Glossary

A · B · C · D · E · F · G · I · M · N · P · Q · R · S · T · W

A

Aggregation

Adding related deals together to test a threshold. Deals with the same counterparty for the same purpose, or for one project, in any twelve months count as one matter. That stops a project being bought in pieces to stay under a figure. Charter §2.2 · Chapter 2 · see Exceeding

Arm's length

Terms no worse for the company than a stranger would offer. For a deal with a Related Party, the minute must record the proof: two comparable quotes from others, or an independent valuation. The packaging contract was approved against two dearer quotes. Charter §5.5 · Chapter 4

Articles of association

The company's constitution, registered at Companies House. Brackenholme's Articles follow the Model Articles with a few changes, and they win where the charter differs. A director must act within them (section 171). Charter, paragraph (A) · Chapter 1 · Chapter 6 · see Model Articles

Audit & Risk Committee

The board's committee that checks the accounts, the auditors, the internal controls, the risk register and spending against Schedule B. It also receives every speak-up report and every bad food-safety result. Dr Anand Raghavan chairs it, and it recommends while the board decides. Charter, Schedule C · Schedule C, paragraph 4 · Chapter 7

Authorisation of a situational conflict

The board's permission for a director to stay in a situation that could pull against the company. It is given at a meeting where she neither counts in the quorum nor votes (section 175). Its conditions can withhold named papers and suspend the investor's information rights on the same subjects. Charter §8.3 · Charter §8.4 · Chapter 5

B

Board

The directors acting together: at a meeting with a quorum, or by a written resolution that every eligible director signs. Three of five directors are a majority, but they are not the board. The charter fixes its five seats. Definition: Board · Charter §1.2 · Chapter 1 · Chapter 6

Board Charter

A board's written rules for itself: what it decides, what it leaves to management, how it meets and what it records. Brackenholme's charter adds procedure but no duties. Only the board can change it, on the chair's recommendation, and it reviews the charter every February. Definition: Charter · Charter, paragraph (A) · Charter §10.5 · Chapter 1

Board evaluation

The board marking its own work, once a year at the February meeting. Each director answers a questionnaire the company secretary sends round, and the chair reports on the answers. Every third year an outside adviser chosen by the chair runs it instead. Charter §10.3 · Chapter 9

Board Pack

The papers for a board meeting, sent to every director at least five business days before it. Each paper for decision names the Schedule A item or the Delegated Authority it arises under. Reading the pack is how a director shows reasonable care (section 174). Definition: Board Pack · Charter §7.2 · Chapter 1 · Chapter 10

Business Day

A weekday that is not a public holiday and on which the company's office is open. The Board Pack goes out five business days before a meeting, and the monthly management accounts follow within 15 of month end. Notice of a meeting counts calendar days instead. Definition: Business Day · Charter §7.1 · Charter §7.2 · Chapter 1 · Chapter 6

C

Capital expenditure

Money spent on things the company keeps, such as a machine. The chief executive may approve it up to £250,000 if it is in the approved budget. Outside the budget, spending of more than £250,000 is a Matter Reserved (Schedule A, item 2). Schedule A, item 2 · Charter, Schedule B · Chapter 2

Casting vote

An extra vote for the chair of a meeting, to break a tie. The Model Articles give one, but Brackenholme's Articles remove it. So the chair has no casting vote, and a tied proposal fails. Charter §4.5 · Chapter 1 · Chapter 6

Certified extract

A copy of one decision from the minutes, signed by the company secretary as a true extract. A bank asks for one before it lends. She certifies only a decision she can find: a quorate meeting, or a written resolution every eligible director signed. Charter §1.5 · Charter §4.6 · Chapter 6 · Chapter 10

Chair

The Independent Director who leads the board. He sets the agenda with the company secretary, runs each meeting and leads the yearly evaluation. He has no casting vote, and for urgent business he may call a meeting on 48 hours' notice, or less if delay would harm the company. Definition: Chair · Charter §1.3 · Charter §4.2 · Chapter 1 · Chapter 6

