Directors are appointed to manage a company’s day-to-day operations. Their primary responsibilities include acting in the best interest of the company, exercising care and diligence, and avoiding conflicts of interest. Directors have a fiduciary duty to shareholders, meaning they must prioritise the company’s welfare over their personal interests. Additionally, they are responsible for ensuring the company’s compliance with relevant laws and regulations, including financial reporting, corporate governance, and statutory obligations.

The articles of association are a vital document that outlines how the company operates internally and third parties. This document sets out the rights and responsibilities of directors, shareholders, and other stakeholders. It typically covers important aspects like how directors are appointed and removed, how meetings are conducted, and the voting rights of shareholders. The articles must comply with the laws of the jurisdiction where the company is registered, and they can be changed as needed, usually with the approval of the shareholders. Another example of the effects of articles of associations on how a company operates are the “Objects” these are now often removed from the articles but in the past they were prevalent, whilst many may view them as simply setting out what the company aims to do they can also place restrictions on the directors as to what they can do with consequences if they are deemed as operating in breach of them.

Both directors and the articles of association must adhere to the law and regulations governing them. If they don’t, there can be serious consequences, including fines, disqualification of directors, and damage to the company’s reputation.

In summary, knowing the roles of directors and the importance of the articles of association is crucial for good corporate governance. Directors need to do their jobs diligently, while the articles serve as the foundational document guiding the company’s operations. Being familiar with these elements is essential for anyone involved in managing or advising a company.

If you have any questions regarding your position as a director, your company’s articles of association or company law, do not hesitate to take legal advice. As we highlight above, the consequences of it going wrong can be serious.

Please contact our expert Corporate Commercial Law team if you require further advice on the above.

Article written by Commercial Assistant Lara Kljajic.

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A director’s powers and authority stems from legislation, the Companies Act 2006 being the most relevant legislation, and the articles of association of the company in question (see our previous blog post on articles of association here) which acts as the company’s constitution.

There are areas of the articles of association that need consideration where there is only one director of the company.

One area may be how a company executes documents/binds itself.

Another involves decision making. A board meeting is often required for decisions and authorisations relating to key parts of a company’s business such as borrowing money. A board meeting involves more than one person, and a quorum is often defined in the articles as two directors or more.

The model articles, which are the template that many companies do not alter when they are incorporated, requires a quorum of two directors but also allows for sole directors to make decisions – usually via sole director resolutions. However, the case of Hashmi v Lorimer-Wing (also known as Re Fore Fitness Investments Holdings Ltd) relating to whether a sole director had the power or authority on their own as the sole director led to lenders and banks requiring a change of articles before they would lend to sole director companies as it would affect their ability to recover monies that they have lent.  

The subsequent case of Re Active Wear Limited (in Administration) reversed the decision of the previous case but bearing in mind that interpretations of the law can change, it is worth checking your articles of association if you are a sole director as the contents could be written for companies with more than one director.

Updating and ensuring the articles reflect the structure you have in place rather than a hypothetical one can help your company continue to operate smoothly (and is most certainly worth doing if you are looking to sell the company at some point in the future).

The corporate / commercial department at BTTJ advises businesses across all sectors, from long-established companies to enterprises that are just starting up.  Our team consists of commercial and corporate law solicitors with extensive expertise – and the experience required to adopt the right strategy in every situation. Please contact us for further advice.

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The accuracy requirements of this Act include that registered office addresses must be an ‘appropriate address’ at all times. Many companies utilise a registered office address that is not their trading address (it is often, for example, their accountants). The Act defines an appropriate address as one where:

• any documents sent to the address should be expected to come to the attention of a person acting on behalf of the company; and
• any documents sent to that address can be recorded by an acknowledgement of delivery.

It has been the case previously that companies could provide a PO box or an address such as a paid office for their registered office address. This meant that documentation sent to the address or served at the address would not necessarily be brought to the attention of the company or it’s directors. As a result of this, when chasing payment for unpaid bills, it would be standard practice to not send preaction letters to the registered office address as they would be assumed not to have been read by the directors of the company.

The consequences of not having an appropriate address are that the company could be struck off.  If the address is identified by Companies House as not appropriate, they will change the address to a default address at Companies House providing the company with 28 days to change the address to an appropriate address or Companies House will begin the striking off process.

The act also requires a “registered email address” to be provided to Companies House, this address will not be shown on the public record, but it must be an appropriate email address. An email address is an “appropriate email address” if, in the ordinary course of events, emails sent to it by the registrar would be expected to come to the attention of a person acting on behalf of the company.

For further advice or assistance on this matter, please contact our expert Corporate Commercial team who will be happy to assist.

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A CIC can be company limited by shares, both private and public, or a company limited by guarantee, it cannot change from one set-up to the other. A CIC of either type must include certain regulations/points in their constitutional documents (or “Articles of Association”).

