2. Company Decision Making + Shareholders Flashcards
How are votes counted for a written resolution circulated to the shareholders?
1 vote per share owned
Ordinary resolution
- More than half of votes signifying agreement
Special Resolution
- 75% or more votes must signify agreement
Can all companies use the written resolution method?
No, permitted for private companies but not for public companies by the CA 2006
When is it necessary to have a further board meeting after a shareholder’s meeting?
- Only necessary when it is a decision which the directors require authority to enter into
- Otherwise (decision for shareholders alone), ends at the shareholders meeting
Who are ‘eligible members’ for the purpose of written resolutions?
WR must be circulated to all eligible members:
- Eligible members are shareholders who are entitled to vote on the resolution as of the circulation date of the resolution
How can a meeting be authorised to be held on ‘short notice’ - does this change for private and public companies?
(1) Majority of company shareholders
(2) who between them hold 90% or more of the company’s voting shares must consent (95% for public companies)
How are votes counted in a poll vote?
1 vote for each share owned by shareholders
Who can demand a poll vote according to the model articles:
- chair of the meeting
- directors
- two or more people having the right to vote on the resolution or
- a person / persons representing not les than 10% of the total voting rights of all shareholders having the right to vote on the resolution
Minimum notice period for a general meeting?
14 clear days
- clear = the day notice is received by shareholders and day of general meeting itself are not counted for purposes of the notice (only days between the two)
- includes weekends / non-business days
If notice is sent by post or email for a general meeting - when is it ‘deemed received’
48 hours after it was sent (only business days)*
- this is added onto the 14 days
How long do you have, after getting a written resolution, to signify your agreement? According to the Model Articles
- lapse date is 28 days from circulation, regardless of method
When can a Poll Vote be called?
(MA): can be demanded before, during or after voting
If a poll vote is called after voting has taken place in the general meeting - which outcome will prevail if the two contradict?
The outcome of the poll vote will override outcomes of the show of hands vote
What is the quorum of a shareholder’s general meeting?
Generally, 2
- But if only 1 shareholder, Q = 1
How is voting ‘done’ in a general meeting? How are votes counted?
By a share of hands, with each shareholder getting 1 vote
If a shareholder has a personal interest in the matter discussed at the general meeting, are they prevented from voting? How is their vote counted?
(1) Shareholders are not prevented from voting
(2) Vote will be counted UNLESS it is a deciding vote on matters like:
i. resolution to buy back some of all a shareholder’s shares
ii. ordinary resolution to ratify a director’s breach of duty (when the director in Q is also a shareholder)
Which decisions CANNOT be taken on short notice by the shareholders?
(1) removal of a director
(2) Long Term Service Contract
(3) Loan to a director
If you want to hold a meeting about a service contract on short notice, can you? What alternatives are there?
- No
- Can file a written resolution, stapling the service contract to it
How do the shareholders request decision-making by written resolution? Does this change based on the model articles?
- (Standard MAs) Shareholder / shareholders must have 5% or more of voting rights in company can demand this
- (Amended MAs) May make this figure below 5% but CANNOT INCREASE IT
Once shareholders / a shareholder have submitted their statement of 1000 words to accompany their written resolution to the company, how long does the company have to circulate this?
The company has 21 days from the request of the shareholders to circulate it
If the company has to incur expenses to circulate a written resolution, who pays these?
The shareholder requesting circulation must pay any company expenses in complying with the request
If a director has a personal interest in a proposed transaction, can they vote on the resolution?
- No, if the companies have unamended model articles (MA 14)
- Yes, if MA 14 has been disapplied
If a director has a personal interest in a proposed transaction / arrangement with the company, do they have to make this known?
- Yes, this is consolidated by statute and cannot be disapplied by company articles
If a director has a personal interest in a proposed transaction / arrangement with the company, do they have to make this known? Are there any exceptions?
(1) Yes
(2)
i. If it cannot reasonably be regarded as likely to give rise to a conflict of interest
ii. if other directors are already aware of it
iii. if it concerns terms of a service contract that have been or are to be considered…by a meeting of the directors.
