Members and GMs

Question 1

What two criteria must be met to be a member of a company?

Answer 1

1) Consent to be a member

2) Be entered in the Register of Members

Question 2

Is there a minimum or maximum number of members that a company must have?

Answer 2

Minimum = 1
No Max
Remember a company cannot allow for all their shares to be redeemable as otherwise this would fall below the minimum threshold

Question 3

Why is it unwise to register shares in children’s names?

Answer 3

Their dealings are VOIDABLE

Question 4

Can anyone become a member of a company?

Answer 4

Subject to the Articles any natural person or entity with legal capacity may be a member. A subsidiary cannot be a member of it’s holding company unless it is holding them as a trustee

Question 5

A professional partnership wishes to acquire some shares. How should they be registered?

Answer 5

In the name of one or more partners

Question 6

How can a guarantor transfer their membership to someone else?

Answer 6

They can’t - they must resign as guarantor and a replacement must apply in their place.
Remember that personal guarantee does not cease immediately but continues for a period of one year after resigning as guarantor

Question 7

What two tests must be satisfied in order to bring a claim for unfair prejudice?

Answer 7

1) The conduct must be unfair

2) Must have caused prejudice or harm to the interests of some (or all) members

Question 8

What are the grounds for bringing a derivative action?

Answer 8

Negligence, breach of duty or breach of trust

Question 9

How do you start a derivative claim?

Answer 9

Establish a prima facie case

Question 10

When would a shareholder petition for the ‘just and equitable winding-up’ of a company?

Answer 10

This is used in circumstances where there is a breakdown in mutual trust and confidence - i.e. in situations of 50:50 deadlock between members and the company management

Question 11

Which type of company cannot pass a written resolution?

Answer 11

Public company - but remember the duomatic principle - where it can be shown that ALL members having the right to attend and vote at a GM would assent to a matter, that assent is as binding as the resolution in a GM

Question 12

Can any member request that a resolution be circulated?

Answer 12

Yes provided the member/members have 10% or more of the voting rights at a GM

Question 13

What additional resolutions would a quoted company routinely add to its AGM notice?

Answer 13

• Receipt of director’s remuneration report
• Approval of directors’ remuneration policy (triennial)
• Authority to issue shares
• Waive pre-emption rights
• Approval of political donations
• Authority to reduce general meetings notice to 14 days

Question 14

Which documents should be available for inspection by members at an AGM?

Answer 14

• Register of Members
• Directors’ service contracts
• Notice

Question 15

Are amendments to resolutions allowed?

Answer 15

For ordinary resolutions only to correct obvious typographical mistakes
No amendments can be made to a special resolution

Question 16

What does clear days mean?

Answer 16

Clear days excludes the date the notice of a meeting is given and the date of the meeting (weekends and bank holidays are included!)

Question 17

What must a traded company have done to allow a members’ meeting to be held on 14 days’ notice?

Answer 17

Pass a special resolution at the previous GM or AGM - SHOULD BE GLUED IN YOUR HEAD NOW!

Question 18

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

Answer 18

At a meeting the majority is of those voting and on a written resolution it is of the entire voting share capital

Question 19

What is the requirement for short notice for 1) a private company 2) a public company

Answer 19

1) Private = 90% + majority in numbers
2) Public = 95% + majority in numbers

This protects minority members!