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CS Executive · Company Law and Practice · Directors

The Board of Sagar Foods Ltd wants to authorise its Managing Director to decide on his own when to make calls on shareholders for unpaid money on shares, without any Board meeting. Which statement is correct?

The power to make calls on shareholders for unpaid share money must be exercised by the Board through a resolution passed at a Board meeting. It cannot be handed to the Managing Director to exercise alone, so the proposed authorisation is not permitted.

  1. AAllowed, because the MD can exercise all Board powers if the articles are silent
  2. BAllowed, if a circular resolution is later ratified by the audit committee
  3. CNot allowed, because the power to make calls on shareholders must be exercised by the Board through a resolution passed at a meeting and cannot be delegated to the MDCorrect
  4. DAllowed, if the MD reports the calls to the Registrar within thirty days

Explanation

Certain powers, including making calls on shareholders for unpaid money, can be exercised only by the Board through resolutions passed at its meetings. They are not left to an individual director or to a later ratification. The silence of the articles or a report to the Registrar does not change this.

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