Board And General Meeting And Written Resoluitions

Question 1

Who makes decisions on behalf of a company?

Answer 1

Decisions are made by the company’s directors (managers) or shareholders (owners).

Question 2

Can an individual be both a shareholder and a director?

Answer 2

Yes, an individual can be both a shareholder and a director, operating in two different capacities.

Question 3

How does a director participate in decision making?

Answer 3

A director participates by attending board meetings or voting on a director’s written resolution.

Question 4

How does a shareholder participate in decision making?

Answer 4

A shareholder participates by attending general meetings or voting in a shareholder’s written resolution.

Question 5

Who has the majority of decision-making authority in a company?

Answer 5

The company’s directors have the majority of decision-making authority and are responsible for the day-to-day management of the company’s affairs.

Question 6

What does Model Article 3 grant to directors of a limited company?

Answer 6

Model Article 3 grants directors general authority to manage the company’s business and exercise all the powers of the company.

Question 7

How can directors make decisions?

Answer 7

Directors can make decisions by either holding a vote at a board meeting or passing a directors’ written resolution.

Question 8

What must directors comply with when passing decisions?

Answer 8

Directors must comply with certain procedural rules set out by the Model Articles and the Companies Act 2006.

Question 9

What are Model Articles?

Answer 9

Model Articles are a constitutional document known as the ‘articles of association’ that regulate the internal affairs of the company.

Question 10

What articles apply to companies incorporated on or after 1 October 2009?

Answer 10

A standardised default set of articles, known as the ‘Model Articles’, will apply.

Question 11

What articles apply to companies formed before 1 October 2009?

Answer 11

A different set of default articles, known as ‘Table A Articles’, will apply.

Question 12

Do shareholders typically involve themselves in company decision-making?

Answer 12

No, the company’s shareholders (its owners) do not typically involve themselves in the decision-making.

Question 13

What decisions can only be taken by the company’s shareholders?

Answer 13

Decisions that can only be taken by the company’s shareholders include:
- Changing the company name (s77, CA 2006).
- Changing the company’s articles of association (s21, CA 2006).
- Removing a director (s168, CA 2006).
- Ratifying a director’s breach of duty (s239, CA 2006).
- Disapplying pre-emption rights (s569 and s570, CA 2006).

Question 14

Which decisions require shareholder approval?

Answer 14

1. Approving a director’s service contract for a fixed term of more
   than two years (s188, CA 2006).

2.Approving the company entering into a substantial property
transaction (s190, CA 2006).

3. Approving the company lending money to a director (s197(1), CA
   2006).

4.Approving making a compensation payment to a director for loss
of office (s217, CA 2006).

5.Approving the payment of a dividend (MA 30).

6.Authorising the issuing of new shares in the company if the
directors do not have the requisite authority (s551, CA 2006).

7.Authorising a buy-back of shares by the company (s694 and s716,
CA 2006).

8.Authorising the company to reclassify some of its share capital as
distributable profits (s641, CA 2006).

Question 15

How do shareholders vote on matters requiring their approval?

Answer 15

Shareholders vote either by:
- A vote by show of hands: where each member present has one vote.
- A poll vote: where each member has one vote per share they hold.

This reflects shareholders’ views in proportion to their respective interests.

Question 16

What is a General Meeting?

Answer 16

A General Meeting is a meeting of the company’s shareholders.

It is where shareholders can vote on matters requiring their approval.

Question 17

What is an alternative to calling a General Meeting for voting?

Answer 17

A company can hand out, post, or email a written resolution to its shareholders.

Question 18

What can shareholders do with a written resolution?

Answer 18

Shareholders can sign and return the written resolution if they wish to vote in favor of the proposed resolution.

Question 19

Where can further mechanisms regarding General Meetings and Shareholder’s Written Resolutions be found?

Answer 19

These mechanisms are considered further in notes on General Meetings and Shareholder’s Written Resolutions.

Question 20

Decisions that can be taken by the shareholders (or directors)

Answer 20

Appointing a new director (MA17).

Question 21

How can a director call a board meeting?

Answer 21

A director may call a board meeting by giving notice of the meeting to the directors.

(MAg (1))

Question 22

Who can give notice of a board meeting?

Answer 22

The directors may authorize the company secretary to give notice rather than giving it themselves.

(MAg(1))

Question 23

What is the requirement for notice of a board meeting?

Answer 23

Notice must be reasonable.

Question 24

What are directors entitled to regarding notice?

Answer 24

Directors are entitled to receive reasonable notice of the board meeting.

(Re Homer District Consolidated Mines, Ex parte Smith (1888) 39 Ch D 546)

Question 25

What determines what is considered reasonable notice?

Answer 25

What amounts to reasonable notice depends on the circumstances.

Question 26

How much notice might suffice for small companies?

Answer 26

For small companies, just a few minutes might suffice if all directors are in one place where the board meeting is to be held.

Question 27

What is the key question regarding notice?

Answer 27

The key question is: have the directors had a reasonable opportunity to attend?

Question 28

Can a company’s articles specify a minimum notice period?

