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ACCA Applied Skills · Corporate and Business Law (Global) · Company directors

Dunmore Co's articles state that a director must hold 500 shares in the company within two months of appointment. Priya is appointed a director but, after four months, still holds no shares and has not obtained any. What is the likely consequence?

Priya must vacate office because the articles required a share qualification within two months and she failed to meet it. Companies may validly impose such conditions. Her acts before vacating remain valid, as she was properly appointed and acted in good faith.

  1. APriya must vacate office because she has not met the qualification requirement in the articles, although her earlier acts remain validCorrect
  2. BPriya's appointment was void from the start, so all her earlier acts are invalid
  3. CPriya may stay as director indefinitely because share qualifications can never be imposed by articles

Explanation

Articles may impose a share qualification, and failure to meet it within the stated time usually requires the director to vacate office. Her earlier acts stay valid because she acted while validly appointed. The qualification is not void and does not make the appointment void ab initio.

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