Company Decision Making

Question 1

how can directors call a board meeting?

Answer 1

any director can call a board meeting by providing reasonable notice

Question 2

what type of notice must be provided to call a board meeting?

Answer 2

there are no formality requirements for a notice

only reasonable notice is necessary (which is whatever notice is usual for directors to give)

Question 3

what is the quorum for a board meeting? what does a quorum mean?

Answer 3

minimum 2 directors (this can be increased in the articles)

no proposal may be voted at in a board meeting unless the meeting is quorate

(unless the company only has 1 director in which case the quorum is 1)

Question 4

what is the voting threshold to pass board resolutions at a board meeting?

Answer 4

majority vote of directors present and voting

(unless the company only has 1 director in which case they can take decisions on their own)

Question 5

what happens in the event of a tie at a board meeting?

Answer 5

if there is a chairperson, they have the casting vote

Question 6

can directors make decisions without holding a board meeting?

Answer 6

• yes only if directors unanimously agree on the resolution
• this requires directors to indicate to each other that they share a common view via any means like on the phone
• a written record of this MUST be kept

Question 7

in what cases cant the directors decide without shareholder approval?

Answer 7

• some matters are outside directors’ powers and must be decided by a shareholder resolution (e.g., amending articles)
• some matters are within directors’ powers but first require approval of shareholders before directors have the authority to act (e.g., approving transactions between directors or a loan from the company to a director)

Question 8

what are the 2 types of resolutions shareholders can pass and what are their voting thresholds?

Answer 8

1. ordinary resolution: must be passed by a majority of shareholders entitled to vote and present at the general meeting (over 50%)
2. special resolutions: must be passed by at least 75% of shareholders entitled to vote and present at the general meeting

Question 9

what two methods of voting can be undertaken by shareholders at a general meeting?

Answer 9

1) vote by show of hands (default) = each shareholder present and entitled to vote is entitled to one vote

2) poll vote (when demanded) = each shareholder present and entitled to vote will have one vote per share carrying voting rights

–> a vote is put to a show of hands unless a poll vote is duly demanded (articles cannot exclude this right)

Question 10

Who can demand a poll vote under the Model Articles? (4)

Answer 10

a poll vote can be demanded by:

1. chairman
2. directors via board resolution
3. 2 or more shareholders entitled to vote on the resolution
4. shareholder(s) representing at least 10% of the total voting rights of shareholders entitled to vote on the resolution

Question 11

when can a poll vote be demanded? (3)

Answer 11

1. before the GM
2. at a GM before a show of hands vote
3. at a GM directly after a show of hands vote

Question 12

what is the quorum for a general meeting? what is the effect of this?

Answer 12

• 2 shareholders (including proxies and corporate representatives of corporate shareholders)
• no business can be transacted if meetings are not quorate (except appointing a chairman)
• (unless a company only has 1 member in which case the quorum is 1)

Question 13

what is the written resolution procedure? when can it be held? what is the voting threshold? (7 points)

Answer 13

• written resolutions approved by directors at a board meeting will be sent to all eligible members entitled to vote
• a notice period of 28 days will apply during which members can respond and vote in favour or against the resolution
• if members do not vote, their votes are counted against the resolution
• every member has 1 vote per share
• written resolutions must be passed by the required majority of all voting members (unlike a GM where the threshold is counted by those present)
• if the resolution does not receive the required majority within 28 days, it will lapse and it is not passed
• the written resolution procedure can only be used by private companies but not for the removal of a director or auditor from office

Question 14

how can directors call a general meeting of the shareholders?

Answer 14

directors pass a board resolution by simple majority - but directors must give notice of the GM

Question 15

what type of notice is required to call a general meeting (2)

Answer 15

1. normal notice procedure: at least 14 clear days notice
2. short notice procedure after which a GM can be held immediately after the BM

Question 16

how are 14 clear days counted for the normal notice procedure?

Answer 16

• the day of the GM and the day of the notice are excluded
• clear days includes weekends and bank holidays
• the notice is deemed served 48 hours after it is posted

so - there must be 14 days between BM and GM

Question 17

what is the threshold required to use the short notice procedure to call a GM?

Answer 17

a GM can be called immediately after a BM by:

• a majority of the shareholders (more than 50%) entitled to vote
• holding at least 90% of the total voting rights

Question 18

what is the 4-step procedure for shareholder decision making?

Answer 18

1. Directors hold a board meeting to approve the form of the notice and authorise its circulation to the shareholders. The notice states the date and location of the GM, and any draft resolutions to be considered at the GM
2. The GM takes place and shareholders vote on the resolution
3. Directors hold another board meeting where they are informed of the members’ decision and they will decide on how to implement the decision - and pass a board resolution authorising any director or secretary to act if necessary
4. post-meeting matters are dealt with

Question 19

what are the post-meeting matters that directors must undertake after shareholders vote on a resolution? (7)

Answer 19

Internal record keeping:
1. keep minutes of all meetings
2. update statutory books if anything changed: register of members, directors, PSC
3. documents that need to be kept at the registered office - e.g., directors service contracts

Filings at Companies House / Registrar of Companies
1. resolutions that affect the company’s constitution with the Registrar of Companies within 15 days of being passed
2. all special resolutions within 15 days of being passed
3. ordinary resolutions that give directors the authority to allot new shares
4. Copies of amended articles and any forms (e.g., change of name forms)

Question 20

how can shareholders call a general meeting if the board refuses?

Answer 20

• shareholders holding at least 5% of the paid-up voting share capital can serve a s303 request on the board requiring it to call a general meeting
• the request will state the general nature of the business that shareholders want to deal with including a draft resolution

Question 21

what must directors do after receiving a s303 request? what can shareholders do if directors fail to do this?

what are the different time limits (3)?

Answer 21

• directors must call a GM within 21 days of receiving the s303 request to be held not more than 28 days after the notice calling the GM
• if directors fail to do this then shareholders can call the GM themselves to be held within 3 months of service of the s303 request by giving at least 14 clear days’ notice
• shareholders can recover the costs of calling the GM from the company, and the company can recover this personally from the directors

Question 22

in decision making, why is it important to follow the correct procedures?

Answer 22

• if procedures are not followed, resulting resolutions may be invalid (e.g., if the correct notice was not given of a GM or if a meeting was not quorate, the resolution is invalid)
• there may be criminal sanctions (e.g., failure to record meeting minutes may result in the defaulting officer being fined)

Question 23

when would it be preferable to call a GM vs use the written resolution procedure?

Answer 23

• timing = the GM notice procedure is 14 days which may take more time if enough SH are willing to vote on a written resolution but not enough exist to call the short notice procedure (majority holding 90% of voting rights)
• prospects of success = written resolutions are voted on by all shareholders entitled to vote whereas voting at a GM is from those present and voting - so the pool of shareholders may be larger for written resolutions which may be hard to meet (but SH can appoint proxies at GM). Also, each SH has 1 vote per share for a written resolution whereas this will only apply at a GM if a poll vote is demanded.