Directors' terms repel boarders
Sunday 05 July 1992
But they are generally less welcome news for the company's directors. They can find themselves facing removal from the board, followed by dismissal. The new principal shareholder usually wants its own management team to take over.
Recommending shareholders to accept an offer for their shares can create a conflict of interest for directors, who find themselves torn between their duties to the company and their own employment worries.
Many directors seek to protect their position by negotiating long-service agreements. The Companies Act requires only directors' employment contracts of more than five years to have prior shareholder approval. The terms of some service agreements allow directors to treat themselves as having been dismissed in the event of a successful takeover.
This is usually coupled with the right to automatic compensation. The existence of such agreements can act as an obstruction to a successful takeover bid. Nick Bertolotti of Arthur Andersen, the accountant and consultant, says: 'If the costs of a successful takeover bid have to take into account the expense of paying off five directors each with a five-year rolling contract and a package of pounds 200,000 per annum, it can be sufficient to deter any potential predator.'
Directors' powers and responsibilities are governed by a cocktail of regulations including statute, common law and Stock Exchange rules. The Companies Act provides that directors' service agreements of longer than 12 months must be available for inspection at the company's registered office. In the case of listed companies, the Stock Exchange extends the right of inspection to include potential investors and other interested parties. In addition, public companies are required to disclose the size of any termination payments made to directors.
However, payments made to directors as compensation for loss of employment don't normally require shareholder approval. The City code on takeovers states that when a bid for a company is in progress, advantageous amendments to a director's service agreement should receive prior shareholder approval. And under common law, directors have a duty to act in the best interests of the company.
- 1 Nathan Collier: Montana man inspired by same-sex marriage ruling requests right to wed two wives
- 2 Amber Roof: Sister of Charleston shooting suspect Dylann Roof launches fund-raising appeal for wedding and honeymoon
- 3 'Help me I'm trapped in a factory' messages keep being found on bottles of vitamin water
- 4 Right to die: Belgian doctors rule depressed 24-year-old woman has right to end her life
- 5 BP hit with record $18.7 billion fine over Deepwater Horizon Gulf oil spill
Nathan Collier: Montana man inspired by same-sex marriage ruling requests right to wed two wives
Amber Roof: Sister of Charleston shooting suspect Dylann Roof launches fund-raising appeal for wedding and honeymoon
Russell Brand condemns moment of silence for Tunisia attack victims as a 'minute of bulls**t'
Right to die: Belgian doctors rule depressed 24-year-old woman has right to end her life
Worker killed by robot at Volkswagen car factory
Greece crisis: IMF was pushed around by Angela Merkel and Nicholas Sarkozy – and now it is being humiliated
Forget little green men – aliens will look like humans, says Cambridge University evolution expert
'I wish the BBC would stop calling it Islamic State' – David Cameron unleashes frustration at broadcaster
Greece crisis: The wider lesson is that it’s time to abandon this failed experiment in currencies
Girl, 7, stares down hate preacher at Ohio festival with pro-LGBT rainbow flag gesture
They are neither a 'state' nor 'Islamic': Why we shouldn't call them Isis, Isil or IS
iJobs Money & Business
£15000 - £17000 per annum: Recruitment Genius: This company offers a range of ...
£15000 - £16000 per annum: Recruitment Genius: Customer Service Advisors are r...
£20000 - £25000 per annum + OTE £45K: SThree: SThree were established in 1986....
£40000 - £60000 per annum: Recruitment Genius: A Compliance Manager is require...