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 (after a s 303 request from members holding >= 5% share capital)?

Answer 3

The shareholder who requested the meeting, or any shareholder(s) holding 50% 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 general meeting?

Answer 8

14 clear days, unless articles provide for longer

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

48 hours

Question 11

How can you work out notice periods quickly on the exam?

Answer 11

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

Question 12

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

Answer 12

21 clear days

Question 13

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

Answer 13

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

Question 14

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

Answer 14

Majority of shareholders (in number), holding 90% of the shares

Question 15

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

Answer 15

For matters requiring documents to be left at the registered office for 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

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.

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 / buy back 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, and can be demanded by:

1. Any two shareholders or more (in the MA, maximum five or more in bespoke Articles), or
2. Shareholders with not less than 10% of the voting rights or 10% of the paid-up capital

Question 22

Can a Plc pass a written resolution?

Answer 22

No, they are available to private companies only

Question 23

Can a written resolution be used for both types of shareholder resolutions?

Answer 23

Yes

Question 24

What action can a written resolution not be used for?

Answer 24

Dismissing a director or auditor

Question 25

In addition to the board deciding to circulate a written resolution, who can require them to do so?

Answer 25

Shareholders who hold at least 5% of the voting rights

Question 26

To whom must a written resolution be circulated?

Answer 26

All shareholders eligible to vote

Question 27

What two things must a written resolution contain?

Answer 27

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 28

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 28

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

Question 29

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

Answer 29

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

Question 30

What is the four step process when a decision requires approval of both the directors and shareholders?

Answer 30

1. Approval starts with board meeting and board resolution approving the matter
2. Board then resolves to call shareholders general meeting or circulate written resolution for shareholders to approve
3. Shareholders vote whether to pass the resolution, and it is passed if they do
4. Board then enters into the approved transaction, resolving this if relevant

Question 31

Whilst no further action is usually required, what is one situation where directors will need to take further action, and what is that action?

Answer 31

If the resolutions have approved entering a contract to purchase property, the directors would need to resolve to appoint two directors to execute the contract

Question 32

Does the strict process have to be followed if the directors and shareholders are the same people?

Answer 32

Yes

Question 33

Unless otherwise provided, what nine things require an ordinary shareholder resolution only?

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
Must be >£100,000 or>10% net asset value (as shown in most recent statutory accounts)

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, it will be an SPT if its value exceeds 10% of the company’s net assets

Question 36

Within what time period of a resolution being adopted by the board, shareholders, or both must it be filed at Companies House?

Answer 36

14 days

15 days for special resolution