Chapter 11
Companies (2): Management, control
and winding up
In this chapter we consider the management and control of companies and the ways in
which companies can be wound up.Management and control of companies
In the previous chapter we saw that a company limited by shares must have shareholders,
who are known as the company’s members. We also saw that a company’s articles of
association are part of its constitution, and that the constitution of a company binds both
the members and the company. A company’s articles will provide that its board of directors
should manage the company. They will also set out rules relating to the appointment and
removal of directors.
Executive directors devote substantially the whole of their working time to performing
their duties and derive most of their income from their connection with the company. They
are usually employees of the company. Non-executive directors do not devote their whole
time to performing their duties. They are generally paid a small fee for their services.Appointment and removal of directors
The first directors of a company agree to become directors when the company is registered.
Unless the articles provide otherwise, subsequent directors are appointed by an ordinary
resolution of the members. Articles often provide that directors may be appointed in other
ways. For example, the articles of many large companies allow the board of directors to
appoint directors to fill casual vacancies which have arisen.
Public companies must have two directors but private companies only need to have one.
Usually the directors of a company also own shares in the company. In small companies
they often own a majority of the shares. However, there is no requirement that a director
should also be a member of the company.
The articles of association usually set out how a director can be removed. Sometimes, for
example, the articles of public companies provide that directors should retire by rotation.
If this is the case, the directors who have held office for the longest would retire at the
company’s annual general meeting. The retiring directors could usually offer themselves for
re-election and could be automatically re-elected if no-one else stood to fill the vacancies.
No matter what the articles might say, s. 168 of the Companies Act 1985 provides that a
director can always be removed by an ordinary resolution of which the members have been
given special notice. This means that the company has been given 28 days’ notice of the