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Medium2 marksMultiple Choice
Corporate and Business LawSection BSyllabus FManagement and AdministrationMTQ
This question is part of a case study — click to read the full scenario(Case 55)

SCENARIO 4: AquaGrid PLC, a regional water utility, is considering a major infrastructure upgrade. The board of directors is split. Director A wants the cheapest option to maximize short-term shareholder dividends. Director B wants a more expensive, eco-friendly option, arguing it benefits the local community and ensures long-term sustainability, even if it reduces dividends this year.

Under Section 172 of the Companies Act 2006 (Duty to promote the success of the company), which approach is legally correct?

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ACCA · Question 57 · Corporate and Business Law

SCENARIO 4: AquaGrid PLC, a regional water utility, is considering a major infrastructure upgrade. The board of directors is split. Director A wants the cheapest option to maximize short-term shareholder dividends. Director B wants a more expensive, eco-friendly option.

The shareholders are unhappy with Director A's performance and wish to remove him from the board before his term expires. What is the statutory procedure to remove a director under Section 168 of the Companies Act 2006?

Answer options:

A.

A special resolution passed at a general meeting, requiring 14 days' notice.

B.

An ordinary resolution passed at a general meeting, requiring 28 days' special notice.

C.

A board resolution passed by a majority of the other directors.

D.

A written resolution signed by 51% of the shareholders.

How to approach this question

Recall the specific statutory mechanism and notice requirements for removing a director.

Full Answer

B.An ordinary resolution passed at a general meeting, requiring 28 days' special notice.✓ Correct
Section 168 of the Companies Act 2006 states that a company may by ordinary resolution remove a director before the expiration of their period of office. However, 'special notice' is required for this resolution. Under Section 312, special notice means notice of the intention to move the resolution must be given to the company at least 28 days before the meeting. Furthermore, a director cannot be removed via a written resolution; it must be at a general meeting so the director has the right to be heard.

Common mistakes

Thinking a special resolution (75%) is needed, or forgetting the 28-day special notice requirement.
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