Chapter 5: Companies meetings

Question 1

Principles applying to shareholders meeting

Answer 1

• properly called and convened
• to be properly convened if prescribed notice was given by persons who have the authority to convene the meeting
• Notice given to all persons entitled to receive notice
• Meeting must be convened for time, date and place that are accessible to shareholders of company
• Meeting can commence once quorum is present
• -Quorum is minimum number of members who have to be present at meeting before meeting can commence

Question 2

Record date

Answer 2

Defined by S1 as the date on which company determines identity of its shareholders and their shareholdings for purpose of this Act. Record date determines shareholder right
May be set by board of directors, deciding which shareholders are entitled to:
-receive notice of shareholders meeting
-participate in and vote at shareholders meeting
-decide matters by written consent or electronic communication

Question 3

What happens if no record date is set by board of directors

Answer 3

Record date will therefor be:

• in case of meeting, latest date by which company is required to give shareholders notice of that meeting
• date of action or event

Question 4

Calling of shareholders meetings

Answer 4

Can be called by board of directors or other specified company MOI or rules.
Said meeting must be called in circumstances of:
-Board required to convene meeting and refer to matter of decision by shareholders as provided in Companies Act or MOI
-meeting demanded by shareholders, provided the demand is signed by holders of at least 10% of voting rights entitled to be exercised in relation to matter proposed to be considered at meeting

Question 5

Relevant points to make when demand is made

Answer 5

• Specifies specific purpose for which meeting is proposed
• Company or shareholder of company, can apply to court for order setting aside demand for meeting for reason of being frivolous or called for no other purpose than reconsidering a matter already decided by shareholders
• Shareholder submitted demand for meeting may withdraw demand before start of meeting
• When meeting demand withdrawn, company must cancel meeting if one or more demands being withdrawn, voting rights of remaining shareholders continuing to demand meeting, falls below minimum percentage of voting rights required to call meeting

Question 6

Butler v van Zyl

Answer 6

Issue: right of shareholders of company to request shareholder meeting to effect the removal of a director

Company N holding 78% of shares, sought removal of managing director, accusing them of risking losing assets.

They therefor called a requisition in terms of S61(3)

decision to proceed using this provision based on advice that company would be forced to convene meeting due to peremptory provision.

The board member in question voted against the meeting but other directors found it necessary and therefor meeting set to be held.

MD, the director in question, launched urgent application to court requesting meeting be declared invalid and set aside and for parties to be interdicted from holding shareholders meeting for purpose dealing with proposed resolution

Court held shareholders were entitled to demand board of directors convene shareholders meeting for proposed purpose, director was was authorized to respond to that demand by convening meeting of the board

Question 7

What constitutes a proper notice

Answer 7

• Notice for shareholders to convene must be in writing
• must include include date, time, and place
• If company sets record date, notice must include record date
• notice should explain general purpose of meeting and other specific purposes
• Public and non-profit companies that has voting members need to give 15 business days before date of meeting. Provisions of MOI can specify a longer period
• Copy of proposed resolution received by company and to be considered in meeting must accompany notice convening meeting.
• Notice indicate percentage voting rights required for resolution to be adopted
• Notice convening annual general meeting of company must contain summary of the financial statements that will be tabled at meeting. Notice needs to also explain procedure shareholder can follow to obtain complete copy of annual financial statements of preceding year.
• Notice must contain prominent statement that shareholder is entitled to appoint a proxy to attend, participate in and vote at meeting in shareholder place
• Indicates meeting participants will be required to provide satisfactory proof of identity at meeting

Question 8

What happens if company fails to give notice or a defect is present in giving notice?

Answer 8

Meeting can proceed provided persons entitled to vote in respect of each agenda item are present at meeting and agree to waive notice of meeting or in case of defect, ratify the defective notice

Present shareholder is deemed to have waived notice or have received it.

Question 9

Ratification of defective notice

Answer 9

meeting may proceed to consider the matter. immaterial defect or accidental or inadvertent failure in delivery of notice to particular shareholder does not invalidate action taken at meeting

Question 10

Thompson v ILIPS (Pty) Ltd

Answer 10

Court found the shareholders meeting to appoint a CEO was not correctly convened due to Quorum under which there was a lack of notice.

