The function of a director is to exercise his powers and be a member of the company. If there are directors of the company and any one of them do not exercise their powers, the effect of their exercising their powers is that the company ceases to exist. This happens automatically, as soon as there is a power of appointment exercised by a director. So it can happen that one or more directors of the company wish to resign, there has to be an election as to who will be the new directors, which must be done by the Board of Directors.
There are two main classifications of directors: the general and the special. The general directors are the people that have the ordinary duties relating to the running of the business. The special directors are people who have more specialized duties. Special duties are those that have been imposed upon the company by the Memorandum and Articles of Association.
The general duty is to perform the functions that are required of the directors. This is done by ensuring that accounting records are available to all necessary parties and that they are properly maintained. They ensure that shareholders meet all their requirements and have all the relevant meetings. The responsibility of keeping the books is also a duty that is carried out by all directors.
When a director is about to retire, there will normally be a meeting of the Board of Directors to appoint someone as his replacement. The Board usually makes the decision by voting and then appoints the person as a new director. The only requirement is that the person must have the qualifications that have been nominated for the position by the shareholders. These qualifications can include knowledge of the company, financial affairs, experience in finance, accounting records and such other relevant duties. It is usual for members of the public who are interested in becoming directors of the company to attend such a meeting where they are presented with a list of possible replacements and told of their duties.
The officers are obliged to exercise their power of appointment as well as their power of removal only once a year at the general meeting of the Board of Directors. If a member of the public does not want to serve any further term, the Board of Directors will normally refer the matter to the Board of Trustees. Once the matter has been referred, it is up to the Trustees to carry out the process of choosing a suitable candidate to fill the vacancy. When making a decision about a new first director, the Trustees must take into account whether the person would be able to serve the company in an effective manner. This can only be determined after taking into account all the requirements of the company and whether the person is likely to be able to fulfil those requirements.
It is usual for there to be a clause in the Memorandum and Articles of Association that says that the company is controlled by the directors of the company. This clause is called section 2 of the Memorandum and Articles of Association. This clause provides that the company is controlled by the directors for a specific period of time which is referred to as directors’ term. This means that the company can only be controlled by the appointed number of directors for a certain number of months after the date when the last directors are appointed.
The purpose of this clause is to provide protection to the directors against the risk of default and bad business judgment. For small businesses it may be difficult to determine whether directors must have a fiduciary duty or not. Generally it is accepted however that directors must perform the necessary functions in the interests of the company and its members and that they should exercise independent judgment. A company’s directors must have a reasonable awareness of all the facts that affect or are relevant to the company and its affairs.
There are some additional duties that directors of the company are required to perform. First directors must decide whether to call a meeting or send a letter to shareholders requesting that they attend or not. Second, directors must report on behalf of the company at meetings of other directors and also at Board meetings. Third, the company must make annual reports to shareholders covering financial activities, profit and loss, and assets and liabilities. These reports are required to be filed with the Securities and Exchange Commission.