ACCA Applied Skills · Corporate and Business Law (Global) · Company directors
Kestrel Ltd's articles require every director to hold at least 500 qualification shares within two months of appointment. Naveen is appointed as a director but fails to acquire any shares within two months. What is the likely legal position?
Naveen must vacate office because the articles make holding the qualification shares a condition of being a director. Such share qualifications are valid if the articles impose them. His earlier acts are not automatically void, and the company is not wound up.
- ANaveen must vacate office, because the articles impose the share qualification as a condition of holding officeCorrect
- BNaveen remains a director and the requirement is unenforceable as a matter of law
- CNaveen's earlier acts as director are automatically void for all purposes
- DThe company must be wound up because of the breach
Explanation
Articles may impose a share qualification, and failing to meet it within the stated period means the director must vacate office. Acts done before vacating are not automatically void, because third parties are protected, so the claim that earlier acts are void is wrong.
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