The decision making process within a company is largely regulated by its articles of association. The information below is based on the provisions of the model articles for private companies limited by shares. These are the default articles that apply to any such company that has not adopted alternative or amended articles.
The general rule about decision making by directors is that any decision of the directors must be either a majority decision at a meeting or a unanimous decision taken in accordance with the provisions set out below under the heading 'Unanimous decisions'.
If a company only has one director, and no provision of its articles requires it to have more than one director, the general rule does not apply.
A unanimous decision of the directors is taken when all eligible directors indicate to each other by any means that they share a common view on a matter.
Such a decision may take the form of a resolution in writing, copies of which have been signed by each eligible director or to which each eligible director has otherwise indicated agreement in writing.
Eligible directors are those who would have been entitled to vote on the matter had it been proposed as a resolution at a directors' meeting. A decision may not be taken in this way if the eligible directors would not have formed a quorum at such a meeting.
Any director may call a directors' meeting by giving notice of the meeting to the directors or by authorising the company secretary (if any) to give such notice. The length of notice given must be reasonable in all the circumstances.
Notice of any directors' meeting must indicate:
Notice of a directors' meeting must be given to each director, but need not be in writing.
Directors can waive their entitlement to notice of a particular meeting, by giving notice to that effect to the company. They can even do this after the meeting has taken place provided their notice of waiver is given not more than 7 days after the date on which the meeting is held.
Participation in a directors' meeting, or part of a directors' meeting, does not require their physical presence in the same place. The requirement is that they can each communicate to the others any information or opinions they have on any particular item of the business of the meeting. No particular method of communication is required. A meeting might, therefore, validly take place, for example, by means of a telephone conference call.
At a directors' meeting, unless a quorum is participating, no proposal is to be voted on, except a proposal to call another meeting.
The quorum for directors' meetings may be fixed from time to time by a decision of the directors, but it must never be less than two, and unless otherwise fixed, it is two.
If the total number of directors for the time being is less than the quorum required, the directors must not take any decision other than a decision
The directors may appoint a director to chair their meetings.
The directors may terminate the chairman's appointment at any time.
If the chairman is not participating in a directors' meeting within ten minutes of the time at which it was to start, the participating directors must appoint one of themselves to chair it.
If the numbers of votes for and against a proposal are equal, the chairman or other director chairing the meeting has a casting vote.
But this does not apply if, in accordance with the articles, the chairman or other director is not to be counted as participating in the decision-making process for quorum or voting purposes (see 'Conflicts of interest' below).
If a proposed decision of the directors is concerned with an actual or proposed transaction or arrangement with the company in which a director is interested, that director is not to be counted as participating in the decision making process for quorum or voting purposes, unless the company by ordinary resolution disapplies the provision of the articles which would otherwise prevent a director from being counted as participating in the decision making process.
References to proposed decisions and decision making processes include any directors' meeting or part of a directors' meeting.
If a question arises at a meeting of directors as to the right of a director to participate in the meeting (or part of the meeting) for voting or quorum purposes, the question may, before the conclusion of the meeting, be referred to the chairman whose ruling in relation to any director other than the chairman is to be final and conclusive.
If any question as to the right to participate in the meeting (or part of the meeting) should arise in respect of the chairman, the question is to be decided by a decision of the directors at that meeting, for which purpose the chairman is not to be counted as participating in the meeting (or that part of the meeting) for voting or quorum purposes.
The directors must ensure that the company keeps a record, in writing, for at least 10 years from the date of the decision recorded, of every unanimous or majority decision taken by the directors.