7. Companies: Joint Decision Making Flashcards
Who usually calls meetings?
Directors
A shareholder holding at least what % of the paid-up voting capital can require the directors to call a meeting, within what time must the directors (1) call the meeting and (2) hold the meeting?
5%. Called within 21 days; held within 28 days.
What happens if the directors fail to call the meeting within 21 days?
The shareholder who called the meeting, or any shareholder(s) holding 50% of the voting rights can call the meeting themselves
When can the court call a meeting?
If it is impractical/impossible for the company to call it, e.g. deadlock between shareholders
To whom must notice of a general shareholders meeting be given?
- All shareholders and directors
- Personal representatives of deceased shareholders
- Trustee in bankruptcy of any bankrupt shareholders
- Auditor, if there is one
In what four forms can notice of a meeting be?
- In writing
- Electronically
- By email
- Via a website
What five things must the notice of the meeting contain?
- Company name
- Time, date and place of the meeting
- General nature of business to be carried on at the meeting
- Right to appoint a proxy to attend
- Full text of any special resolution
How much notice must be given for a general shareholders meeting in a ltd/ private limited company?
14 clear days, unless articles provide for a longer period.
How much notice must be given if a shareholder is calling a meeting to remove a director?
28 days
What additional time period is added where notice is communicated by a method other than hand delivery?
48 hours
How can you work out notice periods quickly on the exam?
Last date notice can be given:
- Meeting date minus 15 days if hand delivered
- Meeting date minus 17 days if other method
Earliest date a meeting can be held:
- Notice date plus 15 days if hand delivered
- Notice date plus 17 days if other method
How much notice must a Plc give for its annual general meeting?
21 clear days
What is a shareholder’s option if notice is insufficient?
They can seek to have any action taken at the meeting for which notice was insufficient declared invalid.
What proportion of shareholders must agree to hold a meeting on shorter notice?
Majority of shareholders (in number), holding 90% of the shares
In what situation can the short notice procedure not be used?
For matters requiring documents to be left at the registered office for 15 days prior to the meeting, e.g., where the meeting is seeking a special resolution, as special resolutions have to be filed 15 days prior to the vote.
If a company has more than one shareholder, can a single shareholder who is present in his own capacity but also as proxy for another shareholder form a quorum of two?
No
What proportion of shareholders at a meeting are required to approve (1) an ordinary resolution and (2) a special resolution?
Ordinary resolution: Simple majority of shareholders at the meeting
Special resolution: 75% or more of the shareholders at the meeting
Compare with written resolutions which require those percentages of all shareholders.
What six things are among those for which a special resolution is required?
- Amend the articles
- Reduce share capital / buy back shares
- Wind up the company
- Change company name
- Disapply pre-emption rights
- Change company status, i.e. private to public
Within what time period must a special resolution be filed at Companies House?
15 days
What is the normal method of voting at meetings?
Show of hands
What is a poll vote and what two groups can demand one?
Instead of one vote per shareholder in the show of hands method, it becomes one vote per share, and can be demanded by:
- Any five shareholders or more, or
- Shareholders with more than 10% of the voting rights or 10% of the paid-up capital
Can a Plc pass a written resolution?
No, they are available to private companies only
Can a written resolution be used for both types of resolutions?
Yes
What action can a written resolution not be used for?
Dismissing a director or auditor
In addition to the board circulating a resolution, who can require them to do so?
Shareholders who hold at least 5% of the voting rights
To whom must a written resolution be circulated?
All members eligible to vote
What two things must a written resolution contain?
- Statement informing the shareholder how to signify agreement
- When the resolution will lapse if not approved, typically 28 days from and including the circulation date (unless the articles provide differently)
Whilst the % thresholds for ordinary and special resolutions are the same >50% and >75% as when voted in person, what is the crucial difference with a written resolution with regard to the pool from which those % are taken?
For a written resolution, it is >50% and >75% of all shareholders, compared to just those present at a meeting
To summarise, what decisions can the directors make and what decisions must the directors and shareholders consult on?
Directors: Day to day decisions
Both: Decisions that might adversely affect shareholders
What is the three step process when a decision requires approval of both the directors and shareholders?
- Approval starts with board meeting and resolution approving the matter
- Board approves resolution to call general meeting and circulate written resolution for shareholders to approve
- Shareholders vote whether to pass the resolution, and it is passed if they do
Whilst no further action is usually required, what is one situation where directors will need to take further action, and what is that action?
If the resolutions have approved entering a contract to purchase a factory building, the directors would need to call a resolution to appoint two directors to execute the contract
Does the strict process have to be followed if the directors and shareholders are the same people?
Yes
Unless otherwise provided, what nine things require an ordinary shareholder resolution only?
- Appoint/remove director/auditor
- Adopt annual accounts
- Declare a dividend
- Approve director’s decision to allot shares
- Approve substantial property transaction with an interested director
- Ratify of director’s breach of duty
- Enter service contract with director of more than two years
- Make loan to director
- Give payment to director for loss of office
What is a substantial property transaction and what is the de minimis threshold?
Where a director buys or sells property from or to the company.
Less than £5,000 is de minimis
At what threshold is a transaction automatically an SPT and what is the test for figures between £5,000 and it?
£100,000. If between 5k and 100k, it will be an SPT if its value exceeds 10% of the company’s net assets
Within what time period of a resolution being adopted by the board, shareholders, or both must it be filed at Companies House?
14 days
15 days for special resolution
