Company Decision Making and Shareholders Flashcards
How much notice must be given for a board meeting?
Whatever is deemed ‘reasonable’ - could be a few minutes could be in days.
What is the quorum for board meetings?
Two.
What are the requirements for a notice of a general meeting?
Must set out:
- The time date and place;
- Nature of business;
- if a SR is proposed, the wording of the SR; and
- each shareholder’s right to appoint a proxy.
What is the minimum notice required for a general meeting?
14 days - day of the meeting itself will not be counted.
When considering days lapsed for notices, how long after delivery are the clear days counted?
1 day for hand delivery, 3 days for post or email.
What is the minimum quorum to pass a resolution?
2
What is the right to appoint a proxy?
If a member cannot attend a meeting, it is their right to appoint a proxy to vote on their behalf.
Not necessary if the resolution they’re voting in favour of is going to pass regardless.
What is a poll vote?
Shareholders vote on the basis of one vote per share they own - rather than one vote per person.
What percentage of shares must a shareholder have to call a poll vote?
10%
When can a GM be held on short notice?
When:
A majority in number of the shareholders, who own 90%+ (95%+ Public) of the company’s voting shares , consent.
Upon receipt of consent, the GM can be held straight away.
What is a written resolution?
Board hands out descriptions of the ordinary/special resolutions they wish to pass and annex any relevant documents;
Shareholder signs and returns the WR if they vote in favour of it.
What percentage of shares must a shareholder have to call a WR?
5%
How many Days does a WR lapse after?
28
What is the Duomatic Principle?
If shareholders discuss and unanimously agree a matter, the company needn’t circulate a WR / hold a GM
How are Directors appointed?
Via an ordinary resolution; or
via a board resolution.
A company can vary this position.
Can the board approve all service contracts?
No. A long-term service contract (one that doesn’t give the option to end the contract before 2 years) must get the approval of members via OR.
How can shareholders remove a director?
OR; 28-day notice period of removal resolution to be provided instantly to the concerned director.
What if the board refuse to hold a GM on special notice to remove a director?
Under s303, the members may compel the board to hold a general meeting for the company.
When must a share certificate be issued?
All members have a right to a share certificate within 2 months of allotment or transfer.
What percentage of shareholding must a member have to be entered on the PSC register?
25%+
What is the relationship between the company constitution and the shareholders? What are their rights under it?
It is a statutory contract between the company and the shareholders.
Shareholders can sue for breach of contract if a shareholder, or the company itself, doesn’t abide by the constitution.
What is the nature of a shareholders agreement?
It is a contract between the shareholders. Breach of the agreement can lead to a breach of contract claim.
Say if a resolution is passed in contravention of the shareholders’ agreement, what are the legal implications?
None in company law. However, there may be a breach of contract claim and the affected shareholder can claim against the breaching shareholders.
What are ordinary shares?
Give the right to attend and vote at GMs; entitled to receive dividends if they are declared.
Increase in value in conjunction with the company.
What are preference shares?
Enhanced rights over dividends; ordinary shareholders will receive the dividend after the preferential shareholders.
Often not allowed to exert power by voting at GMs
What is the difference between a cumulative and non-cumulative preference share?
Cumulative: If a dividend isn’t called one year, the shareholder is entitled to an increased dividend the year after;
Non-cumulative: If a dividend isn’t called one year, the shareholder loses the right to that dividend.
What is a derivative claim?
A claim instigated by the shareholder on behalf of the company against a director.
What is an unfair prejudice petition?
Shareholder can apply for a remedy when the company has been run in a way that is unfairly prejudicial to the member. E.g. they didn’t receive a dividend, or were not allowed to control the company.
If a court assesses the claim to be a strong one, then the company can be ordered to buy back the shares from the shareholder at their market value.
What are the stages of a derivative claim?
SH applies for permission - court only hears claims that have a prima facie case of success (SH must be acting in good faith and breach hasn’t been ratified).
If the director is liable, they may have to pay damages to the company or they can be removed from office.
