Division 5 of Part VIII of the Companies Act 1997 sets the entry requirements for the boardroom.
Section 128 — number and residence
(1) A company shall have at least one director.
(2) At least one director of the company shall be ordinarily resident in the country.
This matches section 11(d), which lists one or more directors among the four essential requirements of a company. A sole director is perfectly proper, and under section 108(b) that director is the board.
Section 128(2) is not satisfied once and forgotten. If the resident director resigns, dies or ceases to be ordinarily resident, the company is in breach until another resident director is appointed. A foreign-owned company should build a replacement mechanism into its arrangements, and note that a foreign enterprise also needs certification under the Investment Promotion Act 1992 before carrying on business.
Section 129 — qualifications and disqualifications
A natural person who is not disqualified by subsection (2) may be appointed a director. The following are disqualified from being appointed or holding office:
(a) a person under 18 years of age;
(b) a person prohibited from being a director or promoter of, or being concerned or taking part in the management of, a company under section 425, 426 or 428;
(c) a person who is or becomes of unsound mind;
(d) in relation to a particular company, a person who does not comply with any qualifications for directors contained in the constitution of that company.
The words are “is or becomes”. A director who becomes of unsound mind is disqualified from that point, and under section 135(1)(c) the office is vacated on becoming disqualified under section 129. The same is true of a person who becomes subject to a prohibition under sections 425, 426 or 428 while in office.
Paragraph (d) lets a constitution add requirements — a shareholding qualification, professional membership, residence, or a maximum age. Those apply only to that company.
A person that is not a natural person cannot be a director of a company.
So a holding company cannot sit on the board of its subsidiary. It must appoint an individual, who then owes the duties personally — subject to the group exceptions in section 112(2) and (3), which require an express constitutional permission.
Section 129(4) — the trap for a disqualified person
A person who is disqualified from being a director but who acts as a director is a director for the purposes of a provision of this Act that imposes a duty or an obligation on a director.
The provision is deliberately one-sided. A disqualified person who acts as a director takes on every duty and obligation the Act imposes — the section 112 duty, section 115 care and diligence, the interested transaction obligations, and liability for insolvent trading under section 348.
Section 129(4) works alongside section 107(1)(a), which already catches a person occupying the position of director by whatever name called, and alongside sections 427 and 429, which impose liability for contravening a prohibition.
Section 130 — written consent and certification
A person shall not be appointed as a director unless he has consented in writing, in the prescribed form, to be a director and certified that he is not disqualified from being appointed or holding office.
Two documents in one: a consent and a certification of non-disqualification. Related obligations follow:
- Section 13A(1) — a company shall keep at its registered office a signed consent by each person named as director, and produce it to the Registrar forthwith on written request.
- Section 137(2A) — the same obligation for each new director.
The certification is that you are not disqualified. A person subject to a prohibition under sections 425, 426 or 428 who certifies otherwise faces the offence of making a false statement under section 420, in addition to liability under sections 427 or 429 for contravening the prohibition.
Before accepting an appointment
- Check you are not disqualified under any limb of section 129(2), including any qualification in the constitution.
- Read the constitution — it governs the number of directors, board procedure in place of Schedule 4, and whether any reserved matters make shareholders deemed directors under section 107(3) and (4).
- Understand the duties you are taking on — sections 112 to 116, the interested transaction regime, and the liability provisions in sections 54, 348 and 348A.
- Ask about solvency and the accounts. Section 188 requires records enabling the financial position to be determined with reasonable accuracy at any time, and section 348A makes their absence a source of personal liability.
- Consider indemnity and insurance under section 140, and check what the constitution authorises.
- File a general notice of interests under section 118(2), listing every company and person in which you have an interest.
- Sign the section 130 consent and certification, and confirm the company holds it at the registered office.
Under section 136, the acts of a person as a director are valid even though the appointment was defective or the person is not qualified. Third parties are further protected by section 19(1)(b), under which the company cannot assert that a person named in the latest section 137 notice was not duly appointed.
Sources
- Companies Act 1997 — ss 11, 13A, 19, 54, 107, 108, 112–116, 118, 128–130, 135–137, 140, 188, 348, 348A, 420, 425–429; Schedule 4
- Investment Promotion Act 1992
Before relying on anything here, read the current text of the Companies Act 1997 and check for later amendments. If a decision matters to you, get advice — start with the Office of the Public Solicitor, or find a firm in the law firms directory.