Committee

A small group of directors given one piece of the board's work under written terms of reference. Every member is a non-executive, and an Independent Director chairs it. A committee recommends and the board decides, unless its terms of reference say otherwise, and it never decides a Matter Reserved. Charter §6.2 · Charter §6.3 · Chapter 7

Company Secretary

The officer who runs the board's procedure and keeps its records, but who is not a director. She keeps the minutes, the Conflicts Register, the Decision Log and the statutory registers, sends every notice and Board Pack, and certifies extracts. You are her assistant. Definition: Company Secretary · Charter §1.5 · Chapter 1 · Chapter 10

Confirmation statement

A yearly filing confirming that what Companies House holds about the company is still correct. Brackenholme's review period ends on 3 May, the anniversary of its incorporation, so the statement is due by 17 May on form CS01 (section 853A). It never replaces the 14-day notice of a new director. Chapter 10

Conflict of interest

A position in which a director stands to gain from the other side of something the company is deciding. It is a position, not an accusation. The Act deals with a deal with the company under section 177, and with a standing situation under section 175. Charter Part 5 · Charter Part 8 · Chapter 4 · Chapter 5

Conflicts Register

The company secretary's record of every declaration of interest, every authorised situational conflict and every approved Related Party deal, each with its conditions. The board reviews it at every meeting, and each director confirms that her entries are complete. Definition: Conflicts Register · Charter §5.4 · Charter §8.4 · Chapter 4 · Chapter 10

Corporate governance

How a company is directed and checked: who decides what, on what information, and who watches them. A company with outside investors usually writes those rules down, as Brackenholme did in its board charter. Charter, paragraph (A) · Chapter 1

D

D&O insurance

Directors' and officers' liability insurance. It pays a director's legal costs and damages if she is sued for what she did in office. Brackenholme keeps cover of at least £10,000,000, renewed each April on terms the board approves (Schedule A, item 15). Charter §10.4 · Schedule A, item 15 · Chapter 2 · Chapter 9

Decision Log

A running record the company secretary opens in any incident that may lead to a recall, a report to a regulator or a claim. It records each decision, who took it, when and on what information. The minute says why, and the log shows who knew what, step by step. Definition: Decision Log · Charter §9.6 · Chapter 8 · Chapter 9

Declaration of interest

A director telling the other directors the nature and extent of her interest in a proposed deal with the company (section 177). Under the charter she declares before the board takes the item. “My husband owns the supplier outright” is a declaration, and “I have an interest” is not. Charter §5.2 · Charter, Schedule F · Chapter 4

Delegated Authority

The power of a named manager to approve a matter alone, within a limit in Schedule B. The chief executive, the chief financial officer and the site managers each have one. Every limit applies to the whole matter, and an approval that cannot be found counts as not given. Definition: Delegated Authority · Charter, Schedule B · Charter §3.4 · Chapter 2 · Chapter 7

Director

One of the people who direct the company together as its board. Brackenholme has five, and each owes the company the same seven duties. When a director joins or leaves, Companies House must be told within 14 days, on form AP01 or TM01. Chapter 3 · Chapter 10

Duty not to accept benefits from third parties (section 176)

A director must not accept a benefit from anyone but the company if it is given because she is a director. Gifts, fees and jobs for relatives all count, but ordinary hospitality that could not cause a conflict does not. She declines and tells the company secretary. Charter §5.6 · Chapter 3

Duty to act within powers (section 171)

A director must act within the company's constitution and use each power only for the purpose it was given. Three directors who sign a written resolution without the other two use a power the Articles give only to all of them. Issuing shares to shift votes breaks the second half. Charter §5.1 · Chapter 3 · Chapter 6

Duty to avoid conflicts of interest (section 175)

