This lecture has been prepared by Ammar Younas, Senior Lecturer in Commercial Law at Westminster International University in Tashkent for the Class of 2019-2020 Introduction to Business Law.

1. Ammar Younas

2. House of Medici

5. Medieval Law Merchant
Italy – the place of development of the law merchant
Lex mercatoria
 Maritime and commercial instruments
 Bill of lading and bill of exchange
 Banking and insurance

6. Medici Bank 1393
• The Medici Bank of Florence
was the most important financial
institution in 15th-century
Europe.
• The Medici Bank was the chief
bank for the Roman Catholic
curia, and it had branches in the
major cities of Italy, as well as in
London, Lyon, Geneva, Bruges,
and Avignon.

8.  A Director is a part of a collective
body of Directors called the Board
responsible for the
superintendence, control and
direction of the affairs of the
Company.
 Under s 250 of the CA 2006 it is
provided that:
“In this Act, ‘director’ includes
any person occupying the
position of director, by
whatever name called.”

9. • Executive Director
• Non-Executive Director
• Shadow Director
• De Jure Director
• De Facto Director
• Chairperson

10. Executive Director devotes his or her whole working
time to the company often as an employee of the
company and has a significant personal interest in
the company as a source of income
 Non-Executive Director is a member of the board of
directors of a company who does not form part of
the executive management team. He or she is not
an employee of the company or affiliated with it in
any other way.They are differentiated from inside
directors, who are members of the board also
serving as executive managers of the company
(most often as corporate officers).

11. • The distinction between executive and non-
executive directors has no significance in
company law though it may cause difficult
problems in employment law
• The UK Corporate Governance Code
‘The board should include an appropriate combination
of executive and non-executive directors (and in
particular, independent NED) such that no
individual or small group of individuals can
dominate the board’s decision taking”

12. • Shadow Director means a person in accordance with
whose directions or instructions the directors of the
company are accustomed to act (CA 2006, s 251(1)),
but the advice given in a professional capacity does
not make the adviser a shadow director.
A person is described as de jure director if:
 The person has duly been appointed to the office;
 The person has agreed to hold office;
 The person is not disqualified from being a director;
 The person who has not vacated the office.
A person who is not a de jure director but acts as a
director of the company is called a de facto director.

13.  Chairperson
 Articles often provide for his or her appointment for
purposes of chairing and managing the board and
shareholder meetings
 may have special, personal responsibility in relation to
‘corporate governance’
 sometimes given a casting vote in JV/similar companies.

14. CEO vs BOD members
BOD vs Auditors

15.  CA 2006, s 154 (1) requires every private company to have at least one director
 Section 154 (2) requires every public company to have at least two directors.
 Every company must have at least one director, who is a natural person
 Section 156 gives the Secretary of State to require a company, which has fewer
than the statutory minimum number of directors or has no natural person as a
director, to make the necessary appointments within a specified period of one to
three months. Failure to comply is an offence

16.  The CA 2006 does not prescribe who is to be responsible for appointing the
directors of a company though it requires the first directors to be appointed by a
statement signed by, or on behalf of, the subscribers of the memorandum and it
gives the company’s members a right to dismiss directors of the company
 Provision for appointment is normally made in a company’s articles. In the absence
of any provision, directors are to be appointed by the company’s members
 An appointment of a person as a director of a company does not take effect unless
the person agrees to the appointment

17.  First directors of a company are included in the statement of proposed officers
 Under the model articles for a public company, art 21(1) in SI 2008/3229, at the first
annual general meeting of the company all its directors must retire. So none of the
first directors can continue in office beyond the first annual general meeting unless
they are reappointed by the members

18.  Company Directors Disqualification Act 1986
 By personal insolvency – from the time when an individual is adjudged
bankrupt until the bankruptcy is discharged or annulled
 By being auditor
 By being too young – an individual under the age of 16 cannot be
appointed a director, except by an appointment which is not to take
effect until his or her 16th birthdays

19. The 300 shares in a company were owned equally by a brother and two sisters. All three
shareholders were also directors. The articles provided that on any resolution to remove a
director that director’s shares should carry three votes per share. The two sisters wanted to
remove their brother as a director. At a general meeting the sisters voted for removal, the
brother voted against. The sisters claimed that the resolution had been passed by 200 votes to
100. The brother claimed that it had been defeated by 300 votes to 200.
Held: The article giving the enhanced voting rights was perfectly valid. Therefore, the
resolution to remove the brother from the board of directors had been defeated by 300 votes to
200.

