UK Law and Practice Contributed by: Gareth Sykes, James Palmer, Isobel Hoyle and Hannah Whitney, Herbert Smith Freehills Kramer
• Shareholders – under the Companies Act, there are a number of decisions (eg, amend - ing the articles of association and certain share capital matters) that are reserved for shareholders and can only be passed by shareholder resolution. In some cases, these decisions can be delegated to the board of directors under a company’s articles of asso - ciation. 3.3 Decision-Making Processes The board of directors, management team and shareholders make decisions in the following ways. • The board of directors – decisions by the board are taken in the form of board reso- lutions and are typically taken at a board meeting. The procedures for board meetings and the voting requirements for board resolu - tions are set out in the company’s articles of association. Resolutions are typically passed by a simple majority. Board resolutions may also take the form of written resolutions, meaning a board meeting does not have to be physically convened. The articles of the company may also permit directors to meet virtually, using videoconferencing or similar communication tools. When making deci - sions, the directors must have regard to their general duties under the Companies Act (see 4.6 Legal Duties of Directors/Officers ). • The management team – the management team implements decisions made by the board but acts through delegated authorities from the board. As such, decisions must be made within the terms of the delegation. • Shareholders – decisions by shareholders are taken in the form of shareholder resolutions at a general meeting (or for private companies only, they may be taken by written resolu- tion, in which case a physical meeting will not
be required). In order to convene a general meeting to pass a shareholder resolution, a company must provide shareholders with notice of the meeting, including informa - tion about the issues that are to be resolved. The Companies Act stipulates the approval threshold for each type of shareholder deci - sion to be passed, which is typically either a simple majority (required to pass an ordinary resolution) or a majority of not less than 75% (required to pass a special resolution). Most shareholder resolutions can be passed by an ordinary resolution though some, such as an amendment to the articles of associa - tion or a disapplication of pre-emption rights on an allotment of shares, require a special resolution. Public companies, but not private companies, are required under the Compa - nies Act to hold an annual general meeting of shareholders (AGM). Standard business for an AGM includes the re-election of directors, appointment of an auditor and authorisation of certain matters in relation to a company’s share capital. In terms of board structure, companies have a single-tier, unitary board. Executive and non- executive directors are both members of the board, in contrast to other jurisdictions where non-executive directors sit on a separate super - visory body. Under the Companies Act, private companies must have at least one director, and public com - panies at least two directors and a company secretary. For all companies, directors must be over 16 years of age. 4. Directors and Officers 4.1 Board Structure Requirements in Law
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