Chapter 7: Companies - Joint Decision Making

Question 1

Who is required to hold an annual general shareholders’ meeting?

Answer 1

Public company is required by statute.
Private company has no such obligation.

Question 2

Who usually calls a general meeting?

Answer 2

It is usually the directors who call a meeting (under statute)

Question 3

When can shareholders require the directors to call a general meeting?

Answer 3

Shareholders who hold at least 5% of the paid-up voting capital can require the directors to call a meeting.

Question 4

What must be done if the shareholders request the directors to call a general meeting?

Answer 4

On receipt of such a request, the directors must:
i. call the meeting within 21 days, and
ii. it must actually be held within 28 days.

Question 5

What will happen if the directors fail to call a general meeting after the shareholders request it?

Answer 5

If the directors fail to call the meeting, the shareholders who requested it, or any shareholders holding at least 50% of the voting rights of the company, can call the meeting themselves.

If that happens, the shareholder who calls the meeting is entitled to be reimbursed by the company for reasonable expenses.

Question 6

Who, other than the shareholders, can require the directors to call a general meeting?

Answer 6

A resigning auditor can require the directors to call a meeting if the auditor wishes to give reasons for the resignation.

Question 7

When can the court call a general meeting?

Answer 7

If it is impracticable for the company to call it, e.g., in cases of deadlock between shareholders.

Question 8

Who must notice of a general shareholders’ meeting be given to?

Answer 8

i. all shareholders,
ii. all directors,
iii. the personal representatives of any deceased shareholders,
iv. the trustee in bankruptcy of any bankrupt shareholders, and
v. to the auditor, if one has been appointed.

Question 9

What form can notice of a general meeting take?

Answer 9

i. in writing,
ii. electronically, by email, or
iii. via a website

Question 10

What notice is needed if a shareholder wishes to call a meeting to consider a resolution to remove a director?

Answer 10

The shareholder must give the company notice at least 28 clear days prior to the meeting

Question 11

What must be contained in the notice for a general meeting?

Answer 11

Must include:
i. the company name,
ii. the time, date, and place of the meeting,
iii. the general nature of the business to be carried on at the meeting,
iv. a statement of the right to appoint a proxy to attend the meeting, and
v. the full text of any special resolution

Question 12

When must notice of a general meeting be given?

Answer 12

At least 14 clear days before the meeting unless the articles provide for longer notice.

Question 13

What does clear days mean?

Answer 13

The date the notice is given + the date of the meeting are not counted.

Question 14

What happens if notice is communicated by a method other than by hand delivery?

Answer 14

An additional 48 hours must be included for deemed service.

Question 15

What notice is required of a public company’s AGM?

Answer 15

At least 21 clear days’ notice.

Question 16

What can be done if notice of the general meeting is insufficient?

Answer 16

A member who is unhappy with action taken at a meeting can seek to have the action declared invalid.

Question 17

When may a general meeting be held on short notice?

Answer 17

If agreed by a majority in number of the shareholders who hold 90% of the shares.
- 95% for non-traded public companies.

Question 18

When can the short notice procedure not be used?

Answer 18

In circumstances where documents must be left at the registered office for 15 days prior to the general shareholders’ meeting

Question 19

What quorum is required?

Answer 19

Unless the company’s articles provide otherwise, the quorum required for a shareholder meeting is 2 (unless the company is a single member company) members.

Question 20

What are the 2 types of resolution?

Answer 20

1. Ordinary,
2. Special

Question 21

What is needed for an ordinary resolution?

Answer 21

Simple majority - more than 50% of the members at the meeting

Question 22

What is needed for a special resolution?

Answer 22

Approval of 75% or more of the members at the meeting

Question 23

What are special resolutions generally required for?

Answer 23

Actions of the company that may detrimentally affect the shareholders.

E.g., the Companies Act 2006 requires a special resolution for:
i. any alteration to the articles,
ii. a reduction in the company’s share capital,
iii. the winding up of the company, and
iv. to change the company’s name.

Question 24

What is needed after a special resolution is passed?

Answer 24

All special resolutions must be filed at Companies House within 15 days

Question 25

What is the normal method of voting at a general meeting?