A director must avoid a situation in which her interests conflict, or may conflict, with the company's, such as a stake in a competitor. The duty applies even with no deal in view. The other directors may authorise the situation on conditions, without her counting or voting. Charter §8.2 · Charter §8.3 · Chapter 3 · Chapter 5

Duty to declare an interest in a proposed transaction (section 177)

A director with any interest in a deal the company is about to make must declare its nature and extent before the company enters it. An indirect interest, such as one through a husband's company, counts in full. The charter moves it to before the board takes the item. Charter §5.2 · Chapter 3 · Chapter 4

Duty to exercise independent judgement (section 173)

A director decides for herself and hands her vote to nobody. A director nominated by an investor may take the investor's views into account, but she votes as she judges best for the company. If the investor gives her an instruction, she must ignore it. Charter §8.1 · Chapter 3 · Chapter 5

Duty to exercise reasonable care, skill and diligence (section 174)

A director must bring the care, skill and diligence expected of anyone doing her job, and more if she knows more. So a food scientist on the board reads a laboratory result as a food scientist would. Diligence starts with reading the Board Pack. Charter §7.2 · Chapter 3 · Chapter 8

Duty to promote the success of the Company (section 172)

A director must act in the way she honestly thinks most likely to promote the company's success for its shareholders as a whole. On the way she must weigh six factors, from the long term to fairness between shareholders. A minute that shows the factors weighed is her evidence. Charter §10.2 · Chapter 3 · Chapter 8

E

Exceeding

Every threshold in Schedule A uses this word, and it means more than. So a £250,001 machine outside the budget is reserved, and a £250,000 one is not. Value covers the whole term, and related deals in any twelve months add up. Charter §2.2 · Chapter 2 · see Aggregation

Executive director

A director who also works in the business. Margaret Holroyd, the chief executive, and Daniel Okoro, the chief financial officer, are Brackenholme's two. An executive director sits on no committee, because she would be checking her own work. Charter §1.2 · Charter §6.2 · Chapter 1

F

Fiduciary

A person who holds power for someone else and must use it for them, not for herself. The chapters say “a person in a position of trust”. A director is one, and section 178 gives a breach of her duties the courts' usual consequences. Charter §5.1 · Chapter 3 · Chapter 4

G

Governance statement

A short public account of who sits on the board, how it decides and what it did in the year. The board approves it with the annual accounts, and the company secretary prepares it. Brackenholme reports against the Wates Principles voluntarily (Schedule A, item 18). Charter §10.6 · Schedule A, item 18 · Chapter 9

I

Indemnity

A promise to meet someone else's liabilities. A company may not exempt a director from liability to it for negligence or breach of duty. It may insure her, and give her a qualifying indemnity within the limits of sections 232 to 234. Charter §10.4 · Chapter 3 · Chapter 9 · see Qualifying indemnity

Independent Director

A non-executive director the board finds independent when she joins and every February. She has had no job or material business with the company in three years, has no family tie to a shareholder above 10%, and was not nominated by a shareholder. A quorum needs one. Definition: Independent Director · Charter §1.6 · Chapter 1 · Chapter 6

Information barrier

A rule that stops named information reaching a named person. For an investor's director it must close two routes: the papers she receives as a director, and the investor's own information rights. Charter §7.3 · Charter §8.3 · Chapter 5

Information rights

An investor's right, under its investment agreement, to be told certain things about the company. The board cannot rewrite that contract. It can make a conflict authorisation depend on the rights being suspended for the same subjects. Definition: Investment Agreement · Charter §8.3 · Chapter 5

Internal control

A rule plus a check, joined by a written record. Schedule B is the rule about who may approve what. The Audit & Risk Committee's quarterly review of spending against those limits is the check, and it found one machine bought on four orders. Charter §9.2 · Chapter 7

