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Corporate Law > Lecture 4-Member meetings and restrictions on decision making > Flashcards

Lecture 4-Member meetings and restrictions on decision making Flashcards

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1
Q

What are the rules for public and proprietary companies and the AGMs? (annual general meetings)

A
  • section 250N
  • all public companies must hold an AGM
  • proprietary don’t have to, but can
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2
Q

What are all other meetings except the AGM called?

A

-extraordinary general meetings (EGM)

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3
Q

Where are the rules for calling the member meetings found?

A
  • internal governance rules (RRs and constitution)

- the Corp Act (2001)

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4
Q

What are the rules for the EGMs?

A

-similar to an AGM,

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5
Q

What do companies try to do with member’s meetings?

A

-only have it once a year, as little as possible as they are very expensive

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6
Q

Who can call a member’s meeting?

A
  1. usually the board
  2. can be single director (RR s249C)
  3. in a listed company by a single director s 249 CA
  4. the court
  5. members 249D, 249F
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7
Q

How can court call a member’s meeting?

A
  • s249G
  • on application of a director or a member if it is otherwise impracticable (e.g. if RR s249C is replaced and single director cannot call a meeting, or member is suspecting something amiss and doesn’t qualify for 249D, or 249F)
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8
Q

What does s249 deal with in general?

A

-member’s meetings

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9
Q

What does s249C do?

A
  • RR, a single director can call a meeting of the company’s members
  • functions as a protection of a whistleblowers
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10
Q

What does s249CA do?

A

-in listed companies a single director may call a meeting of the company’s members

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11
Q

What does s249D do?

A
  • directors of a company must call a member’s meeting on the request of a member if they have= 5% shares or 100+ members apply
  • this is paid by the company and the normal 21 days notice and the meeting must be held within 2 months applies
  • slower process
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12
Q

What does s249G do?

A
  • the court can order a member’s meeting
  • on application of a director or a member if it is otherwise impracticable (e.g. if RR s249C is replaced and single director cannot call a meeting, or member is suspecting something amiss and doesn’t qualify for 249D, or 249F)
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13
Q

What does s250N do?

A

-public companies must call an AGM

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14
Q

When are directors exempt from calling a member’s meeting upon request?

A

-when the purpose is improper, therefore something the members don’t have the power over
(NRMA v Parker)

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15
Q

What does s249F do?

A
  • members with at least 5% of shares can call a meeting this way
  • allows members to call a meeting quickly but the members pay for it, if members want sth done quickly= then this is to use
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16
Q

What are the options for members to call a member’s meeting?

A
  • s249D= if you have 5% or 100+ members and proper purpose
  • s249E=the members who applied under s249D can call a meeting themselves if the directors didn’t do it within 21 days(must be more than 50% of the votes of those who applied)
  • s249F= when you have 5% shares you can do it, faster version, but have to pay the expenses!
  • 249G= can go to the court!
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17
Q

What does s249E do?

A

-members with more than 50% of the shares of those who applied with the directors to call a meeting under s249D can call a meeting if the directors have not done so within 21 days(only a ½ of those making the claim not the entire company)

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18
Q

What are the facts of NRMS v Parker?

A

-roadside assistance (NRMA), went from mutual membership company to a proper company
-directors don’t have to do it if it is improper= union saying we protest etc, as that is not a member right
-your resolution must be sth like removal of directors (even if in reality it isn’t really)
proper purpose= you know what shareholders can vote on in shareholder’s meetings,

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19
Q

What is a proper purpose?

A
  • to call a meeting must be proper purpose, so the resolution must be within the power of the members (e.g. removing directors etc.)
  • if not then the directors do not have to call the meeting
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20
Q

What does s249Q do?

A
  • member’s meetings must be convened for a proper purpose
  • motive irrelevant
  • NRMA v Scandrett
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21
Q

What is allowed to be on a member’s agenda?

A
  • only matters that have been included in the notice of the meeting except for the matters stated in s250R (if it is an AGM) so these are= financial records, election of directors = as they always happen don’t have to put in the notice
  • to protect those who do not turn up
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22
Q

What does s250R do?

A
  • lists matters that do not have to be included in the AGM notice as they are so common it is superfluous
  • financial reports, election of directors…
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23
Q

Who sets the agenda for the meetings?

A
  • the directors

- members can request the inclusion of resolutions to be put to the members at the next meeting s249N

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24
Q

What does s249N?

A

-members can request the inclusion of resolutions to be put to the members at the next meeting
(5% of shares or 100+ members)

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25
Q

What do s249O and 249P do?

A

-company must send out notice of members resolutions and statements

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26
Q

How long before the members meeting must the notice be given out?

A
  • general rule: 21 days s249H (also notice of removing or appointing directors)
  • listed public companies: 28 days s249HA
  • other length of time can be specified in the Co’s constitution
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27
Q

Who must the notice of the members meeting be given to?

A

-directors, members, auditors

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28
Q

How can you have members meeting at a shorter notice?

