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1. 1
Role of the Company Director and the
Board
Sport and Recreation Alliance
Presented by Paul Munden
17 January 2013
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Role of the company director & the board
Course content
- corporate governance
- the company’s legal and regulatory
environment
- the director’s role
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Preliminaries
name cards/business cards
introductions – course delegates
course format
mix of presentations, exercises, questions, discussion
style – informal & participative
timings – start, breaks, finish
being a director
law & best practice
must be tailored to individual circumstances
IOD Folders
fun!

2. 4
Paul Munden
Commercial Law Barrister
Chartered Director
Company Secretary, Legal Director and Chief Executive
Business Link for London
Non Executive Director NHS North Essex
Board advisor General Teaching Council for England
Chairman National Youth Music Theatre
Legal Services Board
Justice of the Peace
Other previous appointments
Non Executive Director Customer First UK Ltd
Non Executive Chairman Soda Creative Ltd
5
Introductions – delegates
your name
your role
any previous board
experience?
6
Role of the company director and the
board
Quiz

3. 7
Corporate governance – evolution
UK
business life until mid 19th century
introduction of limited liability – 1844
business scandals – late 1980s
1990s - emergence of corporate governance
- Cadbury, Greenbury, Hampel (1992-1997)
- 1st Combined Code on Corporate Governance (1998)
- Turnbull (1999, 2005)
- Higgs, Smith,
- Combined Codes (2003 - 2008)
- UK Corporate Governance Code 2010-
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The Enron approach!
Normal capitalism: “You have two cows. You buy a bull.
Your herd multiplies, the economy grows - you sell the bull
& retire”
Enron capitalism: “You have two cows. You sell three of
them to your publicly listed corporation using letters of
credit opened by your brother-in-law at the bank where he
works. You then execute a debt/equity swap with an
associated general offer to the public so that you get all
four cows back with tax exemption for five cows. The milk
rights for six cows are transferred via an intermediary to a
Cayman Islands company secretly owned by your chief
financial officer who then sells the rights for seven cows
back to your listed company. Your annual report states that
your corporation owns eight cows, with an option on six
more”
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UK Corporate Governance Code
Application
- UK listed companies on main markets (also exemplar for other
organisations)
- “comply or explain”
Content
- leadership
- effectiveness
- accountability
- remuneration
- relations with shareholders

4. 10
Corporate governance – internationally
OECD
corporate governance codes should:
promote transparent and efficient markets
protect shareholder rights
promote the equitable treatment of shareholders
recognise the rights of stakeholders
ensure timely & accurate financial, performance,
ownership and governance reporting
set out the board’s role for strategic guidance and
monitoring and their accountability to the company.
11
Sarbanes Oxley Act 2002
Application
- publicly traded companies, their employees, officers & owners
- auditors, lawyers, bankers, brokers & analysts of public
companies,
- mandatory – sanctions include fines and up to 20 yrs imprisonment
- CEO & CFO personally responsible for accuracy of financial
reports
- Management must maintain effective internal controls
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Corporate governance – principal tenets
Accountability
Probity
Transparency

5. 13
Shareholder rights
shareholders own shares not companies
shares bring rights:
to a dividend, if paid
to transfer ownership of shares
to vote at a general meetings
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Directors’ relationship with shareholders
fiduciary duties
accountability
powers of appointment & removal of directors
delegated powers – not mandated delegates
“The business of the company
shall be managed by the directors
who may exercise all the powers
of the company.”
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Direction vs ownership
Direction
who is a director?
directors’ authority
Ownership
general meetings/voting/shareholder agreements

6. 16
Company constitution
the organs of the constitution are:
- members (via general meetings)
- board of directors
legal distinction is clear, can become confused
in practice
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Direction, management & ownership
SHAREHOLDERS
BOARD
EXECUTIVE
MANAGEMENT
POWER &
AUTHORITY RESPONSIBILITY
Can be
delegated
Can’t be
delegated
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Powers reserved to board – typical content
board appointments/
removal
terms of reference - board
committees
remuneration/change of
auditors
press releases
communications with
shareholders
dividend payments
changes to internal control
or risk management
arrangements
accounting policies
disposal or acquisition of
major assets
major contracts and
investments
treasury management and
capital policies
strategies and budgets
pension arrangements
policies – e.g. people,
health & safety, conduct,
compliance.