Investor Director

The director an investor nominates under its investment agreement: at Brackenholme, Rachel Achterberg, a partner at Calderbank. She owes the same duties as every director and votes as she judges best for the company. She passes board information to Calderbank only as the agreement allows. Definition: Investor Director · Charter §8.1 · Charter §7.4 · Chapter 1 · Chapter 5

M

Matters Reserved

The twenty decisions in Schedule A that only the board may take. They include the budget, borrowing of more than £1,000,000, any deal with a Related Party and any product recall. A matter not reserved is management's, within Schedule B. Definition: Matters Reserved · Charter §2.1 · Charter, Schedule A · Chapter 1 · Chapter 2

Minute

The board's written record of a meeting. The company secretary takes it, the board approves it at the next meeting, and the chair signs it. It is kept ten years from the meeting, and once signed it is evidence of what the meeting did (sections 248 and 249). Charter §10.1 · Charter §10.2 · Chapter 9 · Chapter 10

Model Articles

The standard articles the law provides for a private company. Brackenholme's Articles keep Article 8, under which a written resolution needs every eligible director, and Article 14, under which an interested director does not count or vote. They remove the chair's casting vote. Chapter 3 · Chapter 4 · Chapter 6

N

Non-executive director

A director with no job in the business. Brackenholme has three: Edmund Ferrar and Dr Anand Raghavan, who are independent, and Rachel Achterberg, who is not. Only non-executives sit on the board's committees. Charter §6.2 · Chapter 1 · Chapter 7

Notice

The written call to a board meeting, giving its time, place and business. Ordinary business needs seven clear days. For urgent business the chair may give 48 hours, or less if delay would harm the company, and the reason goes in the notice and the minute. Charter §4.2 · Charter §4.3 · Chapter 6 · Chapter 8

P

Persons with significant control

The people behind a company, named on a public register (section 790A). The law decides who goes on it, not the board: for example, anyone holding more than 25% of the shares or votes. Brackenholme's register names the family trust's two trustees and Calderbank's holding company. Chapter 10

Protected disclosure

A worker's report, made in the public interest, that she reasonably believes shows wrongdoing such as a danger to health or safety. The law protects her from detriment and dismissal for making it (Employment Rights Act 1996, Part IVA). A report through the Speak-Up Line can be one. Charter §9.4 · Chapter 8

Purchase-order splitting

Dividing one purchase into several orders so that each falls within a lower limit than the whole would need. One need, one supplier and one period are one purchase. The split is a breach by the person who made it, whatever each order cost. Charter §3.3 · Schedule B, paragraph 3 · Charter §9.3 · Chapter 2 · Chapter 7

Q

Qualifying indemnity

A company's promise to meet certain claims brought against a director by people other than the company, within limits the Act sets (sections 232 to 234). It sits beside D&O insurance. A promise to exempt a director from the company's own claims is void. Charter §10.4 · Chapter 9

Quorum

The smallest number of directors who must be present before a meeting can decide anything. The charter sets three, at least one of them independent, in place of the Model Articles' two. A director who may not vote on an item does not count for it. Charter §4.4 · Chapter 1 · Chapter 6

R

Recall

Taking a product back from shops and from the customers who bought it. Any recall or withdrawal is a Matter Reserved (Schedule A, item 17), so only the board decides it. Brackenholme's board recalled three batches after a listeria result, at a cost of £2,400,000. Schedule A, item 17 · Charter §9.5 · Chapter 8

Register of directors

The company's record of who its directors are. When a director joins or leaves, Companies House is told within 14 calendar days, on form AP01 for an appointment or TM01 for a departure (sections 162 to 167). Anyone can search the public record, so a late filing shows. Chapter 10

Related Party

A director, a member of a director's family, a shareholder with more than 10% of the shares, or any company or trust one of them owns or controls. Any deal with one is a Matter Reserved at any value. Holroyd Packaging, owned by the chief executive's husband, is one. Definition: Related Party · Charter §5.5 · Schedule A, item 6 · Chapter 2 · Chapter 4

