UK Company Act 2006 as provide as above and the Articles of Association as well. Mr. Kanters thinks that the intended transactions may boost the snowboard selling business of the company. I believe that the decision of Mr. Kanters made is absolutely reasonable and considerable of the best interest of the company. In addition, both Mr. Kanters and Ms. Moore do not involve any conflict of interest of company such as accept benefit from third party.


Regard the interests of the shareholders as mentioned above, Mr. Kanters and Ms. Moore do not against the interests of the shareholders, as we know the company has suffered from market trend. The sales relating to snowboard has been drop. This result the company experiences severe financial difficulties. The plans that Mr. Kanters planned are to attract more sales and increase the profit of the company.


My suggestion is Mr. Kanters and Ms. Moore could continue their plans without having General Meeting to ask approval of shareholders, because the shareholders do not have the rights to interfere your decision since the decision does not affect their assets, contractual integrity, or amending constitution.