Meetings of shareholders and members

Question 1

Can all companies use members’ written resolutions?

What is the duomatic principle?

Can members’ written resolutions be used in place of any and all resolutions?

On what basis can members of a public company approve a resolution other than at a general meeting? (2)

Answer 1

CA 2006 only allows members of private companies to use written resolutions - no provision in CA2006 for a public company (BUT duomatic principle)

= if it can be shown that all eligible members (those entitled to vote and attend at a GM) unanimously assent to some matter which a resolution approved at a GM could carry into effect, the decision will be validly made and binding even if no meeting takes place or resolution passed

S.288 CA2006 = The members of a private company may pass any resolution that could be put to a GM by WR except for resolutions to:
1. remove a director under CA2006 s. 168; and
2. remove an auditor under CA2006 s. 510 (before their period of office has expired)

By proxy, or by unanimous written resolution under the duomatic principle

Question 2

What is the process for members’ written resolutions? (5)

How is a written resolution circulated?

How are votes calculated?

Answer 2

1. Directors or members propose the resolution as a written resolution
2. Copies of proposed resolution, guidance on how to signify agreement, and date by which the resolution must pass are sent to every eligible member

2A. s.297 CA2006 = alternatively the copy can be circulated for signature, but to be valid, all sufficient signatures must be obtained within 28 days

3. Members signify their agreement by returning a document to the company identifying the resolution and signifying their consent (once agreed, can not be revoked)
4. As soon as the required majority is reached, the resolution passes
   ○ Has the same effect as if passed at a general meeting or class meeting
5. If not achieved before the date specified, resolution will lapse
   ○ s.297 CA2006 = If no date specified = lapse after 28 days

at same time by hard copy, soft copy, or by using a website (also to auditor if company has one)

votes are calculated according to number of shares held by each member

Question 3

Who can require a company to circulate a proposed resolution and accompanying statement?

When does a company need not comply with such a request? (3)

When a valid request is received, what must the company do?

Answer 3

S.292 CA2006 = any member(s) of a private company holding not less than 5% of the total voting rights (they can also request that a statement of fewer than 1,000 words be circulated with resolution)

If the proposed resolution:
1. is frivolous, vexatious, or defamatory; or
2. on being passed, would be ineffective by reason of inconsistent with legislation or company’s constitution OR
3. company applies to court for an order not to comply on grounds that rights conferred by s.292 CA2006 are being abused

S.293 CA2006 = copies of the proposed resolution and any accompanying statement must be circulated to all eligible members at the same time in hard copy, in electronic form, or by means of a website within 21 days of receiving the request

Question 4

What are the 3 main types of members’ meetings?

What are class meetings?

When are they required?

Can shareholders with non-voting shares vote at a class meeting of their class?

What are the rules for holding a class meeting? (2)

Answer 4

(1) annual general meetings (AGMs); (2) general meetings (GMs); and (3) class meetings of the holders of a particular class of the company’s capital

= a meeting where only 1 class of members is entitled to attend and not all the members of a company

required whenever the rights of the holders of the class are to be varied because of some action proposed by the company e.g. change in voting, dividend, or other rights attaching to the class

Yes, non-voting refers to the right to vote at a GM not a class meeting

The same rules for the holding of GMs apply to class meetings, with 2 exceptions under s.334 CA2006:
1. members and courts do not have power to call a class meeting
2. the quorum where a class meeting has been convened for a variation of class rights shall be 2 members holding at least 1/3 in nominal value of the shares of that class

Question 5

Which companies must hold an AGM and when?

Who has the authority to convene an AGM? (2)

Do members of a private company have the statutory right to demand the company holds an AGM?

Answer 5

S.336 CA2006 = every public company and every private company that is a traded company must hold an AGM (private company not traded = no AGM unless Articles state otherwise) within 6 months (9 months for a private traded company) commencing on ARD

1. S.302 CA2006 = Directors have general authority to convene GM, including AGM
2. S.306 CA2006 = Court can order GMs including an AGM
   (S.303 CA2006 =members representing 5% of paid-up share capital may requisition a GM but NOT an AGM)

No, would need to amend articles to force this (but member(s) with 5% TVR can requisition a GM or WR)

Question 6

Name 4 examples of the usual routine business of an AGM.

Name 4 additional resolutions that a quoted company may routinely add to its AGM.

