Company Meetings And Decision Making Flashcards
What are the 2 ways companies can make decisions?
- By passing resolutions at a meeting (or in writing for private companies)
- Unanimous assent
What is a resolution?
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
Explain the difference in ways that votes are calculated at a meeting and by using the WR procedure
- 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)
- WR: calculated based on the voting rights of the total number of members eligible to vote not just those who actually do vote
Explain the difference between an ordinary resolution, a special resolution, and a resolution
- Ordinary resolution = resolution that is passed by a simple majority (50%)
- Special resolution = resolution that is passed by a majority of not less than 75%
- Resolution = classed as an ordinary resolution requiring a simple majority unless the articles specify a higher majority or unanimity
What does the unanimous assent rule state?
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
What types of decisions can and cannot be taken by unanimous assent?
- 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
- 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)
What is the the unanimous assent rule also known as?
The Duomatic Principle
When can a WR not be used? (2)
To remove a director or auditor before their period of office has expired (s.288 CA2006)
What is the process of passing a WR?
- A WR may be proposed by the directors or by members who hold 5% or the total voting rights (s.288(3))
- 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))
- 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))
- Or will lapse after 28 days if no date was specified (s.297(1))
Who can call a general meeting? (3)
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
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?
- 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:
- Time, date, and place of meeting
- 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 - Statement informing members’ of their right to appoint a proxy
- If traded company = details of a website containing specified information - company’s shares and voting rights
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?
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:
- To remove a director
- To appoint someone in place of the director removed at the meeting
- To remove an auditor
- To appoint a new auditor
Company meetings: What is a quorum? Who is a qualifying person? What constitutes a quorum? What are the consequences of an inquorate meeting?
- = 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:
- Member of the company
- Corporate representative
- 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
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?
• A member’s ability to vote can be taken away or restricted by:
- Their shares having no voting rights
- The articles
- 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
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?
• 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
What is a corporate representative?
What powers do they have?
What is an advantage over a proxy?
- 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)
Who must hold an AGM?
When must it be held?
What business is typically dealt with? (5)
• 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:
- Laying the accounts and a resolution to approve them
- Approving the remuneration report
- Approving appointment / re-appointment of directors and auditor
- Declaration of a final dividend
- Authorise directors to engage in certain acts
Who can adjourn a general meeting?
When must this happen? (5)
What will then happen?
- The chair has the power to adjourn a meeting
- Art.41 MA for private; Art.33 MA for plc = the chair:
- Must adjourn if meeting is inquorate within half an hour of start time
- Must adjourn if starts quorate but later becomes inquorate
- Must adjourn a general meeting if directed to do so by the general meeting
- May adjourn if meeting consents to an adjournment
- May adjourn if necessary for safety
Chair will set the date and time of the adjourned meeting = regarded as continuation of original meeting
What records must be kept for a general meeting? (3)
How long must they be kept for and who can inspect them?
• Records that must be kept:
- Minutes of all proceedings of general meetings
- Copies of all resolutions of members passed other than at GM (e.g. WRs)
- 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
What is a class meeting?
When is one held?
How is it different from a general meeting? (3)
Can other members attend?
• = 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:
- Members and the courts do not have the power to call a class meeting
- Where the class meeting is to decide on a variation of class rights, the quorum may differ
- 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
What are the 2 ways to boose member engagement?
- ELECTRONIC MEETINGS
• e.g. online or over the phone for convivence - INSTITUTIONAL INVESTORS
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?
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
