Business Law and Practice
Who decides what
Private companies operate through two organs: the board (Model Article 7 requires a majority at a board meeting, or unanimous written resolution) and the members in general meeting. Members act by ordinary resolution (simple majority of votes cast) or special resolution (75% of votes cast). A common trap is to confuse votes cast with issued share capital - abstentions and shares not voted count for neither side.
Directors' duties (CA 2006 ss 171–177)
Act within powers; promote the success of the company for the benefit of members as a whole; exercise independent judgment; exercise reasonable care, skill and diligence; avoid conflicts of interest; not accept benefits from third parties; declare an interest in a proposed transaction (s 182 covers existing transactions). Certain decisions need member approval: long-term service contracts over two years (s 188), loans to directors (s 197) and substantial property transactions (s 190).
Capital and distributions
Dividends may only be paid out of distributable profits (s 830); an unlawful distribution is recoverable from a member who knew or had reasonable grounds to believe it was unlawful. Directors allot shares under s 550 (private company, single class) or by member resolution; s 561 pre-emption applies unless disapplied. Directors may be liable under s 847 for improper capital returns.
Minority protection
Unfair prejudice (s 994), just and equitable winding up, derivative claims (s 260) and the statutory pre-emption rights offer the minority routes to redress.
Rule of thumb: before drafting any resolution, ask three questions - who decides, what majority, and what notice is needed?