COMPANIES—JOINT DECISION MAKING Flashcards
SHAREHOLDER MEETINGS
A public company is required by statute to hold an annual general shareholders’ meeting, but a private company is under no such obligation. Companies (both private and public) may also hold general shareholders’ meetings as and when required
Who Can Call a Meeting?
1.director
It is usually the directors who call a meeting (under statute).
2.shareholder
3.resigning auditor
4.court
shareholder call the meeting
- Shareholders who hold at least 5% of the paid-up voting capital can require the directors to call a meeting.
- On receipt ofsuch a request, the directors must call the meeting within 21days, and it must actually be held within 28 days.
- If the directors fail to call the meeting, the shareholders who requested it(or any shareholders holding at least** 50%** of the voting rightsof the company) can call the meeting themselves. If that happens, the shareholder who calls the meeting is entitled to bereimbursed by the company for reasonable expenses.
Notice of a general shareholders’ meeting
- Notice of a general shareholders’ meeting must be given to all the shareholders and directors, the personal representatives of any deceased shareholders, and the trustee in bankruptcy of any bankrupt shareholders and to the auditor, if one hasbeen appointed.
- Notice can be given in writing or electronically, by email or via a website.
- If a shareholder wishes to call a meeting to consider a resolution to remove a director, theshareholder must give the company notice at least 28 cleardays prior to the meeting.
content of notice
1.The notice must include the company name, the time, date, and place of the meeting,
2. the general nature of the business to be carried on at the meeting,
3. a statement of the right to appoint a proxy to attend the meeting, and
4. the full text of any special resolution
timing of notice for Shareholder Meeting
- Notice must be given at least **14 clear days **before the meeting unless the articles provide for longer notice. ‘Clear days’ means that the date the notice is given and the date of the meeting are not counted.
- Also, if the notice is being communicated by a method other than by hand delivery, an** addition-al 48 hours** must be included for deemed service.
Exam Tip
To save you the trouble of counting days on a calendar, you can calculate the latest date for which notice can be given as: meeting date minus 15 for hand delivery and meeting date minus 17 for posted delivery. This formula, of course, works in the other direction too: notice date plus 15 (17 if notice is to be posted) is the earliest date a meeting can be held.
Compare: the timing of Annual Meeting of a Public Limited Company
- Public limited companies (but not private limited com-panies) are required to hold an annual general meeting.
- An annual general meeting requires 21 clear days’ notice rather than the 14 clear days required for other the general meetings.
Insuffcient Notice
If the notice is insufficient, a member who is unhappy with action taken at a meeting can seek to have the action declared invalid.
Short Notice
- A meeting may be held on shorter notice if agreed by a majority in number of the shareholders who hold 90% (95% for non-traded public companies) of the shares.
- However, short notice cannot be used in those circumstances where documents must be left at the registered office for 15 days prior to the general shareholders’ meeting,
Quorum
- A valid vote cannot be taken at a meeting of the shareholders unless a quorum is present. Unless the company’s articles provide otherwise,
- the quorum required for a sharehold-er meeting is two (unless the company is a single member company) members (or proxies of two members,
- but a single shareholder who attends a general shareholders’ meeting and who is also a proxy for another shareholder cannot by himself be quorate).
Approval of Resolutions at a Meeting
Resolutions may be approved by a vote of the shareholders
at the shareholder’s meeting. There are two types of resolu-
tion: ordinary and special.
1. Approval of an ordinary resolution requires the afrma-
tive vote of a simple majority (more than** 50%**) of the
members at the meeting
2. Approval of a special resolution requires the afrmative
vote of 75% or more of the members at the meeting.
Special resolutions
the Companies Act 2006 requires a special resolution for
1. any alteration to the articles of association of the company
2. a reduction in the company’s share capital,
3. the winding up of the company, and to change the company’s name.
4. the company’s articles may provide for further matters that are required to be voted on by special resolution.
5. All special resolutions must be filed at Companies House within 15 days.
Method of Voting
- The normal method of voting at a company meeting is by a show of hands—one vote per shareholder who is present or by a proxy whom the shareholder has sent in their place.
- However, it is open to 5 shareholders or more, or shareholders with at least 10% of the voting rights or 10% of the paid-up capital of the company to demand a poll instead.
- poll changes the voting from one vote per shareholder to one vote per share.
Approval of Resolutions byWritten
Resolution
- Written resolutions are available to private companies only and are a way of passing resolutions without having to have a shareholders’ meeting.
- A written resolution can be used for either ordinary or special resolutions
- a written resolution cannot be used to dismiss a director or auditor;
- 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; - The written resolution must be circulated to all members eligible to vote;
- The written resolution must contain a statement informing the shareholder how to signify agreement and when the resolution will lapse, typically** 28 days** from and including the circulation date unless the articles say something different; and
- 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.
- although the percentage of votes needed to pass a resolution is the same used in general shareholders’ meet-ings (more than 50% for ordinary resolutions and 75% or more for special resolutions), here the percentage is based on** all** the shareholders entitled to vote whilst at a meeting the percentage is based on shareholders who attend in person or by proxy). And it is based on one** vote per share** as opposed to one vote per shareholder.
If a decision requires involvement of both the directors and
the members (for example, a special resolution to change
the company’s name),
- approval will start with a board meet-ing and resolution approving the matter.
- The board will also approve a resolution to call a general shareholders’ meeting or circulate a written resolution for the members to resolve to approve the matter.
- The shareholders must then vote whether to pass the resolution, and if they do, the resolution is passed.
- Often, there is no requirement for a further board meeting, However, sometimes another resolution will
be necessary to deal with administration of the decision. For example, if the resolutions approved entering a contract to purchase a new factory building, after the shareholders approve, the directors would need to call a meeting and adopt a resolution to appoint two directors to execute the contract.
