LW: Management and administration

Answer: C. After the first directors named on incorporation, directors are usually appointed by the members (commonly by ordinary resolution) or in accordance with the procedure in the articles, which may also permit the board to appoint additional directors. Option A is wrong — the Registrar records but does not appoint directors. Options B and D are wrong — auditors and creditors have no power to appoint directors.

Answer: D. A shadow director is a person, not formally appointed, in accordance with whose directions or instructions the directors are accustomed to act; such a person can attract many directors' duties and liabilities. Option A is wrong — the secretary is a separate officer. Option C is wrong — an auditor reports on the accounts. Option B is wrong — a debenture holder is a creditor, not a director by influence.

Answer: A. The s.172 duty requires a director to act in the way they consider, in good faith, would most likely promote the success of the company for the benefit of the members as a whole, while having regard to factors such as long-term consequences, employees, suppliers, customers, the environment and reputation. Option B describes self-interest. Option C wrongly elevates one customer. Option D is wrong — the duty does not require risk-avoidance.

Answer: B. The duty to avoid conflicts requires a director to avoid situations where they have, or could have, a direct or indirect interest conflicting (or possibly conflicting) with the company's interests, unless duly authorised. Option A is wrong — holding shares is not itself a breach. Option C is wrong — attending board meetings is a normal function. Option D is wrong — properly approved remuneration is permitted.

Answer: A. The duty applies a twin test: an objective minimum standard of a reasonably diligent person with the general knowledge, skill and experience reasonably expected of someone in that role, raised where the particular director actually has greater knowledge, skill or experience. Option B omits the objective floor. Option C is irrelevant — profits do not set the standard. Option D is wrong — the test is not an average standard across all directors.

Answer: C. Breach of a general duty can lead to civil consequences such as an account of profits, restoration of company property, damages or compensation, or rescission of the relevant contract; the members may also be able to ratify certain breaches. Option A is wrong — breach of a general duty is not automatically criminal. Option B is wrong — remedies exist. Option D wrongly shifts liability to the secretary.

Answer: A. Members may remove a director by ordinary resolution (a simple majority), provided special notice of the resolution is given and the director may make representations; this is subject to any contractual claims, such as for wrongful dismissal. Option B is wrong — removal is a members', not solely a board, power. Option C is wrong — the Registrar's approval is not required. Option D is wrong — directors can be removed in this way.

Answer: D. Disqualification can be ordered on grounds including conduct showing unfitness as a director of an insolvent company, persistent breaches of companies legislation, fraud in a winding up, or conviction for certain offences. Option A is wrong — holding shares in several companies is normal. Option C is wrong — there is no general upper age disqualification. Option B is wrong — disagreeing with a resolution is legitimate.

Answer: B. A public company must have a company secretary who meets the statutory qualification requirements, whereas a private company is not required to appoint one (though it may). Option A overstates the requirement for private companies. Option C is wrong — a secretary has ostensible authority to make contracts of an administrative nature (Panorama Developments). Option D is wrong — strategy is for the directors, not the secretary.

Answer: A. A public company must hold an AGM each year within the statutory period, whereas a private company is not generally required to and can instead transact business by written resolution. Option B overstates the requirement, as it does not apply to most private companies. Option C is wrong — companies may hold general meetings. Option D is wrong — directors generally call meetings, with members able to require one in certain circumstances.

Answer: C. A special resolution requires a majority of at least 75% of the votes cast, and is needed for important decisions such as altering the articles, changing the company's name, or reducing capital. Option A describes an ordinary resolution. Option B is wrong — unanimity is not required. Option D is wrong — members' resolutions are passed by members' votes, not by a proportion of the directors.

Answer: D. Written resolutions let the members of a private company pass most ordinary and special resolutions without convening a meeting, with the majority calculated by reference to total voting rights. Option A is wrong — the procedure is for private, not public, companies. Option C wrongly involves directors and auditors in the consent. Option B is wrong — the procedure cannot be used to remove a director or auditor before the end of their term.

Answer: B. The default minimum notice for a general meeting of a private company is 14 clear days, though members holding the requisite majority may consent to short notice. Option A is far too short. Option C is far too long and is not the statutory period. Option D is wrong — notice is required so members can attend and vote, subject only to the short-notice consent provisions.

Answer: A. A member may petition where the company's affairs are being, or have been, conducted in a manner unfairly prejudicial to the interests of members generally or some part of them; the court has wide remedies, commonly ordering the purchase of the petitioner's shares. Option B is wrong — ordinary trading losses are not unfair prejudice. Options C and D describe matters that do not, of themselves, amount to unfairly prejudicial conduct.

Answer: C. A derivative claim is brought by a member, on behalf of the company, in respect of a cause of action vested in the company arising from an actual or proposed act or omission involving negligence, default, breach of duty or breach of trust by a director; the court's permission to continue is required. Option A describes winding up. Option B is an employment claim. Option D wrongly limits it to claims against auditors.

Answer: D. Under the typical model articles, the directors are responsible for managing the company and may exercise all its powers, subject to the constitution and the Act; members' control is generally exercised through resolutions and appointment/removal rather than day-to-day management. Option A is wrong — members do not run daily operations. Option C is wrong — the secretary lacks general management power. Option B is wrong — the bank is merely a service provider.

Answer: B. This duty prohibits a director from accepting benefits from third parties conferred by reason of their office or of doing (or not doing) something as director, guarding against bribery and divided loyalty; it is not infringed if acceptance cannot reasonably be regarded as likely to give rise to a conflict. Option A is wrong — approved remuneration is legitimate. Options C and D describe ordinary, permissible activities, not prohibited third-party benefits.

Answer: A. A director must declare the nature and extent of any interest in a proposed transaction or arrangement with the company to the other directors before it is entered into, with a similar duty for existing transactions. Option B is wrong — declaration, not resignation, is required. Option C is irrelevant. Option D is wrong — non-disclosure is a breach regardless of whether the contract turns out profitable.

Answer: C. A director ceases to hold office on events such as resignation, removal by the members, disqualification by court order, death, or where the articles provide (for example bankruptcy or long-term incapacity). Option A is wrong — leave does not end office. Option B is wrong — disagreement is part of normal governance. Option D is wrong — acquiring more shares does not affect a directorship.

Answer: D. The quorum is the minimum number of qualifying persons who must be present for a meeting to be properly constituted and able to transact business; for many companies the default is two, with a single-member company quorate with one. Option A reverses the concept. Option C confuses quorum with the agenda. Option B invents an attendance fee, which is not what quorum means.

Answer: B. Conduct by a director amounting to negligence, default, breach of duty or breach of trust may be ratified by the members by ordinary resolution, but the votes of the director (where also a member) and any member connected with them are disregarded. Option A is too absolute — many breaches can be ratified. Option C is wrong — no court order is needed. Option D is wrong — ratification is a members', not an auditors', function.

Answer: A. The company secretary's role is administrative and compliance-focused: maintaining the statutory registers, arranging meetings and minutes, and ensuring documents are filed at Companies House on time. Option B is a commercial matter for the directors. Option C is wrong — a secretary does not personally guarantee company debts. Option D is wrong — auditor appointment generally involves the members, not the secretary acting alone.