When can directors pass a board resolution in the form of a resolution in writing?
If company has Model Article 8 still, they can pass resolution in writing if they can show that decision is unanimous
Is a director entitled to attend a shareholder meeting?
Yes, even if they are not a shareholder themselves
Can a shareholder go to a board meeting (if they are not a director)
No
If a director cannot attend a board meeting, can they appoint a proxy to send in their place?
Generally NO, unless special amended Articles permit this
Are all companies required to hold AGMs in the CA 2006?
Only public companies
Relevant paperwork when changing company name:
a copy of the special resolution to change the name must be filed (s.29 (1) (a) Companies Act 2006 (CA 06)) and the Registrar must be notified (s.78 (1) CA 06). The relevant form is the NM01 and there is a prescribed fee which must be paid.
Through which decision making process are dividends ‘declared’
Formally declared by ordinary resolution (but recommended by directors in board meeting who call general meeting)
For an ordinary resolution to be passed using the written resolution procedure: what is the required majority (and what if people abstain?)
The required majority is MORE THAN 50% of the total voting rights of the eligible members including those abstaining
If the shareholders requisition a general meeting, when must the directors call the general meeting and when must the meeting be held?
If the directors are required to call a general meeting, they must first call that meeting within 21 days from the date of the shareholders’ request. Having called the meeting, the meeting must then take place within 28 days (s.304 CA 2006)
Filing requirements following an ordinary resolution authorising a SPT
If there is a SPT, nothing needs to be filed at companies house (because it is just an ordinary resolution)
When can the shareholders require the directors to call a GM?
Whenever, if shareholders have atleast 5% of all shares (entitled to vote)
What powers do shareholders have wrt getting rid of directors?
- shareholders do not have the right to terminate a director’s employment contract BUT
- they have the right to remove a director from office (ordinary res)
Who is bound by a shareholders agreement?
Those shareholders who are party to the agreement
What actions will place an individual in contravention of a ‘disqualification order’
a person who is subject to a disqualification order contravenes the order if he is involved in the promotion, formation or management of a company without leave of the court.
Do auditors owe a duty of care to company that they audit?
Yes - they can be sued in negligence
- but they do not owe anything to shareholders / directors
Difference between preference shares and ordinary shares - returns
Preference shares allow only a fixed return on investment (instead of a return proportionate to the success of the business via dividends)
Who are ‘connected persons’ for the purposes of a SPT?
Connected persons include the following members of a director’ family: their husband, wife or civil partner or partner with whom they have an ‘enduring relationship’, parents, children (and step-children) (ss.252 and 253 CA 2006).
- NOT siblings
- NOT grandparents
When will the court refuse a shareholders permission to continue with a derivative claim?
If the court is satisfied that the act or omission giving rise to the cause of action has been ratified by the company
Definition of unlawful financial assistance
Where a public company or any subsidiary thereof—whether public or private—gives financial assistance to any person for the purchase of that public company’s shares, this may constitute unlawful financial assistance.
Duomatic Principle
Under the Duomatic principle, if all shareholders, having discussed the matter, who have a right to attend and vote at a meeting unanimously agree that it should pass then the company will be bound without the need for a meeting or written resolution (as the matter could have been put into effect by a resolution had a general meeting been held).
Minimum age of a director
16
Definition of close company:
- definition of ‘control’ in a closed company
Company is
1. controlled than fewer than 5 participators
2. controlled any number of participators, who are all directors (or shadow directors) AND shareholders
‘Controlled’ own more than half the shares in company or half the voting rights or has the right to acquire more than half the shares in the company
When need a company NOT pay HMRC tax on loans it issues to participators or their associates?
- Not a close company OR
- A close company but:
a. loan not for more than 15000 and
b. borrower works full time for the company and
c. borrower owns no more than 5% of company’s ordinary shares - Amount of tax is 32.5% of loan
- can be reimbursed if loan paid back or written off
If a company is caught by the close company requirement to pay tax on a loan to a participator: what is the tax rate + who must it be paid to
The company must pay 33.75% of the loan to HMRC as a ‘deposit’ which is refunded if the loan is repaid or written off
