Introduction to company procedure

Question 1

Company procedure – outline.

Answer 1

• D-t-d business carried out by directors and, where the company has a managing director, the managing director will have authority to enter into all routine commercial contracts on behalf of the company. But specific authority may be necessary from one or more directors, or authority from the shareholders.
• If correct procedures are not followed, resolutions may be invalid, unless the error is accidental. There may also be criminal sanctions, such as liability for a fine if minutes of meetings not kept in the relevant statutory books (ss 248(3) and (4) CA 2006).

Question 2

Board meetings – procedure and rules.

Answer 2

• Board resolutions can be passed by directors at BMs without great formality. Art 9 MA gives directors flexibility in regulating their meetings, providing that any director may call a BM or require the company secretary (if there is one) to do so at any time.
• Reasonable notice of a BM was necessary, and this is whatever notice is usual for directors to give (as held in Browne v La Trinidad (1887) 37 ChD 1).
• A meeting must be quorate for decisions to be valid (Art 11(2) MA requires two minimum directors).
• BMs are passed by majority vote on a show of hands. Chairperson may have a casting vote but subject to company’s Articles.
• A resolution will need referral to shareholders:
  – where matter is outside the powers of the directors and must be approved by a resolution of the shareholders (e.g. amendments to a company’s articles of association, s 21 CA 2006);
  – where a matter is within the powers of directors but requires the prior approval of the shareholders before the directors can be authorised to act (e.g. making of a loan to a director of the company under s 197 CA 2006).
• After a GM has taken place ^, a second BM will be necessary to enable the directors to implement the matter on which the shareholders have voted.
• Post-meeting matters (PMM) – carried out by the company secretary (if one) or a director (if not) (e.g. relevant documents to be filed at Companies house; internal records such as registers and minute books brought up-to-date).

Question 3

General Meetings – procedure and rules.

Answer 3

• The Board is responsible to convene GMs and decide when it should take place.
• S 307 CA 2006 prescribes minimum notice periods:
  – for private companies, 14 clear days’ notice (s 307(1) (notice referring to a period of time).
• The Board must inform the shareholders of when and where the gM should take place by giving notice (notice in this instance is a document inviting shareholders to attend the GM in accordance with provisions of CA 2006). Directors must approve the form of notice of the GM and authorise its circulation to shareholders.
• Quorum for a GM is generally two shareholders (s 318(2) CA 2006) or one for single-member companies (s 318(1)).

Question 4

What are the two different meanings of notice in the context of a GM?

Answer 4

1. a document sent by the directors to the shareholders, announcing that a GM will take place.
2. a period of time which elapses between the directors’ act of calling a GM (by circulating 1. to the shareholders) and the GM itself taking place.

Question 5

How can GMs be called at short notice?

Answer 5

• GMs may be called on less than the usual amount of short notice if it is agreed by a majority in number of members who together hold shares with a nominal value of not less than 90% of the total nominal value of shares which give the right to attend and vote at the GM (S 307(5) CA 2006).
• This provision may be increased up to 95% by provision in company’s articles of association but there is no such provision in MA.

Question 6

Outline the procedure for written resolutions in private companies.

Answer 6

BM resolutions:
* Art 8(2) MA allows directors to take decisions in the form of a directors’ written resolution provided the prescribed procedure is followed. Uncommon in practice.
Ordinary and special resolutions:
* S 281 CA 2006 only private companies may pass a shareholders’ resolution by way of written resolution.
* S 282 CA 2006 states that a written ordinary resolution can be passed by a simple majority of the total voting rights of eligible members.
* S 284 CA 2006 where a company has a share capital, every member has one vote in respect of each share held by him when voting on a written resolution.
* S 288 CA 2006 provides that resolutions to remove a director or auditor from office may not be passed by way of written resolutions.

Question 7

Post-meeting documentation rules

Answer 7

• Copies of all resolutions affecting the company’s constitution must be sent to the Registrar of Companies within 15 days of their being passed.
• All special resolutions must be filed at Companies House, together with amended articles. This is because a special resolution is required to amend a company’s articles (s 21(1) CA 2006).
• All special resolutions must be filed as they form part of a company’s constitution (ss 17(b) and 29(1)(a) CA 2006), as do a few particular ordinary resolutions specified in the CA 2006.
• Copies of amended Articles must be filed (s 26(1)) together with various company forms (see for example s 87(1).
• Directors are responsible for updating the statutory books, e.g. registers of members and directors, and BM and GM minute books.