General Meeting and Shareholder Powers Flashcards
How does the Companies Act 2006 define shareholders?
Shareholders are those who appear on the register of members (s112).
In what four ways may you acquire shares?
- As a subscriber
- As part of a share issue
- By way of transfer
- By transmission ie following death or bankruptcy of a member.
Can a company own shares in itself according to the common law?
No (Trevor v Whitworth). This means a company cannot repurchase or transfer shares in itself to its subsidiaries.
How many general meetings must a company have each year?
Public companies are required to have an annual general meeting (s336), but private companies are not required to have a meeting.
How many days notice is required to call a general meeting?
14 days (s307)
How many days notice is required to call an AGM?
21 days notice (s307)
Who must call a general meeting or annual general meeting?
The directors (ss303 and 302).
Within what time-frame must the AGM be called?
Six months before the end of the financial year (s336).
Who can force a general meeting to be called if it hasn’t been called?
5% shareholders (s305) unless the meeting is not the right arena for the decision (Rose v McGivern). The court can also call a general meeting (s306).
If the notice for a general meeting is given with less than 14 days notice how many of the shareholders are required to be present at the meeting?
95% if the company is public and 90% if private (s307).
What is the default procedure for voting at general meetings?
Show of hands (s284(2) CA 2006 and Arts 42-43 Model Articles).
What is the alternative procedure for voting at general meetings?
Poll (s284(3)).
What difference is there between counting votes by hands and by poll?
By hand each person has one vote. By poll each share counts for one vote (s284(2) and (3)).
If a member has the ability to cast multiple votes at a general meeting must he vote in the same way for all of them?
No, he may split his votes in multiple ways (s322).
Is it possible to enhance your voting rights as a member so that one share could be the equivalent to three shares for example?
Yes, the court upheld a provision of this kind that was in the company’s articles. The provision gave the director who was subject to a resolution asking for his removal x3 the amount of shares he actually owned (Bushell v Faith).
Is it possible to vote by proxy?
Yes, and your proxy can be anyone (s324 confirmed in Re Cousins International Brick Co Ltd).
Is it possible for members to demand a vote by poll?
Yes, if they meet the minimum requirements (s321(2)).
What is the result if a meeting is called by a person who does not have authority to call the meeting?
Any decision taken is void unless it is clear the same decision would have been taken at a valid meeting (Browne v La Trinidad).
What is the default resolution if the articles does not specify?
Ordinary resolution (s281(3)).
Which decisions require special resolutions according to the CA 2006?
- Amendments to articles (s21(1));
- Disapplying members’ pre-emption rights when shares are issued (ss569-571);
- Reducing share capital (s641);
- Redeeming the company’s own shares (s716(1));
- Winding-up the company voluntarily (s84(1) IA 1986);
- Variation of class rights (s633).
What percentages are required to pass ordinary resolutions and special resolutions?
50%+1 to pass an ordinary resolution (s282).
75% to pass a special resolution (s283).
Is it possible to amend the percentages required to pass resolutions?
Yes, but only upwards. It is not possible, for instance, to reduce the percentage of a special resolution to anything below 75%.
What do we understand by a written resolution?
It is a resolution that is circulated to the members (ss290-295) and a decision is passed without a meeting.
Which type of companies are able to take decisions by written resolution?
Only private companies can take decisions this way (s288).
Which decisions cannot be taken by written resolution?
Removal of director or auditor (s288(2)).
What majority is required to pass a written resolution? How does this differ to resolutions passed at a meeting?
Simple majority of all eligible members are required for written resolutions, while simple majorities of members present at the meeting are required for ordinary resolutions at meetings.
Is it possible to hold a meeting with just one person present?
Yes, if the company is limited and only has one shareholder (s318 c/f Sharp v Dawes).
Is it necessary to be in the same physical location to be in attendance?
No (Byng v London Life Association Ltd).
Who has the power to propose resolutions?
- Directors;
2. Sufficiently large group of members ie 5% or at least 100 members with £100 paid-up value each (ss338-338A).
Is it possible to pass resolutions informally?
Yes, as long as the decision is unanimous (s281(4)(a) confirming Re Duomatic). Also see Re D’Jan.
Is it possible to pass amendments to shareholder agreements informally?
Yes, the Duomatic principle applies (Euro Broker Holdings v Monecor).
Is it possible to pass a resolution informally if not all members have explicitly agreed?
Yes, if the resolution only requires members to acquiesce and a member does not explicitly disagree, it will be taken that he has assented (Re Bailey, Hay and Co Ltd).
Does the Duomatic principle apply to special and extraordinary resolutions?
Yes (Cane v Jones).
Does the Duomatic principle apply to decisions required by a group or class of shareholders?
Yes (Re Torvale Group Ltd).
Is it possible to ratify breaches of directors’ duties by the Duomatic principle?
Yes (Progress Property Co Ltd v Moore).
Who must be notified of any resolutions passed?
The Registrar at Companies House (s30) within 15 days of their being passed.
What limitations are there on a members’ voting right?
- Shareholder agreements (Puddephatt v Leith)
- Court may direct in exceptional circumstances (Standard Chartered Bank Ltd v Walker)
- Court may set aside decision of the majority if it is oppressive against the minority (Clemens v Clemens Bros)
- Shareholders must act bona fides when altering the articles (Allen v Gold Reefs of West Africa Ltd confirmed in Citco Banking Corpn NV v Pusser’s Ltd) ie reasonable men could come to the decision of the shareholders (Shuttleworth v Cox), and amendments made which disadvantage the minority but which are passed bona fides cannot be overturned (Sidebottom v Kershaw, Leese & Co).
What statutory powers do shareholders have?
- Appointment/removal of directors (s168);
- Amending articles (s21);
- Winding-up (s84(1)(b) IA 1986);
- Reduce share capital (s641);
- Direct the directors in exceptional circumstances (aka ‘residual power’) (Art 4 Model Articles);
- Petition the court (see Shareholder Protection) (ss260 and 994 and s122(1)(g) IA 1986).
In what circumstances may the shareholders exercise their residual powers under Art 4 of the Model Articles to direct the directors?
Alexander Ward & Co Ltd v Samyang Navigation Co Ltd gives three situations:
- If it is not possible for the directors to act (Foster v Foster);
- If there is dead-lock in the board (Barron v Potter);
- If the board has ceased to exist or fallen below the required number (Barron v Potter)
Does the shareholder have a duty to vote?
No (Kuwait Asia Bank EC v National Mutual Life Nominees Ltd).
Does the shareholder have any duties?
Apparently not according to Lord Maugham in Carruth v ICI Ltd but shareholders must still vote bona fides for the company (Allen v Gold Reefs).
What is the authority that states it is not possible for members to direct directors by passing an ordinary resolution?
Automatic Self-Cleansing Filter Syndicate Co Ltd v Cuninghame.
What majority is required to remove a director?
Simple majority.
Do shareholders have the power to sue in the name of the company?
Generally the power is reserved for the board (Breckland Group Holdings Ltd v London & Suffolk Properties Ltd) as the proper claimant is the company (Foss v Harbottle), but if the wrongdoers are the directors then the rule in Foss v Harbottle permits the majority to sue, and if the majority of shares is owned by the directors the minority may bring a derivative action.