Provisions referred to:

• Item 7(5) of Schedule 5 Transitional Arrangements of Companies Act states that provisions of ACt relating to meetings of shareholders and adoption of resolutions apply from effective date company comes into existence
• S62(1) stipulates company must deliver notice to shareholders
• S62(4) if company fails to provide required notice to shareholder of meeting the meeting can proceed if all persons who are entitled to exercise voting rights acknowledge actual receipt of notice

Question 11

Meetings can be adjourned under condition of:

Answer 11

• presented within hour after appointment time for meeting to begin and quorum not present
• quorum not present at postponed or adjourned meeting, members of company present in person or by proxy will be deemed to constitute a quorum
• if there is other business on agenda of meeting, consideration of that matter may be postponed to later date without motion or vote

Question 12

Quorum not present within 1 hour of scheduled start

Answer 12

Chairperson can extend starting time by an hour or reasonable length pf time on grounds of exceptional circumstances

One week postponement is optional but the MOI may present different time frames

Question 13

Quorum still not present at postponed or adjourned meeting

Answer 13

Members of company present in person or by proxy, deemed to be constitute quorum.

Unless MOI states otherwise, after quorum established for meeting or matter considered at meeting, meeting can continue or matter can be considered as long as one shareholder with voting rights entitled to exercised at meeting or on matter present at meeting

Question 14

Shareholder meeting adjournment

Answer 14

Can be adjourned without further notice on motion supported by persons entitled to exercise majority of voting rights held by al persons present at meeting at time.

may be fixed or until further notice. cannot however be adjourned beyond 120 business days after record date or 60 business days after date on which adjournment occurred. The latter is alterable by MOI.

Question 15

Proxy

Answer 15

Person appointed to represent shareholder at meeting. Common law right.

Act provides for appointment of two or more proxy

Question 16

Ingre v Maxwell

Answer 16

Court held there must at least be two persons at meeting. one person cannot be proxy for all.

Appointment must be in writing and signed, valid thereafter for at least one year. Proxy can alternatively be appointed for specific time.

Proxy can delegate authority. Copy of proxy appointment form must be delivered to company prior to proxy exercising any rights of shareholders meeting

Question 17

S58(1) of Companies Act

Answer 17

Shareholders can appoint individual including individual who is not shareholder of company as proxy to participate in and speak on behalf of shareholders

Question 18

S15(1) of Companies Act

Answer 18

Provisions of company MOI needs to be consistent with Act and provisions contrary or inconsistent with Act can be found void.

Question 19

Barry v Clearwater Estates NPC

Answer 19

To meet quorum, board accepted late filing of proxies. Contested resolutions were put to vote and passed.

Appellant argument, meeting not properly convened due to late acceptance of proxy submissions which amended company MOI. something that could only be done by special amendment

Court held S58(1), provides shareholder may appoint proxy at any time. Provision of MOI requiring 48 hour notice for proxy appointment was null and void as per s15(1) of Act because provisions in MOI were contravention and inconsistent with provisions of Companies Act.

Further held provision of s58(1) are unalterable. right to appoint proxy is provision that doesn’t allow alteration by MOI.

Conclusion held that if provision of MOI contravene with provisions if s58(1) they are void in terms of s15(1)

Question 20

Getz v Spaarwater Goldmining Co Ltd

Answer 20

Argument that certain proxies were invalid due to being undated by proxy-giver and proxy-holder, they therefore did not comply with articles of association of company

Court held that validity of appointment of proxy depends on facts of each case. there can be little doubt that material departure from prescribed form could well invalidate proxy form

Question 21

Davey v Inyaminga Petroleum Ltd

Answer 21

Prescribed proxy form required proxy-giver set out number of shares in respect of which he was authorizing proxy to vote. this was not done.

held that it is crucial to disclose extent of authority conferred on holder of proxy. non-compliance is therefore a material omission rendering proxy incomplete and invalid.

In Getz case however court found that form of proxy complied with every aspect of prescribed form except date left blank

in this case court held the proxy remained valid and non-compliance in this single respect was not material

Question 22

Quorum

Answer 22

With respect to provision of MOI, shareholders meeting cannot begin until at least 25% of holders of voting rights are present.

