Company Meetings And Decision Making

Question 1

What are the 2 ways companies can make decisions?

Answer 1

1. By passing resolutions at a meeting (or in writing for private companies)
2. Unanimous assent

Question 2

What is a resolution?

Answer 2

A vote under which the company resolves itself to a particular course of action if a certain majority of those voting vote in favour.

A legally binding decision

Question 3

Explain the difference in ways that votes are calculated at a meeting and by using the WR procedure

Answer 3

1. Held at a meeting: requisite majority is calculated based on the votes cast by those eligible to vote (I.e. calculated based only on those who actually vote)
2. WR: calculated based on the voting rights of the total number of members eligible to vote not just those who actually do vote

Question 4

Explain the difference between an ordinary resolution, a special resolution, and a resolution

Answer 4

1. Ordinary resolution = resolution that is passed by a simple majority (50%)
2. Special resolution = resolution that is passed by a majority of not less than 75%
3. Resolution = classed as an ordinary resolution requiring a simple majority unless the articles specify a higher majority or unanimity

Question 5

What does the unanimous assent rule state?

Answer 5

Rule provides that if all members agree on a matter, the decision will be validly made even if no meeting takes place and no resolution is passed

Question 6

What types of decisions can and cannot be taken by unanimous assent?

Answer 6

1. Can only be used in cases where the members who assented had appropriate or full knowledge of the matter in question and all members gave their actual assent
2. Won’t apply where statute requires a decision be taken at a meeting or used to make a decision that could not have been made by a resolution (e.g. to declare and unlawful dividend)

Question 7

What is the the unanimous assent rule also known as?

Answer 7

The Duomatic Principle

Question 8

When can a WR not be used? (2)

Answer 8

To remove a director or auditor before their period of office has expired (s.288 CA2006)

Question 9

What is the process of passing a WR?

Answer 9

1. A WR may be proposed by the directors or by members who hold 5% or the total voting rights (s.288(3))
2. A copy of the proposed resolution will be sent to every member eligible to vote along with guidance on how to signify agreement & the date it must be passed by if it is not to lapse (s.291(4) & s.293(4))
3. Requires same majority as a resolution tabled at a meeting & once reached the resolution passes and has effect as if passed at a meeting (s.288(5))
4. Or will lapse after 28 days if no date was specified (s.297(1))

Question 10

Who can call a general meeting? (3)

Answer 10

1.• S.302 CA2006 = directors can call a GM
2.• s.303 CA2006 = members representing 5% of the company’s paid-up share capital (or 5% of voting rights if no share capital)
• Directors must call a meeting within 21 days of request and hold it within 28 days of notice sent out
• If fail = members can call a meeting themselves at the company’s expense
3. • s.306 CA2006 = court can call a general meeting if it is impracticable to call or conduct a meeting in the manner prescribed by the company’s articles or the CA2006

Question 11

How must notice of a general meeting be given and who to?
What form can it take?
What are the 4 things notice must include?

Answer 11

• s.308 CA2006 = notice may be in hard copy, electronic form, or via a website
• S.310 CA2006 = sufficient notice must be given to every member, director, and company auditor
• Failure = meeting invalid, unless failure was accidental

• Notice must include:

1. Time, date, and place of meeting
2. Nature of business to be dealt with
   a. If removing a director = must also include representations made by the director
   b. If an AGM = must state meeting is an AGM
   c. If special resolution = resolution text must be included and state the intention
3. Statement informing members’ of their right to appoint a proxy
4. If traded company = details of a website containing specified information - company’s shares and voting rights

Question 12

What is the length of notice required for a general meeting and an AGM?
What are the rules for traded companies?
What are the 4 resolutions that require 28 days’ notice?

Answer 12

Length of notice:
• General rule = at least 14 clear days
• AGM = at least 21 clear days
• If traded company = at least 21 clear days
○ Reduced to 14 if meeting is not an AGM, members can vote electronically, or members pass a special resolution to shorten
• Can shorten length of notice of GM if 90% of members agree (95% for a public company)
• AGM = all members must agree

• Resolutions requiring 28 days’ notice:

1. To remove a director
2. To appoint someone in place of the director removed at the meeting
3. To remove an auditor
4. To appoint a new auditor

Question 13

Company meetings:
What is a quorum?
Who is a qualifying person?
What constitutes a quorum?
What are the consequences of an inquorate meeting?

Answer 13

• = the minimum number of ‘qualifying persons’ that must be present for a board meeting to be able to transact business and validly make decisions
• s.318(3) CA2006 = For general meetings, a qualifying person = an individual who is a:

1. Member of the company
2. Corporate representative
3. Proxy

S.318 CA2006 = quorum:
• Limited company has 1 members = quorum = 1
In all other cases it will be unless those 2 present are 2 corporate representative or 2 proxies of the same person

• An inquorate meeting cannot conduct any business, unless the articles provide otherwise
• A meeting that starts with a quorum but then becomes inquorate must stop unless the articles provide otherwise

Question 14

How can members’ ability to vote at a general meeting be restricted? (3)
What are the 2 ways to pass a resolution at a meeting and how do each work?