7. 19
Shareholders’ meetings
all meetings are general meetings
annual general meeting
extraordinary general meeting
business conducted at general meetings
is:
ordinary business, or
special business
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Voting at member meetings
Meetings – AGM and EGM
ordinary resolutions > 50%*
special/extraordinary resolutions ≥ 75%*
* of those present and voting (i.e. excl. abstentions)
Voting
by show of hands
by poll
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Role of the company director & the board
Course content
- corporate governance
- the company’s legal and regulatory
environment
- the director’s role

8. 22
The company’s legal and regulatory
environment
features of a company
different legal corporate forms
disclosure of information and reporting
corporate insolvency
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Limited Liability
Who benefits from the concept of
limited liability?
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Examples of board dilemmas
entrepreneurial vs. prudent control
confusion regarding the role of the board
short term vs. long term
commercial need vs. responsibility to others
conflicts of interest
directors of subsidiary companies
directors of JV companies
directors of family companies

9. 25
Constitutional documents
Memorandum of association
Articles of association
Tables A - F (CA 1985)
New Models (CA 2006)
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Memorandum of association
Company’s name including ltd / plc / SE
Country of registration
Members’ liability is limited
Share capital
Subscribers’ signatures
Company’s objects (if required, in articles post Oct 09)
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Articles of association
share capital / rights
transfer/ transmission of
shares
alteration of capital
general meetings
procedures/voting
borrowing powers
appointment, powers
& duties of MD
proceedings at directors’
meetings
disqualification
secretary
dividends & reserves
accounts and audit
capitalisation of profits
winding up
indemnity

10. 28
Corporate forms in the UK
private limited companies
with shares – most common
limited by guarantee – trade assns/charities /clubs
public limited companies
community interest companies (CIC) – public good
corporations formed by statute or by charter
charitable incorporated organisation (CIO)
societas europeae (SE)
unlimited companies – rare, exempt from filing a/cs, tax adv
limited liability partnerships (LLP)
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Corporate insolvency
When is a company deemed to be insolvent?
a. When a company’s liabilities exceed its assets
b. When a company’s current liabilities exceed its fixed
assets
c. When a company is unable to pay its debts as and
when they fall due
d. When company goes into liquidation at a time when
its assets are insufficient to pay its debts and the
cost of winding up
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Wrongful trading
trading when the company has no
reasonable prospect of avoiding insolvent
liquidation
penalties
directors may be personally liable to contribute
disqualification for up to 15 years

11. 31
Wrongful trading – examples
directors acting unreasonably or
negligently by entering into contracts
with knowledge of the company’s affairs
and avoiding the facts
directors failing to meet their duties
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Fraudulent trading
“knowingly carrying on the business of a
company with intent to defraud creditors or
potential creditors”
intent
fraudulent - actual dishonesty/real moral blame
penalties
directors may be personally liable to contribute
criminal offence - Unlimited fine/7 years in prison
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Fraudulent trading – examples
actions/transactions by officers when they know
there are insufficient funds
taking orders and deposits for transaction that
cannot be fulfilled
playing one bank off against another
large variations between balance sheet and
actual figures
Paying off debts with directors’ guarantees

12. 34
Role of the company director & the board
Course content
- corporate governance
- the company’s legal and regulatory
environment
- the director’s role
35
The director’s role
directors’ duties
consequences of a breach of duty
roles and types of director
section, appointment, induction and removal
of directors
leadership
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Who is a director?
Director in law
“any person occupying the position of director by whatever name called”
executive non-executive directors
nominee director
alternate director
shadow director – “someone in accordance with whose instructions the
board is accustomed to act”
Director by name
associate dtr, branch dtr, regional dtr, project dtr

