Management of a company is the sole duty of its directors. They make the operational and strategic decisions of a company and are accountable for making sure that the business meets its statutory obligations. A director agrees to act in the best interests of the company, its shareholders, its employees, and its creditors. Duties of directors which are a series of statutory, common law and equitable obligations are owed to the organizations that hire them. It is an essential part of business law and corporate control.
These duties stipulate that a director will act with the necessary care and skill, act in the best interests of the business, avoid conflicts of interest. They will also promote the success of the company, never to receive paybacks from third parties, declare any interest in a future transaction, and to exercise independent judgment.
Karen, the commercial director at Pret-a-Porter PLC PAP Company, breached her duty not to accept gifts from third parties when she received substantial commissions from other parties. She also failed to disclose this, breaching her duty to announce an interest in planned arrangements. Harry, the sales director, was unable to avoid conflicts of interest when he approved the fraudulent trade to a shop he owned. He also abused his duty to act within his powers, turning the controls to his benefit. Babatunde, the finance director, failed to exercise reasonable care, skills, and diligence when he decided not to act on the information he received. He was unable to promote the success of the company when he allowed it to make losses under his watch, thus destroying the company’s reputation. Due to reasons best known to him, he failed to exercise independently.
The Article of Association is deemed to be the second most vital document in the establishment of business after the Memorandum of Association. It is the strength of amalgamation of any business. The article comprises of the rules and regulations that regulate the industry, clauses related to the merger with other partners, allocation of shares, nature of the business issue, and allocation of debentures. It also explains the law to be adopted in the distribution of bond, rights and responsibilities of shareholders, when and where to hold the annual general meetings, and how profits are to be allocated amongst the shareholders. The clauses embedded in the article of association define how the company will run, but numerous times it also defines what has to be done at the time of the happening of an unexpected event or unexpected situation if faced by the company.
Zorbonak Ltd is a private company legally established through its article of association. The name of the company must have been formed in a memorandum of understanding that is included in the article of association. The nature and the work type of business are clearly outlined as the company aims at selling novelty toys. The company has also set out the rules on how to appoint their directors and detailed guidelines that govern the conduct and term of directors. It is the company’s members who will appoint the directors who are to serve for life. The company has found it suitable to provide for a dispute resolution process by agreeing to solve the disputes through a member’s vote.
The Articles of Association for Zorbonak ltd may be changed by the shareholders dispatching a special resolution in a general meeting or by written resolution. a company’s articles of association, or any part of them, may, subject to the provisions of the Companies Acts and to the conditions in the memorandum of association, at any time be altered or deleted by special resolution, others being substituted as necessary. The company has the power to adopt any new article that could lawfully have been included in the original articles.
A director appointed for life through contract or by an Article of Association of the Company may be removed from office in the General Meeting of the Company according to the provisions of section 169 of the Companies Act, 2013. The removed directors can never be destitute of damages or compensation to which they are entitled under an agreement. It is doable for the stakeholders of the corporation to get rid of the director from his office through an ordinary resolution on condition that the precise process is followed. Martine can be removed despite her protests under several circumstances, although she should be notified about the intention of her removal. After being served with the notice, she must accordingly be afforded the chance to defend herself in writing at the summit where she is to be removed.
The process of changing an article of association is executed by summoning a Board Meeting to alter all or any of the present Articles of Association and make a day, venue, and time for a general meeting for passing a special resolution to make the change. The company should consider the issue a notice for the General Meeting, suggesting the Special resolution and clarifying, among other things, in the clarification. Statement of the implication and the motives of the changes being recommended are also to be included in the notice. Copied of all notices should be forwarded to shareholders if the company is listed with stock exchange highlighting reasons with respect to change in the Articles of Association. General meetings should be held, and the special resolution passed. The business should then file with the company’s stock exchange six copies of such alterations immediately after the meeting has adopted it. One of the forwarded copies must be a certified one.
The company should then file the Special resolution with the related Registrar of companies with the illustrative statement in Form No.23 inside thirty days after its passing and after paying the required filing fee. Newly printed copies of the article should be filed after paying the requisite charge, and the article has been completely altered. Finally, the company should effect the changes in all duplicates of the pieces of association.