A
  • meeting at shorter notice= if all the members agree to it

- 100% must agree if AGM, 95% must agree for any other general meeting

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29
Q

What does the s249L do?

A
  • specifies what the notice of members meetings must contain

- s249 1 c-must have the special resolutions in the notice

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30
Q

How must the notice of members meeting be spelled out?

A
  • Must “fully and fairly inform and instruct the shareholder about the matter on which he or she will have to vote”: Devereaux Holdings
  • Need to balance the information presented, to make it accessible; must not be misleading or deceptive (even if this is unintentional)
  • this rule is so the board doesn’t bury the intention and truth about what they want to do in difficult language etc.
  • S249L 3
31
Q

What is the quorum requirement for the members’ meetings?

A
  • S249T RR

- 2 members and must be present throughout the meeting

32
Q

What does s249T do?

A
  • quorum requirement for members meeting
  • RR
  • 2 members needed for the meeting to be valid
33
Q

What does s249S do?

A
  • use of technology at members meetings
  • A company may hold a meeting of its members at 2 or more venues using any technology that gives the members as a whole a reasonable opportunity to participate.
34
Q

What does s249X do?

A
  • RR for pty ltds only, compulsory for public and public listed Cos
  • proxies, can have a proxy at a members meeting
  • also body corporate can be represented like this (must be by a human)
35
Q

Who elects the chair of the members’ meeting?

A
  • the directors

- RR s249U

36
Q

What does s249U do?

A
  • RR

- directors elect the chair of a members’ meeting

37
Q

What does s250E (3) do?

A

-casting vote of the chair

38
Q

Is there a casting vote with a special resolution?

A
  • no

- either get the 75% or not

39
Q

What does s254 A (2) do?

A

-company can issue preference shares = only if the rights in the constitution or have been approved by special resolution

40
Q

What does s249Y do?

A

-rules on how to vote by proxy at members’ meetings

41
Q

How does one vote at members’ meetings?

A
  • s250J and s250K
  • show of hands normally and if demanded then a poll
  • it is because poll is really expensive and difficult to organise
42
Q

What does s250J do?

A
  • how is voting carried out at members’ meetings (show of hands unless a poll is demanded)
  • RR
43
Q

What does s250K do?

A

-matters on which a poll can be demanded at members’ meetings

44
Q

How can a decision be made in single member companies?

A
  • resolution is passed by the member recording and signing it: s 249B
  • usually proprietary co but can be public too(have to have 3 directors but can have only 1 shareholder)
45
Q

What does s249B do?

A
  • 1 member companies resolutions

- passed by the member recording it and signing it

46
Q

What is a flying minute and who can use it?

A
  • Proprietary companies may use “flying minutes”, in which all members entitled to vote must sign a document agreeing to the resolution: s 249A
  • so do not have to hold a meeting to pass a resolution
47
Q

What does s249A do?

A
  • Proprietary companies may use “flying minutes”, in which all members entitled to vote must sign a document agreeing to the resolution
  • so do not have to hold a meeting to pass a resolution
48
Q

What does s1322 do generally?

A
  • outcome of meeting may be valid despite some irregularity (i.e. failure to follow required procedure)
  • both members’ and director’s meeting
  • one shareholder doesn’t get notice eg. minor stuff up would you have to do the meeting again? -no
  • idea of some proceeding )like quorum =149 but was supposed to be 150) they don’t pin down what procedure it is
49
Q

What does s1322 (1) do?

A

-sets out the section, says that it applies to all legal proceedings under the act and lists some things that are included in the irregularities that are accepted

50
Q

What does invalidated mean?

A

-doesn’t mean it’s valid, it can be invalid because of another reason, but not invalid because of procedural irregularity

51
Q

What does s1322 (2) do?

A
  • proceedings is not invalidated because of procedural irregularities unless the court decides that the irregularity has caused substantial injustice and it cannot be remedied by the court
  • includes absence of quorum, defect of notice or time
  • Onus on the person arguing invalidity
52
Q

Give an example of an irregularity under s1322 (2) that would invalidate the meeting?

A

-election of director, one shareholder didn’t get notice, if court thinks there was injustice= then the meeting cannot stand, it will only invalidate if substantial injustice, like if 55% shareholder= the court says= unjust! the meeting has to go again

53
Q

For s1322 (2) does intent matter?

A

-doesn’t say about deliberateness, so even if irregularity deliberate then still stands and doesn’t matter

54
Q

What does s1322 (3) do?

A
  • accidental omission of notice doesn’t make the proceeding of the meeting void
55
Q

What do s1322 (3) A and AA do?

A

-3AA = person’s inability to access the notice

3A- the technical meetings (like via skype) if breaks down for a bit= fine

56
Q

What is the case with onus with s1322 (2) and (3)?

A
  • automatically validated unless the court says no

- the onus is on the person trying to prove invalidity

57
Q

What do s1322 (4) and (6) talk about in terms of validity?

