LU 5 - Corporate Governance, Shareholders

Question 1

What is the ‘record date’?

Answer 1

The date on which the Co determined its shareholders and their shareholding

Question 2

Why is the record date important?

Answer 2

Important to determine shareholders’ rights:

a. To receive notice of shareholders meetings
b. Participate and vote
c. Make decisions through written and e-communication
d. Exercise pre-emptive rights
e. Receive a distribution
f. Other rights
- It is determined by the board of directors
- It cannot be retro-actively
- At least 10 business days before event/action

Question 3

Discuss shareholders’ meetings

Answer 3

1. Can hold meeting: MOI or rules: directors/any other person specified
2. MUST hold meeting:
   a. MOI or Act (elect director/fill vacancy)
   b. Demanded by shareholders:
   i. Must be signed by 10%+ voting rights entitled to be exercised
   ii. Or less than 10% if allowed by MOI
   iii. Must specify purpose
   c. Any shareholder may apply to court for order setting aside demand, if frivolous/reconsider a previous matter/vexatious
   d. May be withdrawn by shareholder before meeting starts
   e. Meeting cancelled when lower than 10% present

Question 4

What meeting must all public companies hold?

Answer 4

Annual General Meetings

Question 5

What are the time frames involved with the AGMs?

Answer 5

• Must be held within 18 months from incorporation
• Must be held every year
• Must be held within 15 months from previous
• An extension may be granted by the Companies Tribunal

Question 6

What must be presented at the AGM?

Answer 6

1. Directors’ report
2. Audited financial statements
3. Audit committee report

Question 7

What other matters may be part of the AGM?

Answer 7

1. Election of directors
2. Appointment of auditors and audit committees
3. Matters raised by shareholders

Question 8

Discuss ‘notice’ ito the AGM

Answer 8

1. Notice must be in writing
2. Notice must contain:
   a) Date, time, place
   b) Record date
   c) General purpose
   d) Specific purpose when requested by shareholders
   e) Proposed resolutions
   f) Notice that shareholders who can attend and vote - proxy
   g) Satisfactory identification will be required

Question 9

Discuss the notice period of AGM

Answer 9

1. 15 business days for public companies and NPC
2. 10 business days for other companies
3. MOI may provide for longer or shorter periods
4. If time is not met, every person with voting rights is present may decide to waive the time requirement

Question 10

What happens if there is a material defect concerning 1 or more matters iro notice?

Answer 10

If every person with a voting right present then they may vote to ratify the notice

Question 11

Discuss quorum

Answer 11

1. Votes quorum:
   a) Before meeting can begin: 25% shares entitled to vote on any matter present
   b) Before matter can be discussed: 25% shares entitled to vote on specific matter present
   c) MOI can set lower or higher percentages
2. Persons quorum:
   a) If there are more than 2 shareholders, 3 shareholders must be present
3. If a voting or persons quorum is not met with 1 hour from start time (or longer), then the meeting is postponed for 1 week.
   a. Only necessary for notice here if the place changes.
   b. Quorum requirements deemed to be met if 1 shareholder with voting rights is present at the postponed meeting (MOI may change)

Question 12

Discuss ‘voting’

Answer 12

1. Voting is by show of hands. Each person has 1 vote.
2. Voting by poll:
   a) Voting rights are attached to shares held
   b) Required if requested by at least 5 people entitled to vote OR by person(s) who have at least 10% of voting rights
   c) MOI may not provide different
3. Electronic participation (if allowed by MOI, no intermediary, it must be reasonably effective and not costly)
4. If vote not exercised, it is deemed to have voted against resolution

Question 13

Discuss ‘resolutions’

Answer 13

1. 2 types: ordinary and special
2. Ordinary resolution: Supported by >50% of voting rights exercised at meeting
   a) MOI may provide for higher percentages for specific decision, but not removal of director
   b) Can differ per transaction
   c) MOI may increase NOT decrease the 10%
3. Special: Supported by at least 75% of voting rights exercised
   a) MOI may provide more or less %
   b) MOI may provide different % for different matters
   c) Should be 10% more than required for Ordinary resolutions
   - Clear, specific, accompanied by sufficient information

Question 14

Discuss ‘proxy’

Answer 14

1. Holder of shares may appoint individual (who is not holder of shares) to represent him
2. Participate, speak, vote
3. Written, dated, signed (proxy appointment)
4. It is valid for 1 year, unless otherwise stipulated in the appointment
5. It can be revoked