Answer 6

A. Receiving the report and accounts laid before the meeting
B. Declaration of final dividend, if any
C. Election or re-election of directors
D. Re-appointment and remuneration of auditors

Quoted companies:
1. Receipt of directors’ remuneration report (non-binding)
2. Approval of directors’ remuneration policy at least once every 3 years or approve the adoption of a new policy (binding)
3. Ordinary resolution granting authority to directors to issue additional shares
4. Special resolution to disapply pre-emption rights on the issue of new shares

Question 7

Name the 5 steps in the checklist for a listed company AGM to be taken care of by the cosec before the AGM.

Answer 7

1. AGM must be held no later than 6 months (9 months) after financial year-end so ensure appropriate venue is booked (estimate how many attending, decide how room laid out, will sound and vision equipment be needed)
2. Send notice, forms of proxy, and accompanying documents to all eligible members, directors, and auditor within 21 clear days
3. Prepare a chairman’s script to cover running order of events at AGM
4. Co-ordinate list of likely questions to help directors prepare and run through arrangements with chair
5. Draft an announcement to release following AGM

Question 8

What 5 things should the Cosec do on the day of the AGM?

Answer 8

A. Ensure copies of all documents are available, including notice, agenda, Articles, ARA, ROM, and director’s service contracts/terms of appointment

B. Ensure quorum is present and confirm to chair to open meeting

C. Read notice if not taken as read

D. Ensure chair allows time for member questions and explains method of voting

E. Take munites

Question 9

What 5 things should the Cosec do after the AGM?

What 6 things should be included in the announcement for a listed company?

Answer 9

1. Collect all books and papers left
2. Arrange for copies of approved special resolutions to be filed with the Registrar within 15 days of AGM (e.g. dis-application of pre-emption rights)
3. Listed companies must make a market announcement via an RIS asap of all resolutions, other than ordinary resolutions at an AGM, approved by the shareholders
4. Prepare minutes
5. Organise payment of dividend, if approved at meeting

(1) date of meeting,
(2) text or description of each resolution
(3) number of votes cast
(4) proportion of issued capital represented by those votes
(5) number of votes cast in favour, against, and abstained each resolution
(6) confirmation as to whether each resolution was passed or not

Question 10

What 5 things must be included in the Notice of an AGM?

Answer 10

Notice of the AGM must:
i. state the meeting is an AGM
ii. specify date, time, and location (s.311 CA2006)
iii. contain a statement that members are entitled to appoint proxies (s.325 CA2006) and specify an address for the receipt of proxy appointments
iv. distinguish between ordinary resolutions and special resolutions (contain the text of any special resolutions)
v. be dated and signed (usually by cosec on behalf of board)

Question 11

What is the notice period required for general meetings and an AGM?

Is it possible to shorten the length of notice required for a general meeting and an AGM? (UK CG Code?)

What is the notice period required for a general meeting of a traded company and the 3 conditions required to be met to shorten this?

What are ‘clear days’

What are the 4 resolutions requiring special notice to the company?

Why is sufficient notice important?

Answer 11

S.307 CA2006 = GM = at least 14 clear days, AGM = at least 21 clear days

• Can shorten length of notice of GM if majority of members holding not less than 90% of share capital between them agree (95% for a public company)
• For AGM = all members must agree (Para 36 FRC Guidance Board Effectiveness = AGM notice of listed company = 20 working days in all cases)

GM of traded company = at least 21 clear days but can be reduced to 14 provided that:
i. The meeting is not an AGM
ii. Members are offered an electronic voting facility; and
iii. A special resolution has been passed at a previous AGM or at a GM held since the last AGM

S.360 CA2006 = excludes the date the notice of a meeting is given and the date of the meeting itself (includes weekends and bank holidays)

Resolutions requiring 28 days’ notice:
1. To remove a director under s.168 CA2006
2. To appoint someone in place of the director removed at the meeting
3. To remove an auditor under s.510 CA2006
4. To appoint a new auditor
(Company must then give not less than 14 days’ notice to members (or 21 for AGM))

Failure to provide sufficient notice = meeting invalid, unless failure was accidental (protection under S.313 CA2006)

Question 12

What is the quorum required for a meeting of the members?

Will a quorum be present where one member appoints two proxies as their representative and they are the only attendees?

