Lecture 4-Member meetings and restrictions on decision making Flashcards
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
2
Q
What are all other meetings except the AGM called?
A
-extraordinary general meetings (EGM)
3
Q
Where are the rules for calling the member meetings found?
A
- internal governance rules (RRs and constitution)
- the Corp Act (2001)
4
Q
What are the rules for the EGMs?
A
-similar to an AGM,
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
6
Q
Who can call a member’s meeting?
A
- usually the board
- can be single director (RR s249C)
- in a listed company by a single director s 249 CA
- the court
- members 249D, 249F
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)
8
Q
What does s249 deal with in general?
A
-member’s meetings
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
10
Q
What does s249CA do?
A
-in listed companies a single director may call a meeting of the company’s members
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
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)
13
Q
What does s250N do?
A
-public companies must call an AGM
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)
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
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!
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)
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,
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
20
Q
What does s249Q do?
A
- member’s meetings must be convened for a proper purpose
- motive irrelevant
- NRMA v Scandrett
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
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…
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
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)
25
What do s249O and 249P do?
-company must send out notice of members resolutions and statements
26
How long before the members meeting must the notice be given out?
- 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
27
Who must the notice of the members meeting be given to?
-directors, members, auditors
28
How can you have members meeting at a shorter notice?
- meeting at shorter notice= if all the members agree to it
| - 100% must agree if AGM, 95% must agree for any other general meeting
29
What does the s249L do?
- specifies what the notice of members meetings must contain
| - s249 1 c-must have the special resolutions in the notice
30
How must the notice of members meeting be spelled out?
- 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
What is the quorum requirement for the members' meetings?
- S249T RR
| - 2 members and must be present throughout the meeting
32
What does s249T do?
- quorum requirement for members meeting
- RR
- 2 members needed for the meeting to be valid
33
What does s249S do?
- 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
What does s249X do?
- 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
Who elects the chair of the members' meeting?
- the directors
| - RR s249U
36
What does s249U do?
- RR
| - directors elect the chair of a members' meeting
37
What does s250E (3) do?
-casting vote of the chair
38
Is there a casting vote with a special resolution?
- no
| - either get the 75% or not
39
What does s254 A (2) do?
-company can issue preference shares = only if the rights in the constitution or have been approved by special resolution
40
What does s249Y do?
-rules on how to vote by proxy at members' meetings
41
How does one vote at members' meetings?
- 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
What does s250J do?
- how is voting carried out at members’ meetings (show of hands unless a poll is demanded)
- RR
43
What does s250K do?
-matters on which a poll can be demanded at members' meetings
44
How can a decision be made in single member companies?
- 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
What does s249B do?
- 1 member companies resolutions
| - passed by the member recording it and signing it
46
What is a flying minute and who can use it?
- 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
What does s249A do?
- 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
What does s1322 do generally?
- 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
What does s1322 (1) do?
-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
What does invalidated mean?
-doesn't mean it's valid, it can be invalid because of another reason, but not invalid because of procedural irregularity
51
What does s1322 (2) do?
- 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
Give an example of an irregularity under s1322 (2) that would invalidate the meeting?
-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
For s1322 (2) does intent matter?
-doesn't say about deliberateness, so even if irregularity deliberate then still stands and doesn't matter
54
What does s1322 (3) do?
- accidental omission of notice doesn't make the proceeding of the meeting void
55
What do s1322 (3) A and AA do?
-3AA = person's inability to access the notice
| 3A- the technical meetings (like via skype) if breaks down for a bit= fine
56
What is the case with onus with s1322 (2) and (3)?
- automatically validated unless the court says no
| - the onus is on the person trying to prove invalidity
57
What do s1322 (4) and (6) talk about in terms of validity?
- talk about things that start about being invalid
| - the onus is on the person arguing validity
58
What are the facts of Whinestock v Beck and what sections would they use?
- 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
What does s1322(6) do?
- 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
What are the restrictions on member decision making?
- 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
Are directors that are also members restricted in how they can behave as members?
- 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
What is equitable limitation?
-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
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?
- 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
What are the two cases that demonstrate the equitable limitation in cases other than amendment to the constitution?
-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
How does equitable limitation affect s136 (2)?
- 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
What are the concepts dealt with in Gambotto?
-amendments that expropriate shares ! other -amendments that give rise to conflict
67
What are the facts of Gambotto?
- 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
What amendments does Gambotto establishes test for? (2 types)
--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
What must be satisfied to make category 1 amendments valid?
-only valid if: proper purpose, and no oppression of minority shareholders
70
What is proper purpose in category 1 amendments?
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
What is the proper purpose recognized by the court (Category 1 amendments)?
- 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
If you want to take away members' shares what do you have to do procedurally? (price etc.)
- 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
Where does Gambotto not apply?
- where statutory reduction of capital
| eg. Winpar Holdings v Goldfields Kalgoorlie
74
When are category 2 amendments valid?
- 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