A
  • talk about things that start about being invalid

- the onus is on the person arguing validity

58
Q

What are the facts of Whinestock v Beck and what sections would they use?

A
  • family company, one director was permitted to appoint directors, but the first director wasn’t properly in the position, never bothered with re-election, as director he would appoint another directors, his lack of procedure = he didn’t actually have the power to appoint anyone
  • this could be validated under the 1322 (6)
59
Q

What does s1322(6) do?

A
  • court can declare that an act, matter, or thing, or a proceeding, is not invalid so long as:
  • it is procedural in nature
  • the person acted honestly
  • it is just and equitable to make the order
  • no substantial injustice
  • court can validated thing upon request, like if you forget to register, re-elect
  • can only be about procedural thing, also the mistake must be that you acted in good faith, no improper!-no substantial injustice!
60
Q

What are the restrictions on member decision making?

A
  • may exercise voting rights in their own self-interest (even if they are also directors).
  • But there are limits:
  • to stop unfair exploitation of minority shareholders by majority
  • Because it is not always possible for minority shareholders to sell
61
Q

Are directors that are also members restricted in how they can behave as members?

A
  • no
  • if one person both director and shareholder= if acting as diretcor must act like the wonderful being etc
  • if acting as shareholder can be greedy etc.
  • depends on what powers they are exercising
62
Q

What is equitable limitation?

A

-directors have positive duty= have to be good
-shareholders not a positive duty, only cannot be evil
-The rule applies slightly differently for:
! cases involving constitutional amendment
! cases not involving constitutional amendment

63
Q

How does the law deal with if you have a company where the directors are majority shareholders and they’ve done something wrong and a minority shareholder wants the company to decide to sue the directors?

A
  • if they breach the director’s duty= then the members can have action brought against them and the majority shareholders cannot forgive this breach and must agree with suing
  • Bialla v Mallina Holdings
64
Q

What are the two cases that demonstrate the equitable limitation in cases other than amendment to the constitution?

A

-Majority unwilling to sue where they are the alleged wrongdoers: Biala v Mallina Holdings

-Taking the company’s property where the members vote not to sue outsider.
! Menier v Hooper’s Telegraph Works

65
Q

How does equitable limitation affect s136 (2)?

A
  • even where the 136 (2) is complied with amendment may be invalid due to equitable limitation
  • when majority vote to change the constitution then you have to protect the minority!
  • even if you manage to get the 75% then the court may not allow the change if it is hurting the minority
  • important case is Gambotto
  • this only applies to changing the constitution not general shareholder votes
  • applies in when the company puts in an expropriation clause= allows the company to take the shares away
66
Q

What are the concepts dealt with in Gambotto?

A

-amendments that expropriate shares ! other -amendments that give rise to conflict

67
Q

What are the facts of Gambotto?

A
  • company WCP, 99.7% shares owned by IEL (company)
  • Mr Gambotto owns 0.09% shares
  • Other= 0.21%
  • IEL wants 100% of WCP, they put it to a resolutions and votes yes, (only others voted), IEL didn’t vote, Gambotto didn’t (the vote is always of those present)
  • Gambotto put it to court and won
68
Q

What amendments does Gambotto establishes test for? (2 types)

A

–Category 1 amendments: Amendments to allow expropriation of minority’s shares; or valuable proprietary rights attached to their
shares (e.g. voting or dividend rights)
(based on the facts of the case)

–Category 2 amendments: Other amendments involving a conflict of interest
(comments)

69
Q

What must be satisfied to make category 1 amendments valid?

A

-only valid if: proper purpose, and no oppression of minority shareholders

70
Q

What is proper purpose in category 1 amendments?

A

proper purpose= not enough to save money, only if you are saving the company to save them from harm (like if suddenly only aus citizens could own it= then can take it away friom non citizens)
-not just to make it easier

  • Proper purpose test is very restrictive – advancing company’s commercial interests is not enough
71
Q

What is the proper purpose recognized by the court (Category 1 amendments)?

A
  • only “proper purpose” recognized by the court is to prevent harm being done to company, eg:
  • minority s/h is competing with company
  • removal of member is necessary to allow company to continue in present business
72
Q

If you want to take away members’ shares what do you have to do procedurally? (price etc.)

A
  • must make sure there is no opression
    1. procedural fairness – full disclosure and independent valuation
    2. substantive fairness – price is fair (may not always be market value)
  • they are fully informed, shares receive independent evaluation of the shares
  • the price must be fair!
  • the price must be calculated in a fair way
  • even paying more than market
73
Q

Where does Gambotto not apply?

A
  • where statutory reduction of capital

eg. Winpar Holdings v Goldfields Kalgoorlie

74
Q

When are category 2 amendments valid?

A
  • done for a company purpose, and ! no oppression of minority shareholders
  • when a change in constitution but not expatriation clauses
  • fine if for proper company purpose
  • variation of class procedure is category 2 amendment

Corporate Law (5 decks)

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