Will a quorum be present where two members appoint the same person as their proxy?

What happens in the event of a quorum not being present?

What do the Model Artcicles say about inquorate members’ meetings? (2)

Answer 12

s.318 CA2006 = for company with a sole member the quorum is 1, and in all other cases, subject to Articles, the quorum is 2 members present in person or by proxy

No

No - 2 persons are required

Articles usually make provision for a procedure to be adopted in this event

1. MA. 33 (Plc) and 41 (Ltd) = if a quorum is not present within 1/2 an hour, the chair must adjourn the meeting
2. = if a quorum ceases to exist after the meeting has commenced, the meeting is automatically adjourned

Question 13

Can amendments to ordinary resolutions be proposed at a general meeting? (4)

Can amendments to special resolutions be proposed at a general meeting?

What do the Model Articles say in relation to amendments?

If a proposed amendment is allowed, what should happen?

How can a resolution be withdrawn?

Answer 13

Yes provided the amendment:
1. is within the scope of the notice
2. is relevant to the original resolution
3. does not relate to something that has already been voted on
4. is not vexatious

Only to correct obvious grammatical or clerical errors which do not change the substance of the original resolution (beacuse CA2006 requires the text of a special resolution to be set out in notice of meeting)

MA. 40 (Plc) and 47 (Ltd) = prior written notice of amendments must be given to Comapny and the chair may rule the amendment out of order

Meeting should first vote on whether to allow the amendment and then take a second vote on the resolution itself (either in its original or amended form)

Withdrawing = director simply notifies meeting of this fact before the resolution is voted on

Question 14

Who will Chair at members’ meetings?

What is the role of the Chair at a general meeting? (3)

What specific powers with the Articles usually give the Chair? (5)

When should the chair exercise the last power?

Answer 14

MA. 31 (plc) and 39 (Ltd) = chair of the board will also be chair for GMs, if chair is not present, another director takes chair, and in the absence of any director the members may elect a member to take chair

Role = (1) ensure that the meeting is properly and fairly conducted, (2) allow all opinions and points of views to be expressed, and (3) ensure the sense of the meeting is properly captured and recorded in the minutes

1. Authority to adjourn the meeting (requires consent of members unless due to disorder, safety, or quorum not attained)
2. Rule on points of order
3. Eject members for unruly behaviour (should be a last resort)
4. Decide upon the validity of amendments proposed for resolutions
5. Demand a poll

Chair has a duty to ensure that the sense of the meeting is captured and recorded = chair should demand a poll when a resolution is defeated on a show of hands and the chair is aware there are substantial number of proxy votes in favour of the resolution

Question 15

What are procedural motions?

What are the 6 common procedural motions?

What do the Model Articles say in relation to the last one?

What else would be required?

Answer 15

= motions that are used to regulate the conduct of the business of the meeting

1. the closure (that the questions be now put);
2. next business (that the meeting proceeds to the next business);
3. previous question (that the question be not now put);
4. postponement (version 1) (that the question lie on the table);
5. postponement (version 2) (that the matter be referred back to…); and
6. adjournment

MA. 33 (Plc) = no business at an adjourned meeting shall be transacted other than that which could have been transacted at the original meeting

If the meeting is adjourned for more than 14 days, fresh notice of at least 7 days, must be given

Question 16

Who has the right to appoint a proxy and for them to do what?

How is a proxy appointed? (2)

Who can be a proxy?

What happens when more than one proxy is appointed by an individual?

What 2 options does a corporate member have in order to cast their vote at a general meeting?

What is the difference between the 2?

Answer 16

S.324 CA2006 = all members have the right to appoint one or more proxies to attend, speak, and vote at a meeting on their behalf (as long as not prohibited by Articles)

1. S.327 CA2006 = listed company = proxy appointments must be made in writing
2. MA. 38 & 39 (Plc) and 45 (Ltd) = appointment must be in writing

Members are free to choose eg. the chair and/or another director

When a member appoints more than 1 proxy, each proxy must be appointed to exercise the rights attached to different shares

A. Appointment of a corporate representative (S.323 CA2006 = directors of corporate member pass a resolution for a specific person to represent them) ; or
B. appointment of a proxy

Details of a proxy must be lodged in advance, whereas a corporate representative can bring their letter of appointment to the meeting

Question 17

When must proxy forms be lodged with the company?