Part of the requirements to be complied with is that that the CIC appoints an “Asset Locked Body”, although this can later be appointed, an Asset Locked Body is either a charity or another CIC to whom the assets of the CIC will be passed to should it be wound up, and in the case of insolvency, wound up after the creditors be satisfied. If the Asset Locked Body owns shares in the CIC then they may be able to receive dividends. The intention behind this concept is that the CIC’s success or its assets at least (in the event it is closed) will be paid forward into projects for the community/social development.

A political party may not be a CIC.

CICs are regulated under the CAICE – Companies (Audit, Investigations and Community Enterprise) Act 2004 which also establishes a regulator, which is a separate department with Companies House, a company can either be incorporated as a CIC or  incorporated as a ordinary company first and then apply for CIC status with this regulator, this process takes roughly 10-15 working days and involves changing the name of the company to reflect its CIC status.

A CIC, like many other companies, can be organised as having a small number of members that are also directors or have a board of directors and a larger number of members.

CICs are required to deliver to the Registrar of Companies an annual community interest company report with its annual accounts. This report records their activities for that year including any details on assets transferred for less than market value, dividends paid and the remuneration of directors.

CICs are still covered by company law so in addition to answering to the regulator and the CAICE Companies (Audit, Investigations and Community Enterprise), they will be subject to the Companies Act 2006.

The concept of a CIC is to create a type of entity that can be ran for the benefit of a community and not solely for profit but include some of the benefits (such as limiting liability) that a company can provide.

If you are a CIC or are thinking about starting setting one up and need legal advice, please get in touch with our Commercial and Corporate Law Solicitors who can offer clear and cost-effective expert advice.

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As part of this, the government has sought to find ways to encourage the uptake of renewable sources by both businesses and consumers alike. Whether that is Solar panels (or even a heat pump) for a person’s home or opening a solar farm (or renting land for a solar farm). There are many opportunities.

Whilst we cannot, and will not, advise on these opportunities as investments, we can give a little insight into what these are and some of the legal aspects around them.

Business

Incentives  

As part of the move to encourage businesses towards a more carbon neutral approach, part of the Government’s plan to hit their net zero targets, opportunities for businesses to benefit, especially in periods where energy prices have affected them, have been rolled out.

The smart export guarantee – a replacement for feed in tariffs, provide a guaranteed rate for electricity produced by small business sources such as a business that has solar panels on the roof of its premises or on land that it owns to sell excess energy to the national grid (or energy company). Previously feed in tariffs operated, similar in nature to the Smart Export Guarantee however the rates were considered too high.

Solar Farm – owned and operated by the business  

In some cases, businesses may choose to set up their own solar farm or similar source of energy not just for their own use but also for the purposes of selling energy back to the grid.

The installation of a solar farm often involves a contract known as an EPC contract (Engineering, Procurement and Construction).

The actual installation of a solar farm can be rather quick, although like any contract it can have its own issues, such as immigration laws affecting the workers utilised in installation. There are several stages that are likely to occur, such as assessing irradiation levels for the solar farm, in some cases this is required by investors backing the project. The 4 key stages are the land, planning, grid and the generation assets.

Once the Farm is up and running, contracts will need to be negotiated with the energy companies that the business wishes sell the electricity to and also ensure that your farm is compliant with the necessary health and safety laws and standards for such an operation and if a separate manager is brought in for the farm, the agreement with that manager.

Solar farm – leasing the land to the operator  

It is also possible for land owners with sufficient space to lease out land to solar farm companies or even wind farm companies to install their equipment and operate.  As part of this, the tenants may seek to put in place an option agreement between the landlord and tenant to enable the tenant to have the option to purchase the land they are renting in certain circumstances (such as the landlord proposing to sell the land to another person or entity). Lease agreements can be complex, like all leases, to reflect things such as responsibilities for repair and upkeep. Option agreements may require negotiations as to the valuation of the land when the option is being exercised and on the scenarios in which the option may be triggered.

Consumers

For Consumers, there are many ways that they can be involved in renewable energy, whether that be buying their electricity and gas from suppliers that utilise only renewable sources or purchasing their own solar panels or heat pumps.

Consumers are able to benefit from the smart export guarantee as well as other incentives such as subsidy schemes to install heat pumps.

In the past the solar panel installation side of the renewable energy sector suffered some knockbacks due to several smaller companies becoming insolvent causing those that paid up front to lose their monies. To combat this and to help increase consumer confidence in this sector, the government has created a consumer code for installers and suppliers to follow as well as schemes to protect the deposits paid by consumers and restrict the amount (in percentage of the cost) that the supplier/installation business can take from their customers.

The encouragement of consumers into obtaining solar panels and battery systems forms part of the overall strategy to boost the Energy Security of the country, to enable us to rely less on foreign supplies of energy which influence the prices we pay.

There can be different influences on whether these incentives will benefit a household including whether permission is needed from a landlord, local authority and even regulators where applicable.

For further advice on the legal aspects of the above, please contact our Corporate / Commercial or Commercial Property teams.

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