Company Decision Making Flashcards
What are the shareholder rights to call a general meeting?
Shareholders who either individually or together hold 5% of paid up voting shares in the company may request the directors to hold a general meeting.
Define a substantial property transaction
The purchase or sale of a non-cash asset of either:
- a value of over 10% of the company’s net asset value; or
- a value of over £100,000.
to or from a director or a person connected to a director of the company or its holding company.
What are the minimum execution formalities required for a purchase contract to be binding on a company?
It must be signed by the company, by a person authorised to act on behalf of the company (express or implied).
How can the accounting period of a private limited company be changed?
There is no limit on the amount of times a company can change its accounting period however there are two conditions:
1) it will not be effective if it is changed less than 5 years later than the previous time it was changed; or
2) where the new accounting period date will result in a new accounting period exceeding 18 months.
If the conditions are met, can the directors change the accounting period of the company at a board meeting without shareholder approval?
Yes
Briefly explain the duomatic principle.
Where all shareholders having a right to attend and vote at a meeting, and having discussed the matter, unanimously agree to the passing of a resolution, then the company will be bound without the need for a meeting or written resolution.
This is because the matter could have been put into effect by a resolution had the general meeting been held.
What must a notice of a general meeting include?
The right for shareholders who cannot attend to appoint a proxy.
What is the general rule regarding deadlock of voting at a board meeting?
The negative view will prevail if the voting is tied (ie the resolution will not pass).
The chairperson can break the deadlock with their casting vote if they so choose (unless bespoke articles suggest otherwise).
What is required to remove company auditors?
The passing of an ordinary resolution is required.
Which three main decisions need to be approved by special resolution?
- Changing articles of association;
- Changing the name of the company;
- Buyback of shares out of capital.
Give an example where shareholders have to give permission to the directors to go ahead with the decision.
Substantial property transactions (eg buying property from a property from a director).
Explain the requirements of reasonable notice for a board meeting.
Where a director calls a board meeting, they must give reasonable notice to the other directors. This is subjective on the facts.
- the noice must include the time, date and place of the. meeting (MA 9(3));
- if it is not intended they are in the same place (eg teams), notice must state method of communication, and the means of communication must be able to communicate to the others any info or options they have on articular items of business (MA 10(1)(b)).
What is the minimum amount of directors which can be present at a board meeting to ensure a quorum is present (MA 11)?
Two directors (for model articles).
Explain the procedure where director has a personal interest in a proposed transaction or arrangement with the company.
They must declare the nature and extent of their interest to the board (s177 CA 2006).
S177(6) sets out the following situations where a director does not need to declare their personal interest in a proposed transaction or arrangement:
- if it cannot reasonably be regarded as likely to give rise to a conflict of interest;
- if, or to the extent that, the other directors are already aware of it; or
- if, or to the extent that, it concerns terms of a service contract that have been or are to be considered…by a meeting of the directors.
Explain the rules on directors voting on matters where they have an actual or proposed interest.
(MA 14) Director won’t count for the quorum or vote if a proposed decision of the board is concerned with an actual or proposed transaction or arrangement with the company in which a director is interested.
MA14 can be dissapplied in the articles.
What does model article 8 provide for?
That a meeting does not have to be called.
A board resolution can take place in written form (or any other method which can effectively sow the agreement).
Where written method is used (eg board minutes), unanimous decision is needed as opposed to 50% majority for physical meetings.
Name the two ways a shareholder resolution can be passed.
- Written resolution;
- Resolution at a general meeting.
How is a shareholder meetings called?
Directors will call a general meeting of the shareholders by passing a board resolution.
This will be done where the directors want the shareholders to pass a shareholder resolution, or if the shareholders have requested that the board call a meeting to enable the shareholders to vote and pass on one or more resolutions.
What is an AGM and are they applicable to all companies?
Annual General Meeting.
Companies formed under CA 2006 will not hold AGMs unless they include a provision in the articles to achieve this.
Explain the notice requirements for general meetings of shareholders to be called.
Directors must give notice to every shareholder and every director, and to the auditor if there is one;
They must be given a hard copy, ether in electronic form or by means of a website, or a combination of the two.
Notice must set out the following:
a) time, date and place of the meeting (s311 (1) CA 2006);
b) general nature of the business to be dealt with at the meeting;
c) if a special resolution is proposed, the exact wording of the special resolution; and
d) each shareholder’s right to appoint a proxy to attend on their behalf (s325).
What is the minimum notice period required to be given to shareholders for a general meeting?
14 clear days.
The day the shareholders receive the notice and the day of the meeting are not counted as clear days.
If the notice is sent out by post or email, the notice is deemed received 48 hours after the notice was posted/ emailed.
Are shareholder prevented from voting in a proposed transaction where they have an interest?
No.
Nam the two exceptions where a shareholder would be prevented from voting in a transaction in which they have an interest.
1) where the shareholder is also a director, and the vote is deciding whether or not to ratify a breach of that director (ie ratifying their own breach);
2) resolution for the buyback of some or all of their own shares.
Can a shareholder with a personal interest in a matter vote where they are also a director?
Yes, as in such a case they will be voting in their capacity as a shareholder, not a director.
What is a poll vote?
Where shareholders vote in a general meeting on the basis of one vote for each share they own, instead of the usual one vote per person.