20.  The model articles provide that a person ceases to be a director as soon as:
 That person ceases to be a director by virtue of any provision of CA 2006 or is prohibited from
being a director by law
 A bankruptcy order is made against that person
 a medical practitioner gives a written opinion stating that that person has become physically or
mentally incapable of acting as a director and may remain so for more than three months
 By reason of that person’s mental health, a court makes an order
 Resignation or retirement

21.  The model articles in SI 2008/3229 provide for retirement of directors
by rotation. It requires all the directors to retire at the first AGM.
 A company may, by ordinary resolution, remove a director before the
expiration of the director’s period of office, notwithstanding anything
in any agreement between the company and the director (s 168 of
CA2006). Special notice is required of any resolution to remove a
director and a copy of the special notice must be sent by the company
to the director concerned

22.  Unitary board versus dual board:
 Unitary: USA, UK and most of the EU states:
 Comprising both executive and non-executive directors
 Responsible for all aspects of company’s activities
 Shareholders elect the board at the company’s annual general meeting
 Dual: Austria, Germany, the Netherlands, Denmark:
 Supervisory board and executive board of management
 Clear separation between the functions of the boards

23.  A director of a company does not have a right to be remunerated for any services
performed for the company except as provided by its constitution or approved by the
company’s members
 Directors have no authority to pay the company’s money to themselves or any one of
their member, unless they are given authority by the company’s constitution or the
payment is approved by the members (Re George Newman and Co [1895])
 It is accepted that the directors are to be paid fees for holding office and provision for
such fees is usually made in the articles of association.The model articles authorize
the directors to determine their own remuneration for their services to the company
as directors

24. Fat Cats
Why BOD gets the biggest chunck?

25. Directors have duties towards the company and towards the members of the
company as a whole.
A director stands in a fiduciary position to the company, and is therefore in a
position of great trust. There are two separate aspects of the fiduciary duty owed
by directors:
(i) The directors must exercise their powers for the benefit of the company as a
whole.
(ii) There must be no conflict between the directors’ interests and the interests of
the company.

26. Automatic Self-Cleansing Filter Syndicate Co Ltd v Cunninghame [1906] (Court
of Appeal
One of the company’s articles gave the directors the power to sell the company
property on whatever terms they thought fit. At a general meeting of the company an
ordinary resolution was passed, ordering the directors to sell company property to a
new company. The directors did not approve of the terms of the contract and refused to
sell.
Held: The directors were within their rights. Whether or not to sell was a question for
them and not for the shareholders.

28. What type of Companies Silk Road had?
• Were there investors and shareholders?
• What is still left in Uzbek business from its ancient heritage?

29. Agora
The agora was a central public
space in ancient Greek city-states.
The literal meaning of the word is
"gathering place" or "assembly".

32. Is BOD works like
Agora?
• How Board of Directors take company decisions?
• Do share holders have a say in company decisions?

33. Essential reading (available at WIUT library):
 French, D., Mayson, S., and Ch. Ryan, 2011-2012. Company Law, 28th edn. Oxford:
University Press
 Pettet B. Company Law. 2005. – Chapter 8, 9, 10.
 Griffin S. Company Law. 2006. – Chapter 21, 22.
 Masons. Company Law. 2004. – Chapter 14, 15, 16.
 Рахманкулов Х., Гулямов С. Корпоративное право. 2004 – Глава 8.
Acts
The Companies Act 2006
The Model Articles of association in SI 2008/3229
Web-links:
 http://www.boardmember.com/ Corporate Board Member magazine
 http://www.iod.com/ Institute of directors website
 http://www.nacdonline.org/ National Association of Corporate Directors
 http://www.non-execs.com/ Non-Executive Director's roles and responsibilities