Appointment

How are directors appointed?

As explained elsewhere in this book it is possible for a person to be a director without having been properly appointed. Such a director is either a de facto director or a shadow director. This is most definitely not recommended. Directors should be properly appointed in accordance with the law and the articles, and this is what does happen in the great majority of cases.

How are the first directors appointed?

The first directors are chosen by the subscribers to the memorandum. Their names, disclosable personal details and consent signatures must be on form IN01 which is submitted to the Registrar of Companies as part of the process of registering a company. These first directors automatically take office as soon as the company is registered by the Registrar.

What part does the law play in the appointment of directors?

The law plays very little part, leaving it to the provisions of the articles. However, it is significant in two areas:

It directs how the first directors are appointed.

It provides that in a public company two or more prospective directors cannot be proposed with a single resolution, unless this is unanimously agreed by the meeting. This enables the members to choose individually rather than be confronted with an all or none decision.

Of course a person disqualified by law (such as a person disqualified under the Directors Disqualification Act 1986) cannot properly be made a director.

What part do the articles play in the appointment of directors?

Subject to the few legal restrictions, articles govern the appointment of directors. The provisions of Table A or the new model articles are very widely adopted but many variations are possible and sometimes encountered.

What do the new model articles say about how directors are appointed?

All three versions of the new model articles include:

'(1) Any person who is willing to act as a director, and is permitted by law to do so, may be appointed to be a director -

by an ordinary resolution, or

by a decision of the directors.'

How are directors appointed if the company has no living members or directors?

The new model articles for private companies, but not the new model articles for public companies, include the following:

'(2) In any case where, as a result of death, the company has no members and no directors, the personal representatives of the last member to have died have the right, by notice in writing, to appoint a person to be a director.

(3) For the purposes of paragraph (2), where 2 or more members die in circumstances rendering it uncertain who was the last to die, a younger member is deemed to have survived an older member.'

What do the model articles say about the appointment of directors by the members?

Table A takes steps to limit the scope of members to ambush directors at or shortly before a general meeting. Other than for a person proposed by the directors, notice of a proposed appointment must be given to the company, together with details of the proposed director and evidence of his willingness to be appointed. Regulation 76 of Table A states:

'No person other than a director retiring by rotation shall be appointed or reappointed a director at any general meeting unless - he is recommended by the directors; or not less than fourteen nor more than thirty-five clear days before the date appointed for the meeting, notice executed by a member qualified to vote at the meeting has been given to the company of the intention to propose that person for appointment or reappointment stating the particulars which would, if he were so appointed or reappointed, be required to be included in the company's register of directors together with notice executed by that person of his willingness to be appointed or reappointed.'

There are no equivalent provisions in the new model articles.

What does Table A say about notice to the members of a resolution to propose a director?

Notice of between seven and 28 clear days must be given to all who are entitled to receive notice of the meeting. This is necessary unless the proposed person is recommended by the directors or is retiring by rotation. The notice must include the particulars of the proposed director that must (if the appointment is made) be entered in the register of directors.

There are no equivalent provisions in the new model articles.

Can the directors appoint a director?

They can if Table A or the new model articles apply.

What steps should be taken on the appointment of a new director?

The register of directors and the register of directors' residential addresses must be amended, and Companies House must be informed within 14 days of the appointment. It may be necessary to notify the bank and the bank mandate may need to be amended. Other notifications should be considered.

We forgot to notify Companies House of my appointment as director. What should we do and am I a director?

Yes, you are a director, so long as you were properly appointed and accepted the position. You became a director as soon as this happened and you took on all the rights and all the responsibilities. An offence has been committed from day 15 onwards by the company's officers and that includes you. Fortunately prosecutions are rare so long as there are no aggravating factors, such as a fraud or the same person being at fault many times.

What you must do is send form AP01 to Companies House now. Do not lie about the date of the appointment. Although the chances of the lie being discovered might be small, it would be the wrong thing to do and could have unfortunate consequences.