Appointing a Director: Practical Steps and Post-Meeting Matters

Once a company has decided to appoint a director, the following procedure should be followed in order to approve a service contract.

1. FIRST BOARD MEETING

How to call a meeting?

To call a meeting, all directors must be notified, orally or in writing. There is no specified time this must be called by, but it must be reasonable. Companies may set a required minimum time and it is worth incorporating this in your articles. 

A meeting must have a minimum of 2 directors present and voting, also known as “the quorum”.

Agenda of the meeting:

The directors can make a decision to appoint a director, but the service contract cannot last longer than 2 years, inclusive. In this case, the agenda would mean that they can prepare and sign the service contract to hire the director. 

Where the proposed service contract is more than 2 years, the directors must vote in regard to calling a general meeting of shareholders to approve the director’s service contract. There must be a notice of 14 clear days (the days until the meeting, not including the day of notice and the day of the meeting itself). Any short notice is not permissible here, as the service contract should be made available for inspection by the members if the company at the company’s registered office for not less than 15 days. 

The notice of the meeting should include: 

• time;

• date and place of the meeting;

• a proxy notice;

• special notice of the resolution to remove the director; and 

• notice to the director of the resolution to remove them.

Voting:

Voting in this meeting will take place unanimously or by a simple majority on a show of hands. Directors eligble to vote get one vote each. 

2. GENERAL MEETING

The second step is to call a meeting between the directors and the shareholders - a general meeting.

In order to appoint a new director, all shareholders and directors of the company must be notified with a notice period of 14 clear days.  If there is insufficient time, a written resolution procedure could be another option as a short notice procedure, reducing notice time if agreed by at least 90% of the shareholders. 

This last option would need a memorandum, which in practice means that if a short notice period is agreed, it cannot be used for the approval of a long-term service contract, longer than 2 years.

Unless the company is a single member company, a minimum of 2 shareholders are required to be present and voting at the meeting.

Voting involves an ordinary resolution - this is a vote which requires more than 50% of the votes in favour. Voting is done on a show of hands, however, a poll vote may be demanded (a vote depending on shareholdings) by a member holding at least 10% of voting shares.

3. SECOND BOARD MEETING

The last step is to call another board meeting, which follows the same procedure as previously. The only difference being the agenda. 

At this meeting, the chairperson will report what resolutions were passed at the General Meeting.

Under the power given by Model Article 3, director’s general authority, the board can now enter into the director’s new service contract. At this stage, voting must be unanimous or by a simple majority show of hands. Interested directors cannot vote unless the company has voted to disapply Model Article 14, involving conflicts of interest.

4. POST - MEETING MATTERS

Post-meeting matters will be dealt with by the secretary instructed, or a director if there is no secretary.

There are 2 more steps needed at this stage:

• Update the external reporting by giving the registrar notice of the memorandum and copy of the service contract for inspection.

• Update the internal records:

• Draw up minutes of the board meetings and the general meeting and enter them into the company’s books, where they must be conserved for at least 10 years.

• Keep a copy of all meetings and resolutions.

• Keep a copy of the service contract and the memorandum in case it is needed for an inspection at the company’s registered address

Author: Irene Correro-Garcia -

Author: Irene Correro-Garcia -

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DISCLAIMER

This article has been written by law students for the sole purpose of providing informative insight. The information in this article is intended for educational purposes only and does not constitute legal advice, nor should the information be used for the purpose of advising clients. You should seek independent legal advice before relying on any of the information provided in this article.