Business Law and Practice - Companies: Member Voting

Question 1

General Meetings

Answer 1

Public companies: required to have an annual general meeting (not required for private companies)

Shareholders owning at least 5% of the company’s paid-in voting capital have the right to require the directors to call a meeting

Resolution passed at board meeting to call a general meeting

Shareholders, directors and the company’s auditor must be given notice of general meeting

• Contents of notice prescribed by legislation

Must be called in 14 clear days (don’t count day of meeting or day notice sent out, can count weekends and public holidays)

• If hand-delivering notice: start counting the day after you have delivered notice (notice date + 15 days)
• Notice posted/emailed: add on two days for deemed service (notice date + 17 days)

Members can agree to hold meeting on short notice:

• Majority of shareholders must agree
• That majority must hold at least 90% of shares

Members can agree to hold meeting immediately so long as there is no resolution to be passed which requires information to be avalable at registered office for 15 days prior to the meeting

Question 2

Quorum Requirements

Answer 2

General meeting not valid unless quorum is present

Statute provides that quorum is two - company can vary this in their articles

Question 3

Shareholders Resolution

Answer 3

Ordinary Resolution

Special Resolution

Question 4

Ordinary Resolution

Answer 4

Approved if over 50% of members present at the meeting vote in favour

Default position - unless Companies Act or Articles state it must be a Special Resolution

Question 5

Special Resolution

Answer 5

Approved if 75% or more of members present at the meeting vote in favour

Required to change company name, amend Articles, reduce share capital, remove pre-emption rights or wind up company (generally for decisions that may detrimentally affect shareholders)

After passed, the company has 15 days to file resolution at Companies House

Question 6

Methods of Voting

Answer 6

Default method is that that shareholders vote at general meeting by show of hands (each has one vote)

Poll vote: each share gets one vote:

• Need five or more shareholders to demand poll OR shareholders who hold at least 10% of voting rights OR shareholders whose shares represent at least 10% of paid up capital

Written Resolution:

• Private companies can pass most shareholders resolutions by obtaining appropriate approval from shareholders in writing
• Alternative to passing resolution at general meeting
• Shareholder with 5% of voting shares can require board to circulate written resolution
• Must contain instructions for voting in favour - silence constitutes voting no
• Time limit for return is typically 28 days (runs as soon as resolution is circulated, no requirement for clear days)
• Passed as soon as enough votes returned in favour (may be before 28th day)
• More than 50% for ordinary resolution and 70% or more for special resolution (approval based on all shares entitled to vote)
• A director or auditor cannot be dismissed by written resolution

Question 7

Substantial Property Transaction

Answer 7

Relates to a director buying property from or selling property to the company

If less than £5,000 it does not require shareholder approval

If more than £100,000 it is automatically considered SPT

Between the figures it will be SPT if value of transaction exceeds 10% of the company’s asset value

Question 8

Taking out a loan

Answer 8

Do not require shareholder resolution provided there are no restrictions in the articles (Model Articles do not include any)

Board has the power to borrow money and so a board resolution is all that will be needed to enter the loan

Question 9

Dividends

Answer 9

Shareholders may reduce the amount of the dividend declared by directors through an ordinary resolution