7. Companies: Joint Decision Making

Question 1

Who usually calls meetings?

Answer 1

Directors

Question 2

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?

Answer 2

5%. Called within 21 days; held within 28 days.

Question 3

What happens if the directors fail to call the meeting?

Answer 3

The shareholder who requested the meeting, or any shareholder(s) holding 5% of the voting rights can call the meeting themselves

Question 4

When can the court call a meeting?

Answer 4

If it is impractical/impossible for the company to call it, e.g. deadlock between shareholders

Question 5

To whom must notice of a general shareholders meeting be given?

Answer 5

1. All shareholders and directors
2. Personal representatives of deceased shareholders
3. Trustee in bankruptcy of any bankrupt shareholders
4. Auditor, if there is one

Question 6

In what four forms can notice of a meeting be?

Answer 6

1. In writing
2. Electronically
3. By email
4. Via a website

Question 7

What five things must the notice of the meeting contain?

Answer 7

1. Company name
2. Time, date and place of the meeting
3. General nature of business to be carried on at the meeting
4. Right to appoint a proxy to attend
5. Full text of any special resolution

Question 8

How much notice must be given for a meeting?

Answer 8

14 clear days, unless articles provide for longer

• in effect, 16 days as date of service/meeting do no count.

Question 9

How much notice must be given if a shareholder is calling a meeting to remove a director?

Answer 9

28 days

Question 10

What additional time period is added where notice is communicated by a method other than hand delivery?

Answer 10

Two extra days if delivered by email or post

• in effect = 18 days

Question 11

How much notice must a Plc give for its annual general meeting?

Answer 11

21 clear days

Question 12

What is a shareholder’s option if notice is insufficient?

Answer 12

They can seek to have any action taken at the meeting for which notice was insufficient declared invalid

Question 13

What proportion of shareholders must agree to hold a meeting on shorter notice?

Answer 13

Majority of shareholders (in number), holding 90% of the shares.
- for non-listed Plc - 95% or more

Question 14

When does the chairman have a casting vote and where does it not?

Answer 14

does - board resolutions
does not - shareholder resolutions (under MAs)

Question 15

In what situation can the short notice procedure not be used?

Answer 15

Any situation where members’ have a right to inspect relevant document @ company’s registered office at least 15 days prior to the meeting

Question 16

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?

Answer 16

No

Question 17

What proportion of shareholders at a meeting are required to approve (1) an ordinary resolution and (2) a special resolution?

Answer 17

O.R: more than 50% 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 - not just those at meeting.

Question 18

What six things are among those for which a special resolution is required?

Answer 18

1. Amend the articles
2. Reduce share capital to effectuate a buy back of shares
3. Wind up the company
4. Change company name
5. Disapply pre-emption rights
6. Change company status, i.e. private to public.

Question 19

Within what time period must a special resolution be filed at Companies House?

Answer 19

15 days

Question 20

What is the normal method of voting at meetings?

Answer 20

Show of hands

Question 21

What is a poll vote and what two groups can demand one?

Answer 21

Instead of one vote per shareholder in the show of hands method, it becomes one vote per share

1. Any five shareholders or more, or
2. Shareholders with more than 10% of the voting rights or 10% of the paid-up capital

Question 22

Two ways a a poll vote can be demanded

Answer 22

1. Any five shareholders or more, or
2. Shareholders with more than 10% of the voting rights or 10% of the paid-up capital

Question 23

Can a Plc pass a written resolution?

Answer 23

No, they are available to private companies only

Question 24

Can a written resolution be used for both types of S.Rs and O.Rs?

Answer 24

Yes

Question 25

What action can a written resolution not be used for?

Answer 25

Dismissing a director or auditor

Question 26

In addition to the board circulating a resolution, who can require them to do so?

Answer 26

Shareholders who hold at least 5% of the voting rights

Question 27

To whom must a written resolution be circulated?

Answer 27

All members eligible to vote

Question 28

What two things must a written resolution contain?

Answer 28

1. Statement informing the shareholder how to signify agreement
2. When the resolution will lapse if not approved, typically 28 days from and including the circulation date (unless the articles provide differently)

Question 29

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?

Answer 29

For a written resolution, it is >50% and >75% of all shareholders, compared to just those present at a meeting

Question 30

To summarise, what decisions can the directors make and what decisions must the directors and shareholders consult on?

Answer 30

Directors: Day to day decisions
Both: Decisions that might adversely affect shareholders

Question 31

Ordinary three steps to passing a shareholder resolution

Answer 31

1. 1st BM to pass BR to call GM
2. Shareholders pass resolution(s) in GM
3. 2nd BM is called to implement decisions and deal w/ admin filings.

Question 32

Is the process any different to ratify decisions in director-shareholder companies?

Answer 32

No - two different hats!

Question 33

Nine key matters approved by members via O.R

Answer 33

1. Appoint/remove director/auditor
2. Adopt annual accounts
3. Declare a dividend
4. Approve director’s decision to allot shares
5. Approve substantial property transaction with an interested director
6. Ratify of director’s breach of duty
7. Enter service contract with director of more than two years
8. Make loan to director
9. Give payment to director for loss of office

Question 34

What is a substantial property transaction and what is the de minimis threshold?

Answer 34

Where a director buys or sells property from or to the company.

Less than £5,000 is de minimis

Question 35

At what threshold is a transaction automatically an SPT and what is the test for figures between £5,000 and it?

Answer 35

£100,000.

If between 5k and 100k = test is whether SPT’s value exceeds 10% of the company’s net assets

Question 36

Within what time period of a special resolutions be filed at Companies House?

Answer 36

15 days from date of passing
- only file the resolution and not the GM minutes!

Question 37

Is a director prevented from voting and counting towards the quorum where a personal conflict of interests arises?

Answer 37

Yes (MA14)
- subject to exceptions

Question 38

What are the exception where a director can nevertheless vote/form part of quorum in transactions where they have a personal interest?

Answer 38

1) Approved via O.R by members
OR
2) directors’ interests does not reasonably give rise to conflict.
OR
3) Permitted exceptions (ie. own service contracts, subscribing/buying shares of company + any of its subsidiaries)

Question 39

Are private companies required to hold AGMs?

Answer 39

Only if formed before 1st of October 2006, otherwise no.

Question 40

Decisions only requiring board approval

Answer 40

• appointment of chair
• change of accounting date
• change of registered office
• change of trading name

Question 41

Are all companies required to filed their annual accounts at CHs?

Answer 41

No - small companies are exempt

Question 42

What qualifies as a small company?

Answer 42

satisfy at least 2 conditions:
1) turnover of max £10.2m
2) balance sheet of max £5.1m
3) not more than 50 employees

Question 43

What other accounting requirement are small companies exempt from?

Answer 43

directors’ requirement to prepare annual financial report

Question 44

When is shareholder approval needed to allot shares?

Answer 44

Where private company has more than one class of shares

Question 45

Is shareholder approval needed for company to issue dividends?

Answer 45

only need to pass an O.R in relation to final dividends

Question 46

What is the ‘wholly-owned subsidiary’ exception, and where is it relevant?

Answer 46

important in directors’ loan context.
- if wholly-owned subsidiary makes loan to its own director, then no need for shareholder approval.
- if wholly-owned subsidiary makes loan to parent company’s director, then parent company’s shareholder need to pass an OR.