Answer 14

• A member’s ability to vote can be taken away or restricted by:

1. Their shares having no voting rights
2. The articles
3. Statute

• S.248 CA2006 = 2 ways to pass resolutions at a meeting:
1. By show of hands
○ Each member has 1 vote unless articles provide otherwise
○ Art.42 MA for private; Art.34 MA for Plc = resolutions are to be taken on a show of hands unless a poll is demanded in accordance with the articles
2. By poll
○ Each member has 1 vote per share, unless the company has no share capital (each member has 1 vote)
○ Art.44 MA for private; Art.36 MA for Plc = a poll can be demanded by the chair, the directors, 2 or more persons with the right to vote, or a person(s) representing 1/10 of the total voting rights
○ Don’t have to use all votes to vote in the same way

Question 15

What is a proxy?
Who is entitled to appoint one?
How is a proxy appointed?
How must the proxy vote?
How is a proxy's appointment terminated?

Answer 15

• Proxy = someone a member has appointed to exercise all or any of their rights to attend, speak, and vote at a meeting of the company

• S.324 CA2006 = a member is entitled to appoint a proxy
• This right must be included in the notice of the meeting that is sent out to the members
• Members are free to choose who acts as their proxy
• MA require a proxy notice be filed with the company to validly appoint a proxy
• S.327 CA2006 = proxy attending a meeting of a traded company must be appointed in writing
• Proxy must vote in accordance with the instructions given by the member who appointment them
• If no instructions = may vote as they wish

• Appointment can be terminated by the member who appointed them

Question 16

What is a corporate representative?
What powers do they have?
What is an advantage over a proxy?

Answer 16

• S.323 CA2006 = a person who has been authorised by a resolution of the directors of a company (A) to represent A at a meeting of another company (B) in which A is a member
• They can exercise on behalf of A the same powers as A could if A were an individual member of B
• Advantage = representative can simply turn up to the meeting and there are no procedural rules to comply with (as there is when appointing a proxy)

Question 17

Who must hold an AGM?
When must it be held?
What business is typically dealt with? (5)

Answer 17

• Private company does not need to hold an AGM but can if so wishes (Unless articles state must hold)

• S.336 CA2006:
• Traded private companies must hold an AGM every year within a 9 month period following its ARD
• Public company must hold an AGM every year within a 6 month period following its ARD

• Business typically dealt with:

1. Laying the accounts and a resolution to approve them
2. Approving the remuneration report
3. Approving appointment / re-appointment of directors and auditor
4. Declaration of a final dividend
5. Authorise directors to engage in certain acts

Question 18

Who can adjourn a general meeting?
When must this happen? (5)
What will then happen?

Answer 18

• The chair has the power to adjourn a meeting
• Art.41 MA for private; Art.33 MA for plc = the chair:

1. Must adjourn if meeting is inquorate within half an hour of start time
2. Must adjourn if starts quorate but later becomes inquorate
3. Must adjourn a general meeting if directed to do so by the general meeting
4. May adjourn if meeting consents to an adjournment
5. May adjourn if necessary for safety

Chair will set the date and time of the adjourned meeting = regarded as continuation of original meeting

Question 19

What records must be kept for a general meeting? (3)

How long must they be kept for and who can inspect them?

Answer 19

• Records that must be kept:

1. Minutes of all proceedings of general meetings
2. Copies of all resolutions of members passed other than at GM (e.g. WRs)
3. Details of decisions taken by a sole member

• S.355 CA2006 = must be kept by the company for at least 10 years
• S.358 CA2006 = any member can inspect free of charge

Question 20

What is a class meeting?
When is one held?
How is it different from a general meeting? (3)
Can other members attend?

Answer 20

• = a meeting where only 1 class of member is entitled to attend and not all the members of a company

• Held when a decision is taken only affecting a particular class of rights
• e.g., a decision to vary the class rights

• S.334 and 335 CA2006 = Differs from a general meeting because:

1. Members and the courts do not have the power to call a class meeting
2. Where the class meeting is to decide on a variation of class rights, the quorum may differ
3. Any holder of shares of the class in question can demand a poll

• Other members from a different class can attend the class meeting if no objection is raised

Question 21

What are the 2 ways to boose member engagement?

Answer 21

1. ELECTRONIC MEETINGS
   • e.g. online or over the phone for convivence
2. INSTITUTIONAL INVESTORS

Question 22

Why were institutional investors criticised?
What did the FCA do to combat this?
How must companies apply the principles and provisions?
What are the 2 tiers?

Answer 22

Criticised by the Walker Report =lack of engagement with companies and not active enough in holding companies to account

• FRC published UK Stewardship Code 2010 to combat this
• Updated in 2012 and new code issued in 2020 to align with 2018 UK CG Code structure
• 2020 UK Stewardship Code consists of a series of principles and provisions
• Signatories to the 2020 code must apply the principles and explain how they have done so
• Principles = apply and explain approach
• Provisions = comply or explain = expected to comply and explain how they have done so, or explain why they haven’t and disclose their alternative approach
• FRC monitors signatories’ compliance and assigns them to Tier 1 or 2
• Tier 1 = signatories provide good quality and transparent descriptions, or explanations
• Tier 2 = report less transparently, or do not provide explanations where they depart from provisions of the Code