Answer 28

Yes, the company’s articles may be amended to specify a minimum notice period, which must be adhered to.

Question 29

What must the notice include according to Model Article 9(2)?

Answer 29

The notice must include the proposed date and time of the meeting, the location, and how the directors will communicate if they are not in the same place.

Question 30

Does the notice need to be in writing?

Answer 30

No, the notice need not be in writing.

Oral notice is acceptable (Browne v La Trinidad (1887) 37 ChD 1 (CA)).

Question 31

What factors should be considered when giving notice for a meeting?

Answer 31

Consider who is calling the meeting, who must receive the notice, what is reasonable in the circumstances, and if specific factors indicate a need for longer or shorter notice.

Question 32

What is a quorum?

Answer 32

A quorum is the minimum number of directors required by the company’s articles to be present at the board meeting for valid decisions to be made.

Question 33

What is required for proposals to be voted upon at a board meeting?

Answer 33

A quorum must be present at a board meeting for proposals to be voted upon.

“Unless a quorum is participating, no proposal is to be voted on” (MA 11(1)).

Question 34

What is the minimum number of directors required for a quorum?

Answer 34

The quorum must never be less than two unless the total number of company directors is one, in which case one director will suffice.

MA 11(2)

Question 35

Can a single director make decisions without regard to the articles?

Answer 35

Yes, a single director can take decisions without regard to any of the provisions of the articles relating to directors’ decision-making.

Model Article 7(2)

Question 36

Who constitutes a quorum?

Answer 36

A quorum is made up of directors only; it does not matter who else might be in attendance at the meeting.

Question 37

What should be considered regarding directors’ attendance at a board meeting?

Answer 37

Consider if there is a sufficient number of directors to constitute a quorum and if any director might be unable to attend the board meeting.

Question 38

Can a director’s absence prevent a decision from passing?

Answer 38

If a director does not want a decision to go through, their absence may impact whether or not the resolution might pass.

Question 39

What happens if a director is personally interested in a transaction?

Answer 39

If a director is personally interested in a transaction, they cannot participate in the quorum for that vote.

MA 14(1): if the board is voting on a transaction in which a director is interested, that director is not counted as participating in the decision-making process.

Question 40

What happens if a director is personally interested in a transaction?

Answer 40

The director will be unable to participate in the quorum if the vote concerns a transaction in which the director is interested.

Model Article 14(1) states that the director is not counted as participating in the decision-making process.

Question 41

Can a director with a personal interest participate in calling a General Meeting?

Answer 41

Yes, if the decision only requires approval by the shareholders, the interested director may count in the quorum to vote to call the General Meeting.

Example: Approving a Substantial Property Transaction.

Question 42

What is an exception to a director being unable to participate in a quorum?

Answer 42

If the directors have previously agreed to modify the company’s constitution to disapply Model Article 14, the director may count as participating.

Question 43

What happens if Model Article 14 is disapplied?

Answer 43

The director will be able to count as part of the quorum even if they have a personal interest in the matter.

Question 44

When will a director not be prevented from participating in the quorum?

Answer 44

A director will not be prevented if their interest cannot reasonably be regarded as likely to give rise to a conflict of interest.

Question 45

What are the exceptions in Model Article 14?

Answer 45

director will not be prevented from participating in
the quorum if:
 MA 14(3): their interest “cannot reasonably be
regarded as likely to give rise to a conflict of
interest”.
 MA14(4)(a): the vote concerns a guarantee given
to or by the Director for an obligation of the
company.
 MA 14(4)(b): the vote concerns a contract with
the director to buy shares in the company

Question 46

How can directors temporarily disapply MA 14(1)?

Answer 46

Directors can temporarily disapply MA 14(1) by ordinary resolution, allowing the director to count in the quorum.

Question 47

What should be considered regarding directors and voting?

Answer 47

Consider if any directors are prevented from voting due to conflicts of interest and whether MA14 applies.

Question 48

What must a director do if they are interested in a proposed transaction?

Answer 48

They must declare the nature and extent of their interest at the board meeting or by written notice before the company enters into the contract.

Question 49

Is the obligation to declare interest disapplied if MA14 is disapplied?

Answer 49

No, the obligation to declare under s177 cannot be disapplied by the company.

Question 50

What must be ensured regarding the quorum for passing a resolution?

Answer 50

There must be enough directors who can participate in the quorum to pass the resolution.

Question 51

What is required for a resolution to pass according to MA 7?

Answer 51

A majority in number of the directors must vote in favour of a resolution.

Question 52

What happens if the vote is tied?

Answer 52

If there is a deadlock, the negative prevails.

For example, if 4 directors are voting on a resolution to change the company’s registered office, 2 vote in favour, and 2 against, the decision will be that the company will not change its registered office.

Question 53

What role does the chairperson have in the event of a deadlock?

Answer 53

The chairperson of the meeting has a casting vote (MA 13).

Question 54

When can the chairperson not use their casting vote?

Answer 54

The chairperson cannot use their casting vote if they are unable to participate in the quorum (MA 13(2)).

Question 55

Does the chairperson need to use their casting vote to make a negative prevail?

