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Companies (Audit, Investigations and Community Enterprise) Act 2004

Section 45 - Appointment of director

245.This section gives the Regulator a power to appoint a person to be a director of a CIC.  This power may only be used if the company default condition is satisfied (section 41(2)).  It enables the Regulator to take action to remedy the circumstances that have caused the company default to arise, such as mismanagement or failure to satisfy the community interest test.  For instance, the Regulator may wish to appoint a director with financial expertise to remedy mismanagement of a CIC's assets.

246.The section contains provisions to ensure that a director appointed under this power will be capable of influencing the direction of the CIC.  For instance, the appointment cannot be blocked by the constitution of the CIC (subsection (3)(b)), and the director is to have all those powers available to other directors of the company (subsection (6)).  The other directors of the company will retain their existing powers.  However, the section also prevents a CIC from removing a director appointed under this power (subsection (7)).  A director appointed under this power will have to comply with the common law and statutory obligations and duties applicable to directors generally.

247.Where a change of directors arises from the use of this power, the Regulator, rather than the company, is required to notify the change to the registrar of companies (subsection (8)).  Where the Regulator has appointed a director under this power, and that person subsequently ceases to be a director, the CIC is required to notify the Regulator, rather than the registrar of companies, of this change in its directors (subsection (10)).  The requirement is on the company to notify the Regulator of this change because it is the company that will ordinarily first become aware of such an event.  Failure to comply with this requirement is an offence (subsection (11)) punishable on summary conviction by a fine not exceeding level 5 on the standard scale  (currently £5,000) (subsection (12)).

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