Company Management FAQs

Can a company buy back the shares in issue from existing shareholders?

This is allowed but it's subject to tax law and so professional advice should be sought. It can be useful when the limited company has the money to pay for the shares that a shareholder wishes to sell but no other shareholder has the funds available. In the same way a limited company can give financial assistance to another party wishing to buy shares in the limited company but again, professional advice must be sought.

Can a director also be company secretary?

Yes a company director may but, if they are the sole company director they may not also be company secretary. That said it is no longer a limited company requirement to appoint a company secretary.

Can a director get compensation for loss of office?

Compensation for loss of office may only be paid if it is approved by an ordinary resolution passed by members at a General Meeting, or if it is authorised in the director’s service contract.

Can directors be disqualified for failing to deliver documents to Companies House?

Yes. They can be disqualified from being a director and from acting as one for up to five years if they persistently fail to deliver the required Companies Act forms and other statutory documents on time.

Can my firm be sued?

A firm or business partnership, unlike a company, is not a legal entity separate from its members. An individual business partner will therefore be personally liable:

1. for his own wrongful acts; and

2. for the wrongful acts of his co-partners committed in the normal course of the firm's business; and

3. for the wrongful acts of the employees of the partnership committed while acting in the course of their employment.

Where the partners are defendants under (1) or (2) above they are sued in the name of the firm (i.e. the claimants are expressed to be 'Thompson, Thompson and Smythe, a firm'). Only those business partners who were business partners at the time of the act complained of will be held liable.

Do all directors have to attend board meetings?

It's definitely advisable for all limited company directors to attend all board meetings, but they can do this by telephone or by video conferencing.

Do directors have to retire by rotation?

In the past, directors were normally appointed for three-year periods and at both the next Annual General Meeting (AGM) after their appointment and at the end of each successive third year of service they had to offer themselves for re-election at the following Annual General Meeting. This requirement has now been dispensed with.

However, if you continue to hold Annual General Meetings, you may need to check with your Articles whether the retirement is still required under the company’s own internal rules. It is no longer a requirement of company law.

Do I have to pay Stamp Duty when I issue shares?

Stamp Duty is only paid on the transfer of shares, not when they are issued. Our Stock Transfer Form lists the transfers that are exempt from Stamp Duty. Generally, one-off transactions under £1,000 are exempt.

Do I need an auditor?

The current small company audit exemption limits are:

Annual turnover less than £6.5 million.

Balance sheet total no more than £3.26 million.

If a limited company breaks just one of the above limits, then it must have an audit. However, even if it passes both of the above tests, if a company is part of a group, is a Public Limited company or is subject to a statute-based regime (e.g. the Financial Conduct Authority) then it may not be able to claim exemption from having an audit.

A limited company can also not claim exemption if 10 per cent of the shareholders have vetoed the exemption; if 10 per cent ask for an audit, one must be undertaken.

If a company is able to take advantage of an audit exemption, the director must state this in the company accounts.

Do shares need numbering?

No, but you can do so if you wish.

Does a director need a service contract?

As an employee a limited company director must be given an employment contract, along with all other employees. However, if they need a separate employment contract drawn up, this will be called a director’s service contract.

Does the chairman have a casting vote?

Under the Model Articles, a chairman is entitled to a casting vote.

How are votes in a shareholders' meeting taken and counted?

Voting is normally done on a show of hands with each member having one vote, no matter how many shares he holds. Proxies are now allowed to vote on a show of hands.

If a poll is required, this means that members vote on slips of paper and under these circumstances the numbers of shares of members is taken into account.

How can a company secretary be removed?

A company secretary can be removed by a company resolution of the limited company directors. A company secretary can be disciplined, dismissed or resign in the same manner as any other employee subject to the terms of their employment contract.

If you employ someone outside the company to be the company secretary, their removal, etc. will be subject to any relevant employment contract or agreement.

How can a company secretary resign?

A company secretary may resign by submitting their resignation in writing to the board of the limited company, who may or may not decide to replace them. If the company secretary is not replaced, then form TM02 should be filed. If the company secretary is replaced, then form AP03 will also have to be submitted.

How can a director be dismissed?

A limited company director may be removed from office by ordinary resolution of the shareholders passed at a general meeting. Special notice must be given and the director has the right to make representations at the meeting. The director can also make written representations before the meeting which must either be circulated to all members before the meeting or read out at the meeting.

In addition, a director can be resigned from office if they have been absent without permission from all directors’ meetings for six months.

Both of these methods should be used as a last resort because less blood tends to be spilt if a director can be persuaded to resign; and do bear in mind that a director is entitled to sue for breach of contract.

Also, please remember to file form TM01 (available in our guide How to Run a Limited Company) within 14 days of the termination.

How can a director retire or resign?

A company director may resign by notifying the limited company in writing or orally. To do so, they should write to the board. A template letter is provided in our guide 'How to Run a Limited Company'.

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