CIMAPRA19-P03-1 Exam - Topic 2 Question 82 Discussion

Question

C Ltd is a private, family-owned company which is hoping to become listed on a recognised Stock Exchange within the next two years. At the moment, the Board of Directors comprises five directors; four of whom are from the founding family and all of whom are involved in the day-to-day running of the business. The remaining director obtained a seat on the Board threeyearsagoas a condition of an investment by a venture capital fund.

The Board meets in half-day sessionsonce a fortnight and the Board meetings are reasonably well run. All decisions are taken by the Board as a whole. There are no sub-committees.

Which of the following steps would it be appropriate for C Ltd to take in the light of the proposed listing?

Nana · Accepted Answer

A) Appoint enough independent non-executive directors (NEDs)that they make up at least 50% of the Board. and B) Appoint one of the NEDs as Chair of the Board. and D) Set up at least three sub-committees namely remuneration, nomination, and audit committees.

Nana · Answer

C) Insist that the venture capital company director be removed as he is not necessarily motivated to act in the best interests of C Ltd.

Nana · Answer

E) Ensure that the current executive directors are given 10 year contracts starting on the day the company is floated, to ensure consistency and continuity in the management of the company.

Nana · Answer

F) Set up an 'agenda setting' sub-committee consisting of the current executive directors to decide the agenda for each Board meeting.