Where should proxy forms be lodged?

What type of proxy forms must listed companies issue?

How should proxies vote? (3)

Can proxies vote both for and against the same resolution?

Answer 17

S.327 CA2006 = it is unlawful for a company to require proxies to be lodged with the company more than 48 hours prior to the time of the meeting (excluding non-working days)

S.333 CA2006 = to an address supplied by the company for that purpose (S.333A required a traded company to provide an electronic address for online and electronic proxy submissions)

LR 9.3.6 = 3-way proxy forms = includes provisions for members to vote for, vote against, or abstain from voting (to demonstrate dissatisfaction)

1. Unless company has taken advantage of S.322A permitting the lodgement of poll votes in advance, the proxy must attend the meeting in person to vote
2. S.324A CA2006 = Proxy must vote in accordance with the instructions given by the member who appointment them (The proxy form allows for a member to indicate which way they wish the proxy to cast their vote)
3. The proxy form must state that if it is returned without any indication as to how the proxy shall vote, the proxy may exercise their discretion

Only if they represent different members or different shares of the same member

Question 18

What are the 2 ways to pass resolutions at a meeting and what do the Model Articles say on this?

What is a poll vote?

Who can demand a poll under the Model Articles? (4)

What does the Companies Act 2006 say about who can demand a poll vote?

For a demand for a poll to be valid, when must it be called?

Answer 18

by show of hands (each member = 1 vote) or by poll
MA. 34 (Plc) and 42 (Ltd) = resolutions are to be taken by show hands unless a poll is demanded in accordance with Articles

= where each member (or their proxy) has the number of votes attached to their shares (usually 1 vote per share)

MA. 36 (Plc) and 44 (Ltd) = a poll can be demanded by the directors, 2 or more members with the right to vote, member(s) representing 1/10 of the total voting rights, or the chair

S.321 CA2006 = any provision in Articles is void if it were to exclude the right to demand a poll by:
1. 5 or more members
2. member(s) representing not less than 1/10 of total voting rights

Must be called before or immediately on the declaration by the chair of the result of the vote on a show of hands

Question 19

When a poll is demanded at a general meeting, what should happen? (4)

Quoted companies must ensure that when a poll vote is taken, what 6 pieces of information are made available on a website and announced via a RIS?

When must the information be made available on a website?

How long must the information be retained?

Answer 19

1. The validity of the demand should be checked to ensure those demanding have the right to
2. Chair then makes a statement confirming properly demanded and announces time for holding the poll (at end of meeting or at a later date)
3. Chair, cosec, or share registrar should inform members of the procedure for the poll e.g. 3-way voting, and attribute ballot papers
4. Members cast their votes

S.341 CA2006 =
(1) date of meeting,
(2) text or description of each resolutions
(3) number of votes cast
(4) proportion of issued capital represented by those votes
(5) number of votes cast in favour, against, and abstained each resolution
(6) confirmation as to whether each resolution was passed or not

When:
Quoted = as soon as reasonably practical
Traded = within 16 days of meeting, or day following declaration of result (if later)

Retained: Quoted = at least 2 years

Question 20

What must the directors of a listed company do following significant voting against a resolution they recommended?

What should happen 6 months later?

What should happen in the annual report?

Answer 20

Provision 4 UK CG Code = When 20% or more of votes have been cast against a board recommendation for a resolution, directors must explain what action(s) they intend to take to consult shareholders to understand the reasons behind the result

Directors should publish an update on the views received from shareholders and actions being taken no later than 6 months after the shareholder meeting

A final summary should be included in the following year’s annual report

Question 21

Many FTSE100 companies carry out poll votes using electronic voting via handheld devices.

What is the disadvantage of this?

What are the 2 advantages of this?

When would electronic voting not be appropriate?

Can companies hold meetings via audio-visual conferencing?

What is the biggest drawback to the use of audio-visual conferring?

Answer 21

Disadvantage = vote capture phase may take longer than traditional ballot papers

Advantages:
1. Results of the poll are almost instantaneous
2. Devices are registered to individual members upon arrival = an attendance record and verifies entitlement to attend, votes held, and negating any proxy appointments previously made

For meetings with very low attendance = not cost-effective and likely take longer to explain how technology works than undertaking a manual poll

Yes

If unreliable system = an adjournment of the meeting is likely to be required in the event of a system failure

Question 22

What is the role of the share registrar at a member meeting?

