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The Supreme Court held that the proper purpose rule is concerned with abuse of power: [6] a company director must not, subjectively, act for an improper reason. Under article 42 of the company's articles of association, the power to restrict the rights attaching to shares is ancillary to the statutory power to call for information under section ...
The exercise by the board of directors of its powers usually occurs in board meetings. Most legal systems require sufficient notice to be given to all directors of these meetings, and that a quorum must be present before any business may be conducted. Usually, a meeting which is held without notice having been given is still valid if all of the ...
While corporate constitutions typically set out the balance of power between directors, shareholders, employees and other stakeholders, additional duties are owed by members of the board to the corporation as a whole. First, rules can restrain or empower the directors in whose favor they exercise their discretion.
Directors' duties are a series of statutory, common law and equitable obligations owed primarily by members of the board of directors to the corporation that employs them. It is a central part of corporate law and corporate governance. Directors' duties are analogous to duties owed by trustees to beneficiaries, and by agents to principals.
In the two-tiered board, the executive board, made up of company executives, generally runs day-to-day operations while the supervisory board, made up entirely of non-executive directors who represent shareholders and employees, hires and fires the members of the executive board, determines their compensation, and reviews major business decisions.
The first director's duty under section 171 is to follow the company's constitution, but also only exercise powers for the "proper purpose" relating to the power. [4] Prior proper purpose cases often involved directors plundering the company's assets for personal enrichment, [ 5 ] or attempting to install mechanisms to frustrate attempted ...
An early illustration of this principle is to be found in Hutton v West Cork Railway Co (1883) 23 Ch D 654, where the English Court of Appeal held that the paying of a gratuity to employees prior to their dismissal was an improper exercise of the powers of the company, because the company was no longer a going concern, and thus stood to obtain no benefit (and no furtherance of its objects ...
Since the board of directors habitually possesses the power to manage the business under a company constitution, a central theme is what mechanisms exist to ensure directors' accountability. UK law is "shareholder friendly" in that shareholders , to the exclusion of employees , typically exercise sole voting rights in the general meeting.