Company with over two shareholders needs at least three present who can exercise voting rights

Question 23

Conduct of meetings

Answer 23

Voting can be done by show of hands or poll amongst those present and entitled to vote.
In voting by show of hands person voting entitled to one vote irrespective of number of shares.
Voting by polls=use of all voting rights attached to shares
Company can allow meeting to be done electronically for shareholders or proxy
this communication must be effective and able to occur without intermediary
shareholder will generally bear cost of access to medium or elcetronic communication. failing to exercise vote person is deemed to vote against resolution.

Question 24

Majority rule

Answer 24

By becoming shareholder you agree to be held by majority

Question 25

Sammel v President Brand Gold mining Co Ltd

Answer 25

The principle of majority is essential to functioning of company and therefore if decisions reach majority in accordance with law they stand even if they negatively impacts shareholders own rights

Question 26

Profit Company with only one director

Answer 26

director has right to exercise any power or perform function of board at any time without notice or compliance with any other internal formalities, except to extent that MOI doesn’t provide otherwise

Question 27

Every director of company is also director

Answer 27

matter to be decided by board decided by shareholders

Question 28

Board holding securities in second company

Answer 28

Can authorize any person to act as representative at second company shareholders meetings.

Question 29

Can shareholder act without meeting convention

Answer 29

Companies Act allows shareholders to make decision without convening meeting.

Shareholders can exercise vote within 20 days of receiving proposed resolution and return written vote

resolution adopted by ordinary or special resolution at proper Shareholder meeting

Election of director can be conducted by written polling of shareholders entitled to exercise voting right.

within 10 days after adopting resolution company can deliver statement escribing results of vote consent process or election to every shareholder who was entitled to vote on resolution

No business required to be conducted at annual general meeting of company may be conducted without convening meeting

Question 30

Annual general meeting

Answer 30

occurs within 18 months of company incorporation. thereafter every 15 months after date of previous annual general meeting.

Question 31

Matters discussed at general meeting

Answer 31

• present directors report, audited financial statements for immediately preceding financial year and audit committee report
• election of directors
• appointment of auditor for ensuing financial year ad auditing committee
• any matters raised by shareholders with or without advance notice

Question 32

Meetings under special circumstances

Answer 32

Meeting in case no/ unavailable directors shareholder can request companies tribunal issue administrative order for shareholders meeting to be convened

Shareholder can apply to court if company fails to do so. Company will have to compensate shareholder applying to company tribunal or court.

Question 33

Ordinary Resolution

Answer 33

Resolution adopted by at least 50% of voting rights at meeting or other than meeting.

There must be a 10% difference between Ordinary and Specials resolution

Question 34

S65(8)

Answer 34

Resolution for removal of director cannot require higher percentage than 50% (i.e. MOI cannot require)

Question 35

S65(10)

Answer 35

MOI cannot require less than 50%

Question 36

Special resolution

Answer 36

At least 75% of voting rights exercised on resolution or different percentage specified in MOI, exercised at shareholder meeting or other than meeting (s60)

Question 37

Voting rights of shareholder and other

Answer 37

Voting rights left to Company MOI

Question 38

S43

Answer 38

Debt instruments includes securities other than shares of company but does not include promissory notes and loans. In terms of the section, debt instrument issued by company may grant special privilege’s including attending and voting at general meetings and appointment of directors except to extent a company MOI provides contrary

Question 39

Proposal of resolutions

Answer 39

Board of directors propose a resolution in terms of S44 or board or shareholders resolution as per S45.

resolution proposal must be clear and accompanied with sufficient information or material explaining it, to allow shareholder vote on resolution.

Question 40

Proposal of resolution by board of directors

Answer 40

Board can decide if proposal taken to meeting by vote

Question 41

Proposal of resolution by shareholder

Answer 41

two shareholders can propose resolution concerning any matter in respect of which they are each entitled to exercise voting rights. When proposing resolution may require resolution be submitted to shareholders for consideration at meeting or next meeting by vote or written vote of members

Question 42

Shareholders agreements

Answer 42

individual agreements between parties to carry out business

Question 43

Gihwala v Grancy Property Ltd

Answer 43

Court held shareholders agreement dealing with right to be appointed as director valid and no reason why such agreement cannot be enforced.

Question 44

S15(7)

Answer 44

shareholders may enter into any agreement with each other concerning matter relating to company, but agreements must be consistent with Act and company’s MOI and provision of such agreement that inconsistent with Act or company’s MOI is void