Answer 25

Show of hands.
1 vote per shareholder who is present, or by a proxy whom the shareholder has sent in their place.

Question 26

Who can demand a poll vote instead?

Answer 26

i. .5 shareholders or more, or
ii. shareholders with at least 10% of the voting rights, or
iii. shareholders with at least 10% of the paid-up capital of the company.

Question 27

What is a poll vote?

Answer 27

Changes the voting from 1 vote per shareholder to 1 vote per share.

Question 28

When are written resolutions commonly used?

Answer 28

In small companies as it is quicker + more cost effective than a face-to-face meeting

Question 29

Who are written resolutions available to?

Answer 29

Private companies only

Question 30

When can a written resolution not be used?

Answer 30

To dismiss a director or auditor

Question 31

Who decides whether to circulate a written resolution?

Answer 31

Normally, the board of directors decide whether to circulate a written resolution.

However, shareholders who hold at least 5% of the total voting rights can require the directors to do so.

Question 32

Who must a written resolution be sent to?

Answer 32

It must be circulated to all members eligible to vote.

Question 33

What information must the written resolution contain?

Answer 33

1. A statement informing the shareholder how to signify agreement, and
2. When the resolution will lapse - typically 28 days from and including the circulation date unless the articles say something different.
3. Any documentation which must be left at the company’s registered office for 15 days prior to a general shareholders’ meeting, or available at the general shareholders’ meeting, must be circulated with the resolution.

Question 34

What kind of voting is a written resolution based on?

Answer 34

Poll vote.
It is based on 1 vote per share.

Question 35

What is the procedure for making a decision if only the directors need to approve it?

Answer 35

If the decision is for the directors alone, e.g., changing the address of the company’s registered office, the board will pass the necessary resolution + comply with any filing requirements.

There is no requirement for any shareholder involvement.

Question 36

What is the procedure for making a decision if it requires approval of both directors + shareholders?

Answer 36

1. Approval starts with a board meeting + resolution approving the matter.
2. Board will approve a resolution to call a general shareholders’ meeting or circulate a written resolution for the members to resolve to approve the matter.
3. The shareholders must then vote whether to pass the resolution, and if they do, the resolution is passed.
4. Often there is no requirement for a further board meting. However, sometimes another board resolution will be necessary to deal with administration of the decision.

Question 37

What matters require shareholder approval by ordinary resolution?

Answer 37

1. Appointment of auditors (if any),
2. Appointment/re-appointment of directors,
3. Removal of a director of the auditor,
4. Adoption of the annual accounts + the reports of the directors and auditors,
5. Declaration of dividends,
6. Approval of the directors’ decision to allot shares,
7. Approval of substantial property transactions
8. Ratification of a director’s breach of duty,
9. Entering a service contract with a director for more than 2 years,
10. Making a loan to a director, and
11. Giving a director a payment for loss of office

Question 38

What is a substantial property transaction?

Answer 38

If a director buys property from or sells property to the company for over £100,000 - automatically considered an SPT.

If it is between £5,000 and £100,000, then it will qualify as an SPT if its value exceeds 10% of the company’s asset value (net assets).

Question 39

What matters require shareholder approval by special resolution?

Answer 39

1. Most decisions to buy back company shares,
2. Changes to the company’s articles of association, and
3. Changes to the company’s name

Question 40

What filing requirements are there for resolutions adopted by the board, shareholders, or both?

Answer 40

If a resolution affects information filed at Companies House, a copy of the changes typically must be filed at Companies House within 14 days of approval of the change.

Question 41

What power do all shareholders have?

Answer 41

They can:
i. vote,
ii. receive notice + attend general shareholders’ meetings,
iii. receive dividends if declared,
iv. restrain directors’ breach of duty

Question 42

What power do shareholders with at least 5% of the shares have?

Answer 42

They can:
i. circulate a written resolution,
ii. request a general shareholders’ meeting, and
iii. circulate a written statement

Question 43

What power do shareholders with at least 10% of the shares have?

Answer 43

They can request a poll vote

Question 44

What power do shareholders with at least 25% have?

Answer 44

They can block a special resolution