13. 37
Breach of duties
Who can take action against directors?
the company
regulators
the Crown
shareholders (derivative claims)
stakeholders
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Grounds for disqualification
Which of the following are grounds for
disqualifying a director?
general misconduct
unfitness
fraudulent trading
wrongful trading
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Disqualification
What is the maximum period for which a
director can be disqualified by the courts?
10 years
life
life for a managing director
15 years

14. 40
Effect of disqualification
acting whilst disqualified
criminal offence
individual is personally liable for debts incurred
by company (any person acting on the
instructions of a disqualified person may also
be personally liable)
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Case Studies
Disqualification of directors
questions
what duties did the directors breach?
were they unfit and would you have
disqualified them?
if so, for how long?
why?
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Directors’ duties
historically – mainly common law
codified in Companies Act 2006

15. 43
Directors’ General Duties
Companies Act 2006
- to act within powers
- to promote the success of the company….
- to exercise independent judgement
- to exercise reasonable care, skill and diligence
- to avoid conflicts of interest
- not to accept benefits from third parties
- to declare interest in proposed transaction or
arrangement
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The success of the company
Companies Act 2006
long term
employees
suppliers, customers and others
community / environment
company’s reputation
need to act fairly as between all members
A director of a company must act in the way he considers, in good
faith, would be most likely to promote the success of the company
for the benefit of its members as a whole, and in doing so have
regard (amongst other matters) to:
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Act within the powers
Does a director have unlimited authority?
No, he must
act in accordance with the company’s constitution
only exercise his powers for the purpose for which
they were conferred

16. 46
Duty of care, skill & diligence
(derived from Section 214, Insolvency Act 1986)
the general knowledge and skill expected of a
person having the same functions (objective
test)
the general knowledge, skill and experience
that the director actually has (subjective test)
Directors must exercise the same standard of
care, skill & diligence that would be exercised
by a reasonably diligently person with:
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Duty of care, skill & diligence
directors need not give continuous attention to
company’s affairs
directors can trust company officials to perform
duties properly delegated, but should monitor
directors should attend board meetings
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Exercise independent judgement
Directors must exercise independent
judgement but:
may take advice
may act in accordance with the company’s
constitution incl. shareholders’ resolutions
directors’ discretion may be fettered by the terms
of an agreement to which the company is a party

17. 49
Avoid conflicts of interest
Examples of conflicts:
family companies
nominee directors
a director on the board of two competing
companies
a director leaving the board of one company
to set up a competing business
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Benefits from third parties
Directors may accept benefits from 3rd
parties if:
it “cannot be regarded as likely to give rise
to a conflict of interest”
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Bribery Act 2010
Offences
1. Bribing another person (sec 1)
2. Receiving a bribe (sec 2)
3. Bribery of a foreign official (sec 6)
4. Failure of commercial organisations to
prevent bribery (sec 7)
5. Connivance (Sec 14)

18. 52
Declaration of personal interests
CA 06 distinguishes three types
transactions/arrangements to which the company
is not a party
proposed transactions./arrangements to which
the company will be a party
existing transactions/arrangements to which the
company is a party
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Directors’ duties – to purchasers of shares
directors and the company are liable for
untrue/misleading statements or omissions
which induces persons to acquire shares
e.g. in a prospectus
directors, as well as the Company, are
personally liable for the particulars in a
prospectus.
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Directors’ duties – to customers, suppliers
and others
directors are not normally liable on contract
unless:
director has signed cheques, purchase orders & promissory
notes where the company’s name does not appear legibly
not clear director is contracting as an agent
director exceeds his authority
before the company is incorporated
performance personally guaranteed by director
fraudulent or negligent misstatements

19. 55
Role of the chairman
Articles of Association
elected by the board
chairman of the board
also acts as chairman of general meetings
may have a casting vote
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Chairman’s role – dual focus
Internal
board leadership
board membership
board direction
board monitoring
responsibility for people
provision of information
External
reporting financial results
wider representational role
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Role of the managing director
- Formulating strategy
- Liaising with the chairman
- Developing a business portfolio in line with strategy
- Delivering the business plan
- Establishing planning and control systems
- Ensuring objectives and standards are understood
- Monitoring results against plans
- Taking remedial action
- Leading management and employees
- Managing the company today to day

