Company Decision-making, the Company’s Officers and Shareholders Flashcards
What are the roles of directors and shareholders in a company’s decision-making structure, and what statutory provision primarily governs the directors’ authority?
Directors handle the company’s day-to-day management, while shareholders provide financial backing and make certain high-level decisions. Directors’ authority to run the company is specified in Model Article (MA) 3. Shareholders typically vote on broader strategic changes, like altering the articles of association or the company’s name (under special resolutions per sections 21 and 77 of the Companies Act 2006)
What types of decisions are exclusively reserved for shareholders, and what is the legal impact of these decisions on directors?
Decisions reserved solely for shareholders often involve special resolutions, including changing the articles of association or the company’s name. Once shareholders approve these changes, directors must comply and ensure proper documentation with Companies House. Directors have no authority to overturn or ignore these shareholder decisions, as they are binding and must be formally executed
Explain the two categories of shareholder decisions that require their involvement and approval. What is the rationale behind each category?
The first category involves decisions shareholders make alone, such as altering foundational company structures like its articles or name, requiring special resolutions (ss 21 and 77 CA 2006). The second category includes decisions that authorize directors to engage in contracts with potential personal gain or significant risk, e.g., when the company buys a director’s property. This approval prevents conflicts of interest and ensures directors act in the company’s best interests, not for personal advantage.
What are the rules regarding notice, quorum, and conflicts of interest in board meetings, according to Model Articles (MA) and the Companies Act (CA) 2006?
According to MA 9, notice of a board meeting must be given to all directors. MA 11 specifies that a quorum of two directors is required for a valid meeting, reducing the risk of unilateral decisions. Under s 177 CA 2006, a director must declare any personal interest in a transaction. Per MA 14, directors with personal interests cannot count in the quorum or vote on resolutions related to their interest, ensuring fair decision-making.
Distinguish between an ordinary resolution and a special resolution in terms of voting requirements and applicability. What rule clarifies this distinction?
An ordinary resolution requires a simple majority (over 50%) of votes, while a special resolution requires at least 75% of votes to pass at a shareholders’ meeting. These apply to different levels of decisions, with ordinary resolutions for regular business matters and special resolutions for more significant changes (e.g., altering the articles). This distinction is outlined in sections 282 and 283 CA 2006.
How does a written resolution process work, and what are the key requirements for passing written resolutions under CA 2006?
For private companies, written resolutions allow shareholders to approve proposals without convening a general meeting, under s 288 CA 2006. The board circulates the resolution document, including instructions for agreement and a 28-day lapse date for response. Unlike general meetings, voting power in written resolutions is based on share ownership, requiring over 50% for an ordinary resolution or 75% for a special resolution. This process saves time and is especially beneficial when convening a meeting is impractical.
How is the 14-day notice period calculated for general meetings, and what adjustments are required if notice is given by post or email?
The 14-day notice period includes “clear days,” meaning neither the day of notice receipt nor the meeting day count. For example, if notice is given on March 1, the earliest meeting date is March 16. If sent by post or email, notice is deemed received 48 hours after sending (s 1147(2) CA 2006), so two extra days are added, making the earliest meeting date March 18. This ensures shareholders have adequate time to prepare for the meeting.
In what cases might a poll vote be preferred over a show of hands in a shareholders’ general meeting, and who can request a poll vote?
A poll vote, where each shareholder’s votes correspond to shares owned, may be called if a show of hands doesn’t reflect shareholder equity, as those with more shares have greater voting power. A poll vote can be requested by the chair, the directors, two or more shareholders, or those representing at least 10% of voting rights (MA 44(2)). Poll votes ensure that shareholders’ voting power aligns with their financial stake, potentially changing outcomes from a show of hands.
Under what conditions can a general meeting be held on short notice, and what are the percentage requirements for private and public companies to consent to this arrangement according to CA 2006?
A general meeting can be held on short notice when a company needs a decision made urgently, making the standard 14-day notice period impractical. For short notice to be valid (s 307(5)–(6) CA 2006), a majority in number of shareholders must consent, and they must collectively hold at least 90% of the company’s voting shares for private companies. This threshold increases to 95% for public companies. Once the necessary consent is obtained, the meeting can be held immediately or at a later date, as agreed.
How can shareholders compel a company to circulate a written resolution, and what specific voting rights threshold is required?
Shareholders holding at least 5% of the company’s voting rights can require the company to circulate a written resolution to all eligible shareholders under s 292 CA 2006. The company’s articles of association may reduce this threshold below 5% but cannot increase it beyond 5% (s 292(5) CA 2006). This empowers minority shareholders to propose resolutions without relying on board initiation.
What rights do shareholders have to include additional information when requesting a circulated written resolution, and who is responsible for associated costs?
Shareholders who request the circulation of a written resolution can include a statement of up to 1,000 words addressing the resolution’s subject (s 292(3) CA 2006). This ensures that their views are shared alongside the resolution. However, these shareholders must bear the costs incurred by the company to distribute the resolution and accompanying statement, as per s 294 CA 2006
What steps must directors take when shareholders request a general meeting, and how does the CA 2006 regulate the timing of these steps?
When shareholders holding at least 5% of voting rights request a general meeting (s 303 CA 2006), the board must act promptly. Directors have 21 days from receiving the request to issue a meeting notice (s 304(1)(a) CA 2006), and the meeting itself must occur within 28 days of that notice (s 304(1)(b) CA 2006). This process caps the total time from the request to the meeting at seven weeks, preventing directors from unduly delaying shareholder-initiated meetings
What are the legal requirements for filing resolutions and other documents with Companies House, and what penalties exist for non-compliance?
Companies must file all special resolutions and specific ordinary resolutions with Companies House, as mandated by s 29 and s 30 CA 2006, to maintain transparency for third parties. Non-compliance results in fines imposed on both the company and its officers, emphasizing the critical nature of meeting filing deadlines to avoid penalization.
What are statutory books, where should they be kept, and what are the relevant forms if these records are moved?
Statutory books are key internal records, such as the register of members and directors, maintained under CA 2006. They must be stored at the company’s registered office or an approved Single Alternative Inspection Location (SAIL). Changes in record location require notification to Companies House using form AD02 (to SAIL), AD03 (from SAIL), or AD04 (to another registered office).
How long must companies keep board and general meeting minutes, and what specific documents are included in this requirement?
Companies must keep board meeting minutes (s 248 CA 2006), general meeting minutes (s 355 CA 2006), and records of any written resolutions for at least ten years at the registered office or SAIL. This extensive record-keeping ensures continuity and compliance, as it provides a formal history of the company’s decision-making processes over time.
What key roles do solicitors play in advising companies on decision-making compliance with CA 2006, particularly in relation to shareholder and board meetings?
Solicitors guide companies in filing resolutions, maintaining statutory registers, and drafting accurate minutes. They ensure clients adhere to CA 2006 requirements, especially regarding documents that must be filed with Companies House, like special resolutions. Non-compliance often incurs fines for both the company and responsible officers, highlighting the importance of legal counsel in corporate governance.
