What to consider when appointing a company director
Companies House recently announced that it plans to start sending appointment letters to a director’s residential address.
When Companies House receives notice of a director’s appointment, they write to him/her outlining the general duties and responsibilities of a director. Currently, this letter is sent to the registered office of the company but Companies House recently became aware that it does not always reach the intended director. So they’re changing their policy to try and ensure more directors actually receive the letter and so are able to undertake their role in complete compliance with the law.
We thought this would be a good time to provide a refresher on things to consider when appointing a company director.
How many directors?
A private company must have at least one director and a public company must have at least two. In each case at least one director must be a ‘natural person’. As well as ‘natural persons’, it is also currently possible to appoint a corporate entity as a director. However, there have been plans for a number of years to ban so-called ‘corporate directors’ but we are yet to receive an official date for this ban to take effect.
Neither the Model Articles nor Table A (the articles of association which apply by default to companies depending on their date of incorporation) include a provision relating to the maximum number of directors but some bespoke company articles may impose a limit so this should be checked before proceeding.
Is the director eligible?
To be appointed as a director, an individual must be at least 16 years old. Although it’s possible to appoint a minor (under 18) as a director, a company should be wary of doing so as it is a role which requires a degree of knowledge and awareness which also comes with significant duties and responsibilities
An individual subject to insolvency or bankruptcy proceedings cannot act as a director.
Who can appoint a director?
On incorporation, a company must provide details of its proposed first directors. The process for any subsequent appointments will be set out in the company’s articles. Typically, this can be done by ordinary resolution of the shareholders or by the board generally but bespoke articles of association may set out alternative or additional methods of appointing a director – for example, an investor or founder shareholder may have a right to have their nominee appointed to the board.
Before being appointed, a director must give consent to act. The company is required to confirm that the director has so consented when it files the Companies House notice of appointment (form AP01).
What if the appointment is invalid?
In order to protect third parties dealing with a director, the acts of a director will continue to be valid even if the appointment turns out to be invalid. An appointment could be invalid if there was a defect in the director’s appointment, if they were disqualified from holding office or if they ceased to hold office for some other reason.
How to document a director’s appointment
A company must maintain two statutory registers relating to its directors. The register of directors must contain certain details relating to each appointed director. These details include the director’s name and service address, and the nationality, date of birth and business occupation of the director. If the director is a corporate director, the register must include the firm name, its registered office and details of the law by which it is governed.
The register of directors must be made available for inspection, generally at the company’s registered office.
A separate register must contain the usual home address of any individual director. This register is not available to the public.
Within 14 days of a person becoming a director, the company must notify Companies House. Notice must also be given if there are any changes to a director’s registered particulars and when the director ceases to hold office.
As you can see, appointing a new director requires a company to follow a range of rules and regulations. It is important that a company’s articles are checked, in conjunction with the Companies Act 2006, before proceeding to ensure any specific requirements are satisfied and the appointment remains valid.
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