20. 58
Role of executive director
two accountabilities:
company director - joint & several liability
functional responsibility - reporting to &
supporting MD
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Myths about NEDs
NEDs should be done away with altogether
it is dangerous nonsense to assume that part-
time NEDs know enough to spot problems
NEDs are about as much use as Christmas
tree decorations
NEDs are like a bidet: no-one knows what
they do, but they add a touch of class
Lord Young
Tiny Rowland
Michael Grade
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Role of NEDs – 11 ‘C’s
contributor
challenger of executives’
proposals
contact provider
confidante
conciliator
checker of Board
processes
crisis manager
coach/mentor to
executive directors
consultant
compensation
conscience of the
company

21. 61
NED independence
UK Corporate Governance Code
They must not:
have been an employee of the company in previous 5 yrs.
have had a material business interest with the company in
previous 3 years
receive income, other than director’s fees
participate in company’s share option or performance related
remuneration/pension schemes
have close family ties with Company’s advisers, directors or
senior employees
have conflicting cross directorships
represent significant shareholders
serve as a director for more than 9 years
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Senior independent
non-executive director
Which of the following does the UK Corporate
Governance Code state are appropriate roles for a
senior independent NED?
a) sounding board for the chairman
b) intermediary for the other directors
c) deputising for the chairman when not available
d) available to shareholders if they have concerns
which are not resolved through usual channels
e) taking the lead role in appraising the chairman’s
performance
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Role of company secretary
convening board and general meetings
minute taker
writing up statutory books
filing statutory returns
communicating with shareholders
dealing with share transactions
compliance
board adviser
assisting the chairman

22. 64
Appointment of directors
executive directors
contract of employment/service agreement
recognises dual status of director and
employee
non-executive directors
no contract required – usually a letter from
the chairman (Higgs Review contains
specimen)
65
Appointment of directors
Private companies:
Any person who is willing to act as a director, and is permitted by law to do
so, may be appointed to be a director -
(a) by ordinary resolution, or
(b) by a decision of the directors
Clause 17 model articles for private share companies
Public Companies
At the first annual general meeting all the directors must retire from office.
At every subsequent annual general meeting any directors -
(a) who have been appointed by the directors since the last annual
general meeting, or
(b) who were not appointed or reappointed at one of the preceding two
annual general meetings, must retire from office and may offer
themselves for reappointment by the members
Clause 21 model articles for public companies
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Removal of directors
‘vacation’ by statute
failure to take up a share qualification
bankruptcy
disqualified by court order
under 16 yrs old (CA2006)
other methods typically included in Articles
resignation
absence (typically six months)
receiving orders made against
mental disorder
removal by written notice (Listed co/subsid.)

23. 67
Removal of directors
Section 168 Companies Act 2006
members wishing to remove give special notice of
ordinary resolution
company sends copy of resolution to the director
board meeting convenes general meeting
director may speak at meeting
board may make representations to the members
proposer may only make representations to the
general meeting
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Complete all Certificate modules
Take the Certificate exam
& gain the Certificate in Company Direction
(Exam prep sessions & 1-2-1 coaching are available if required)
Attend the 3-day Diploma module -
Developing Board Performance
Take the Diploma exam
& gain the Diploma in Company Direction
Progress to Chartered Director
What next?
69
Applying the knowledge
All IoD course leaders and consultants can provide:
On-site support
Coaching or mentoring
Board consultancy
or any other in-house training services
to help you to apply the knowledge within your
organisation.
Please ask your course leader for further details

24. 70
Additional services
Consultancy services
Consultancy on all aspects of directing a company effectively
Board evaluation
Bespoke programmes on corporate governance, finance, strategy,
marketing, people, change or specific company roles
Individual coaching or mentoring
Development programmes for:
Specific roles such as Chairman, MD, FD, non-exec, trustee
Running a successful small business
Leadership skills
Business presentation skills
Negotiation skills
For all enquiries please contact your tutor or call the
IoD Key Account Team on
020 7766 8845