Remuneration Committee

The board's committee on pay, chaired by Edmund Ferrar. Its terms of reference let it decide the pay and bonus of each executive director and of the company secretary. A grant of share options stays a Matter Reserved, so there it only recommends. Charter, Schedule D · Schedule A, item 9 · Chapter 7

Risk appetite statement

The board's yearly statement of which risks the company will accept and which it will not. The board approves it, and reviews the risk register, at least once a year (Schedule A, item 13). Charter §9.1 · Schedule A, item 13 · Chapter 2

Risk register

The company's list of the main risks it faces and who watches each. The Audit & Risk Committee reviews it before it goes to the board, which reviews it at least once a year (Schedule A, item 13). Charter §9.1 · Schedule C, paragraph 4 · Chapter 2 · Chapter 7

S

Section 40 (a person dealing in good faith)

A person dealing with the company in good faith may treat the directors' power to bind it as free of any limit in its constitution. It protects outsiders such as a bank, never the directors who broke the rules. That is why a bank still asks for a certified extract. Charter §3.1 · Chapter 2 · Chapter 6

Seven general duties

The duties every director owes the company under sections 171 to 177 of the Companies Act 2006. She must act within powers, promote its success, judge independently, take care, avoid conflicts, refuse third-party benefits and declare interests in deals. They are owed to the company, not to any shareholder. Charter §5.1 · Chapter 3

Shareholder

An owner of shares, called a member in the Companies Act 2006. Shareholders choose the directors and decide a few matters the charter leaves out on purpose, such as a loan to a director. Brackenholme's are the family trust (55%), Calderbank (35%) and Margaret Holroyd (10%). Charter §2.4 · Chapter 1 · Chapter 2

Situational conflict

A standing position, not a single deal, in which a director's other interests could pull against the company's, such as a stake in a competitor. The director tells the chair at once, in writing. The board may then authorise it on conditions. Charter §8.2 · Chapter 4 · Chapter 5

Speak-Up Line

The charter's route for any worker to raise a concern in confidence with the company secretary or the chair of the Audit & Risk Committee. Each report is recorded and investigated, and no worker may suffer for a report she reasonably believes to be true. Definition: Speak-Up Line · Charter §9.4 · Chapter 7 · Chapter 8

Sub-delegation

Passing an authority down. The charter allows three cases only, each while the holder is away: the chief executive and the chief financial officer for each other, and a site manager to a named deputy. Each is in writing, for a stated period, copied to the company secretary. Charter §3.2 · Schedule B, paragraph 2 · Chapter 2

Substantial property transaction (section 190)

A company buying a substantial non-cash asset from a director or a person connected with her, or selling one to them. The shareholders must approve it as well as the board. Buying a director's husband's factory would need their approval, and the board's approval would not replace it. Chapter 4

T

Terms of reference

A committee's written rules: what it does, who sits on it, and what, if anything, it may decide in the board's place. Only the board adopts or changes them (Schedule A, item 14). Schedules C and D of the charter hold the two committees' terms. Charter, Schedule C · Charter, Schedule D · Schedule A, item 14 · Chapter 2 · Chapter 7

W

Wates Principles

Six governance principles written for large private companies, from purpose and leadership to stakeholder relationships. At the time of writing, only companies above certain size thresholds must report on their governance. Brackenholme is far below them and uses the principles voluntarily in its governance statement. Charter §10.6 · Chapter 9

Withdrawal

Taking a product back from shops and warehouses before customers buy it. Like a recall, it is a decision for the board alone (Schedule A, item 17). Schedule A, item 17 · Charter §9.5 · Chapter 8 · see Recall

Written resolution

A decision of the directors on paper, without a meeting. It counts only when every director who could have voted has signed it (Model Article 8). The company secretary alone circulates it and records the date of the last signature, which is the date of the decision. Definition: Board · Charter §4.6 · Chapter 6