Answer 55

No, they do not need to use their casting vote to make a negative prevail, as the negative prevails in any event in the event of a deadlock.

Question 56

What is the practical limitation of the chairperson’s casting vote?

Answer 56

The chairperson’s casting vote is practically limited to causing a resolution to pass.

Question 57

What is a practical point regarding decision-making?

Answer 57

If possible, it is best to take decisions by a majority rather than by casting vote, as this is more authoritative.

Question 58

How is a decision typically taken by shareholders?

Answer 58

This is normally done by way of a vote at a general meeting (GM), but can also be undertaken by written resolution.

See notes on Shareholder’s Written Resolutions.

Question 59

What happens if the vote is conducted by way of a GM?

Answer 59

The directors will propose the decision and resolve to call the GM. If the resolution passes at the GM, the directors will reconvene the board meeting and note in the minutes that the resolutions proposed at the GM duly passed.

They will also deal with administration.

Question 60

What is the process when directors propose a decision subject to shareholder approval?

Answer 60

They will call a board meeting and the directors will vote on the resolution ‘subject to the approval of the shareholders’.

For example, the directors may vote to propose to grant a director a service contract for a fixed term of 3 years ‘subject to the approval of the shareholders’.

Question 61

What happens after the directors vote to propose a resolution?

Answer 61

The board will resolve to call a General Meeting, at which the shareholders will vote to approve the resolution.

See notes on General Meeting Procedure.

Question 62

What occurs if the vote at the GM passes?

Answer 62

There will be a reconvened board meeting, at which the directors will proceed with the next steps, note in the minutes that the resolutions were approved by the shareholders; and. Deal with administration

Question 63

What does decision-specific administration involve?

Answer 63

Decision-specific administration may include filing forms and/or documents with Companies House and updating Company Registers.

Question 64

What registers must companies maintain?

Answer 64

Companies must maintain various registers, including: a register of members, a register of directors, a register of directors’ residential addresses, a register of secretaries, and a register of persons with significant control (PSC register).

Question 65

When must the registers be updated?

Answer 65

Registers must be updated whenever details set out in the relevant register change, such as when a new director is appointed.

Question 66

What fee must companies pay?

Answer 66

Companies must pay a fee to Companies House.

Question 67

What changes will the Economic Crime and Corporate Transparency Act 2023 bring?

Answer 67

The Act will remove the requirement for companies to keep registers except for the register of members, placing the obligation to notify Companies House of relevant information changes on the company.

Question 68

What are the consequences of failing to notify Companies House?

Answer 68

Failure to notify Companies House will result in an offence being committed, for which the directors can be fined.

Question 69

What is required of directors regarding written records of decisions?

Answer 69

Directors must keep a record, in writing, for at least 10 years from the date of the decision, of every unanimous or majority decision taken by the directors.

MA15

Question 70

What does CA 2006 require regarding meeting minutes?

Answer 70

CA 2006 requires minutes to be recorded for every board meeting, which must be kept at the company’s registered office (or Single Alternative Inspection Location (SAIL)) for 10 years.

5248

Question 71

What is the consequence of failing to keep required records?

Answer 71

A failure to keep required records is a criminal offence committed by every officer of the company in default.

5248(3)

Question 72

How can directors make decisions without a physical meeting?

Answer 72

Directors can take decisions by way of a written resolution, allowing the company to make decisions without holding a physical meeting.

Question 73

What is the first step in the written resolution process?

Answer 73

The resolution is proposed by a director.

Question 74

What happens after the proposal is made in a written resolution?

Answer 74

The proposal is circulated to each eligible director for approval.

Question 75

Who is considered an eligible director for voting?

Answer 75

A director is eligible if they would have been entitled to vote on the matter at a board meeting, meaning directors with a personal interest cannot participate.

Question 76

What is required for a written resolution to pass?

Answer 76

The resolution will only pass if all eligible directors agree to the proposed resolution, requiring unanimity.

Under Model Article 8(1)

Question 77

What is necessary for a vote to pass in terms of quorum?

Answer 77

A vote can only pass if a sufficient number of eligible directors to form a quorum, had a board meeting been held, are able to vote on the resolution.

MA 8(4)

Question 78

What must directors do after a resolution has passed?

Answer 78

Once the resolution has passed, directors must deal with any administration requirements as if the decision had been taken by board meeting.

Question 79

What must directors do once a written resolution has passed?

Answer 79

Directors must deal with any administration requirements as if the decision had been taken by board meeting.

Question 80

What are the administration requirements after a resolution passes?

Answer 80

This includes dealing with decision-specific admin and keeping a written record of the decision for 10 years as required by MA 15.

Question 81

Do directors need to keep minutes for written resolutions?

Answer 81

No, directors do not need to keep minutes under s248 CA 2006, as this applies only to board meetings.

Question 82

Is there a requirement to keep copies of written resolutions under CA 2006?

Answer 82

No, there is no requirement under CA 2006, but the company’s articles may require this.

Question 83

What is considered good practice regarding written resolutions?

Answer 83

It can be good practice to keep copies of written resolutions.