What is the role of the scrutineer at a member meeting?

Answer 22

Registering attendees and counting votes (usually under oversight of Cosec)

Verify the voting results and prepare a report and final certificate for the Chair

Question 23

INDEPENDENT PROXY REPORT

Members of a quoted company may require the directors to obtain an independent report on what?

To be valid, the request must be made by who? (2)

What are the 4 conditions of the request?

Answer 23

On any poll taken or any poll to be taken at a GM

A. Member(s) holding not less than 5% of the total voting rights; or
B. not fewer than 100 members each holding shares on which, on average, at least £100 has been paid up

S.342 CA2006 = the request must be:
i. in writing
ii. identify the poll in which it relates to
iii. be authenticated by those making the request
iv. be received no later than 1 week after the poll is taken

Question 24

INDEPENDENT PROXY REPORT

What must be done following a request to obtain an independent report on a poll?

What are the assessor’s rights? (2)

What must the report state? (4)

Answer 24

S.343 and 344 CA2006 = Directors must appoint an independent assessor who cannot be an officer or employee of company or had any role in connection with carrying out the poll vote

S.348 and 349 CA2006 = Assessor entitled to (1) be present at meeting and during conduct of poll, (2) and have access to the records of the poll and the meeting to which the poll relates

Whether in the assessor’s opinion:
1. the poll procedures were adequate;
2. the votes cast were fairly and accurately recorded;
3. proxy appointments were appropriately assessed; and
4. the notice complied with s.325 CA2006 (statement of right to appoint proxies)

Question 25

In respect of general meetings, who has a right to speak and ask questions?
Explain the arrangements a listed company should make for those asking questions. (5)

Answer 25

1. All members, proxies and corporate representatives entitled to attend and vote at GM may speak and ask Qs
2. Chair should allow all POV to be heard, but may restrict the length of Qs to maintain good order
3. Companies must ensure that all questions put by those attending are answered (ideally prepare answers to expected questions in advance)
4. Quoted company may not answer questions in line with CA2006 if it would require disclosure of confidential information or not in the interests of company
5. Exception to answer Q also exists if answer has already been provided on website

Question 26

What is the majority required for an ordinary resolution to pass?

Name 3 examples of ordinary resolutions.

What is the majority required for a special resolution to pass?

Name 3 examples of special resolutions.

What advantage does passing a resolution at a meeting have compared to the same resolution circulated as a written resolution?

Answer 26

A simple majority (50%) of those present and voting to vote in favour

Appointment/re-appointment of directors and auditors and grant directors authority to allot new securities

Not less than 75% of those present and voting to vote in favour

Alteration of Articles, change of name, disapplication of pre-emption rights

At a meeting, the majority required to approve a resolution is determined by reference to the total votes held by those attending and voting

On a written resolution, the majority required to approve a resolution is determined by the entire voting share capital

Question 27

What is a hybrid meeting?

In order to constitute a valid meeting, what must all attendees be able to do? (3)

In other words, the electronic method must be designed to facilitate what?

Do the Articles need to permit a hybrid meeting?

Which UK-listed company held the first entirely electronic AGM?

Answer 27

Hybrid = board and some members meet in a physical location with other members joining the meeting via an online portal

Participate in the meeting =
1. see and hear the chair and other speakers
2. be able to ask questions
3. lodge a vote

2-way communication

No, can use as long as the Articles don’t prohibit BUT a purely electronic meeting requires express Article authority

2016 Jimmy Choo Plc

Question 28

CONFIRMATION OF VOTING

If a shareholder, their proxy or a corporate representative votes on a poll of a traded company electronically, what must the company do?

In addition to confirming the receipt of electronic votes, a shareholder is entitled to request what other confirmation?

What are the 2 conditions that must be met for the request to be valid?

Following a valid request, what must the company do?

What happens if an incorrectly completed proxy form is handed in?

Answer 28

S.360AA = company must send electronic confirmation to the person casting the vote asap

That on a poll vote their vote was validly recorded and counted

1. Request must be made within 30 days of the GM
2. Shareholder must not have any other reasonable method to determine that their vote has been validly recorded and counted

Supply the confirmation asap, but no more than 15 days after the request

Must be rejected, but if there is time and the shareholding is substantial, they should be returned for amendment