Few small or medium size businesses operate to the letter of their Articles of Association (”Articles”). This is not that surprising given the technical language and complexity of many of these documents. Even where the directors and shareholders are aware of the terms of the Articles the requirements can seem technical and have little relationship to the day to day business of making money. Because of this the Articles are more often observed in the breach. Most of the time companies get away with this relaxed approach but in the event of a shareholders dispute or a dispute between shareholders and directors then the first thing a lawyer is likely to do is get hold of a copy of the Articles and digest the contents. This can lead to some unpleasant surprises.
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In an article in the FT Michael Kavanagh discusses the current challenges facing non-executive directors (with a few quotes from yours truly).
Click here to read the article.
The EU Shareholder Rights Directive is a grand title but on close analysis it does not add much to the armoury of a UK shareholder aggrieved with the company in which they hold shares.
Consequently it has been implemented in the UK (via the Companies (Shareholders’ Rights) Regulations 2009 with relatively little fanfare. The main reason for the lack of excitement is that the regulations generally only apply to “traded companies” and they only marginally increase shareholders rights or powers overall.
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One aspect of the Companies Act 2006 which has not inspired much comment is the new rules about disclosure of directors residential addresses.
These are contained in sections 240 -246 of the Companies Act 2006. These provisions came into force on 1 October 2009, together with most of the remaining provisions of the Companies Act 2006 that had not yet been brought into effect. For an article on all of the key changes coming in to force in October 2009 please click on this link.
The effect of ss 240 - 246 of the Companies Act 2006 will be to make life more difficult for those in the business of pursuing dodgy directors.
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A noteworthy addendum to Sir David Walker’s review of corporate governance is the open letter from the FSA to the Chairman of the ISC dated 19 August 2009.
This letter flags up the FSA’s support for more active shareholder engagement in disputes with boardrooms, with a view to promoting good corporate governance. This encouragement of shareholder activism at this level may be an important development.
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The position of “nominee” director is an interesting one. They are openly appointed to represent the interests of a third party (e.g. a shareholder or creditor or investor) whilst at the same time owing all the duties of an ordinary director.
The duties of a director are extensive and now codified (see article for details) and include as a key requirement the duty to promote the success of the company. To a lawyers eye, the position of nominee director is therefore fraught with potential conflict of interests and fertile ground for boardroom disputes. The recent case of Hawkes -v- Cuddy, re. Neath Rugby Limited provides some guidance for nominee directors.
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The report by Sir David Walker into the governance of the banking industry has some interesting things to say about corporate governance generally.
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Corporate Governance, Shareholders disputes | Ed Weeks | 
August 23, 2010 11:20 am | 
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