Business - Decisions and Resolutions (6) Flashcards
What decisions and resolutions are taken in a company?
Decisions and Resolutions: Companies must follow strict procedures when making and implementing decisions (though bespoke articles may change certain requirements). Decisions will often involve resolutions of the board or the shareholders.
(1) Directors’ Decisions: Directors have authority to make most day-to-day decisions (MA 3).
- CA 2006 refers to these decisions as ‘the company decides’.
(2) Shareholders’ Decisions: Shareholders are required to make or authorise certain types of decision.
- CA 2006 refers to these resolutions as ‘resolutions of the members’ (ordinary), or ‘special resolutions’.
How do directors make decisions?
Directors’ Decisions: Directors make relevant day-to-day decisions by board resolution (MA 3). They can delegate certain decisions to specified employees or directors (MA 5).
(1) Board Meeting: A decision is generally made by simple majority at a board meeting (MA 7).
(2) Written Resolution: A decision can be made by written correspondence if directors agree unanimously (MA 8).
(3) Sole Directorship: Sole directors of companies make decisions independently (MA 7).
How can directors use written resolutions?
Written Resolution: A decision can be passed unanimously in any form of written communication (MA 8).
What is the administration and procedure related to board meetings?
Board Meeting: Most decisions are passed by simple majority at board meetings - these have a number of requirements.
(1) Notice: ‘Reasonable’ notice of the meeting must be given to all directors (Re Homer). This includes the time, date, location, and method of communication (MA 9-10).
(2) Quorum: A minimum of 2 directors entitled to vote must be present at the meeting for each resolution proposed (MA 11).
(3) Declaration of Interests: Directors must declare any personal interests in a proposed resolution to all directors, either prior to or during the meeting (s177), unless an exception applies (see directors’ duties).
(4) Voting: Proposals must pass by simple majority in favour of directors in quorate - this means more than half (MA 7).
Personal Interests: Directors cannot be in quorate or vote on matters in which they have a personal interest (MA 14). However, this article can be permanently removed (SR) or temporarily suspended (OR).
Deadlock: The Chair can break a 50:50 deadlock if they favour the resolution (MA 13). The board would need to have appointed a director as Chair (MA 12).
(5) Administration: Minutes of the meeting must be taken (see administration). A director or directors must also be authorised to enter into any relevant transaction on behalf of the company.
How are shareholder resolutions made at a general meeting?
(1) General Meeting: A decision can be passed at a general meeting of the shareholders.
Ordinary Resolution: These decisions require simple majority in favour (s282).
Special Resolution: These decisions require at least 75% in favour (s283).
How are shareholder resolutions made by written resolutions?
(2) Written Resolution: Most decisions can be passed by written consent of the shareholders.
- Ordinary Resolution: As above.
- Special Resolution: As above.
- Exception: Resolutions to remove a director cannot occur by written resolution.
What is the duomatic principle?
Duomatic Principle: Most decisions can be passed informally by unanimous consent of the members.
How are general meetings requisitioned?
(1) Requisition: General meetings must be approved by the directors or requisitioned by the members (s303).
Board: The board will resolve to call a general meeting by board resolution, to approve relevant issues.
Members: The members can force the board to call a general meeting (ss303-304):
>Shareholders with at least 5% voting rights can give notice to the board, alongside their reasoning.
>The board must provide notice of the meeting to the members within 21 days.
>The notice period must be between 14-28 days (meaning maximum 7 weeks from requisition to GM).
What are the notice requirements for a general meeting?
(2) Notice: Notice of the meeting must be provided to all shareholders, directors, and auditors (ss310;502). This includes the time, date, location and proposed resolutions of the meeting (s311).
Length of Notice: Notice must be at least 14 clear days (or 16 clear days by post or email) (ss306;1147).
Short Notice: A majority of shareholders in number, holding at least 90% of the shares in value, can consent to host the meeting on short notice, which can be immediate (s307).
>This is prohibited for certain decisions, such as SPTs, capital buyback, or removal of directors.
Right to Proxy: Shareholders must be notified of their right to appoint a proxy to vote on their behalf (s325).
Special Resolutions: The exact wording of any special resolutions must be given (s382).
Public Companies: Plcs must give 21 clear days notice of AGMs, and short notice requires 95% in value.
Written Statement: Shareholders with at least 5% voting rights can require the company to circulate a written statement not exceeding 1000 words in respect of any GM (s306).
What is the quorum for a general meeting?
(3) Quorum: A minimum of 2 members entitled to vote must be present on each decision (s318).
>Unless the company only has one shareholder.
What are the voting rules at a general meeting?
(4) Voting: Proposals pass on a show of hands, with one vote per member, unless a poll vote is demanded (MA 42).
Personal Interests: Members do not declare personal interests, but cannot vote on resolutions to: a) buy-back their own shares; or b) ratify their own breach of directors’ duty (s329).
>This includes ‘connected persons’, i.e. enduring partners, children, parents (and step-versions).
Poll Vote: Poll votes may be demanded before and after a vote, providing members one vote per share (MA 44). This overrides any vote-by-hand (even after-the-fact). Abstaining is not a vote against.
Demand: Can be demanded by: a) the Chair; b) the directors; c) 2 or more members with a right to vote; or d) a member with at least 10% of total voting rights of shareholders entitled to vote.
What is the administration requirement for general meeting?
(5) Administration: Minutes of the meeting must be recorded. A resolution must be recorded in writing. Certain resolutions must be filed at CH. Most resolutions must also be stored at the registered office (see administration).
How is a written resolution procedure for shareholder resolutions?
Written Resolution: The written resolution procedure is similar to the general meeting in its effect. However, all eligible members are involved, so abstaining counts as a voting against. Only private companies can pass written resolutions (s288).
(1) Requisition: Written resolutions can be requisitioned in the same way as general meetings (s294).
>Shareholders must pay to circulate any written resolution they have requisitioned.
>Shareholders can also request a written statement (as above).
(2) Notice: Notice in the form of a written resolution document must be provided to all shareholders, directors and auditors (s291). This states the proposal, and invites shareholders to agree by a given ‘lapse date’ (s291).
Lapse Date: 28 days from and including date of circulation, unless altered in the company articles (s297).
(3) Voting: Proposals pass on the basis of one vote per share, unless altered in the company articles (ss282-284).
>Proposals pass as soon as the required majority is met.
(4) Administration: Largely the same as above.
What are some examples of board resolutions?
Registered Address: Changing the registered address (s87) → Form AD01.
Accounting Date: Changing the accounting date (ss391-392) → Form AA01.
Company Seal: Adopting a company seal (s45).
Appoint Chairman: Appointing a Chairman (MA 12).
Appoint Secretary: Appointing a company secretary (MA 3).
Remove Secretary: Removing a company secretary (MA 3).
Appoint First Auditor: Appointing the first auditor only (s485).
What are some examples where shareholder decisions are required?
Amend Articles: Special Resolution (s21).
Change Name: Special Resolution (s90).
Remove Auditor: Ordinary Resolution (s510).
Remove Director: Ordinary Resolution (s162) → GM only.
Ratify Breach: Ordinary Resolution (s239).
Appoint Auditor: Ordinary Resolution (s485) → Subsequent appointments only.
