Company Decision Making and Shareholders

Question 1

How much notice must be given for a board meeting?

Answer 1

Whatever is deemed ‘reasonable’ - could be a few minutes could be in days.

Question 2

What is the quorum for board meetings?

Answer 2

Two.

Question 3

What are the requirements for a notice of a general meeting?

Answer 3

Must set out:

• The time date and place;
• Nature of business;
• if a SR is proposed, the wording of the SR; and
• each shareholder’s right to appoint a proxy.

Question 4

What is the minimum notice required for a general meeting?

Answer 4

14 days - day of the meeting itself will not be counted.

Question 5

When considering days lapsed for notices, how long after delivery are the clear days counted?

Answer 5

1 day for hand delivery, 3 days for post or email.

Question 6

What is the minimum quorum to pass a resolution?

Answer 6

2

Question 7

What is the right to appoint a proxy?

Answer 7

If a member cannot attend a meeting, it is their right to appoint a proxy to vote on their behalf.

Not necessary if the resolution they’re voting in favour of is going to pass regardless.

Question 8

What is a poll vote?

Answer 8

Shareholders vote on the basis of one vote per share they own - rather than one vote per person.

Question 9

What percentage of shares must a shareholder have to call a poll vote?

Answer 9

10%

Question 10

When can a GM be held on short notice?

Answer 10

When:

A majority in number of the shareholders, who own 90%+ (95%+ Public) of the company’s voting shares , consent.

Upon receipt of consent, the GM can be held straight away.

Question 11

What is a written resolution?

Answer 11

Board hands out descriptions of the ordinary/special resolutions they wish to pass and annex any relevant documents;

Shareholder signs and returns the WR if they vote in favour of it.

Question 12

What percentage of shares must a shareholder have to call a WR?

Answer 12

5%

Question 13

How many Days does a WR lapse after?

Answer 13

28

Question 14

What is the Duomatic Principle?

Answer 14

If shareholders discuss and unanimously agree a matter, the company needn’t circulate a WR / hold a GM

Question 15

How are Directors appointed?

Answer 15

Via an ordinary resolution; or
via a board resolution.

A company can vary this position.

Question 16

Can the board approve all service contracts?

Answer 16

No. A long-term service contract (one that doesn’t give the option to end the contract before 2 years) must get the approval of members via OR.

Question 17

How can shareholders remove a director?

Answer 17

OR; 28-day notice period of removal resolution to be provided instantly to the concerned director.

Question 18

What if the board refuse to hold a GM on special notice to remove a director?

Answer 18

Under s303, the members may compel the board to hold a general meeting for the company.

Question 19

When must a share certificate be issued?

Answer 19

All members have a right to a share certificate within 2 months of allotment or transfer.

Question 20

What percentage of shareholding must a member have to be entered on the PSC register?

Answer 20

25%+

Question 21

What is the relationship between the company constitution and the shareholders? What are their rights under it?

Answer 21

It is a statutory contract between the company and the shareholders.

Shareholders can sue for breach of contract if a shareholder, or the company itself, doesn’t abide by the constitution.

Question 22

What is the nature of a shareholders agreement?

Answer 22

It is a contract between the shareholders. Breach of the agreement can lead to a breach of contract claim.

Question 23

Say if a resolution is passed in contravention of the shareholders’ agreement, what are the legal implications?

Answer 23

None in company law. However, there may be a breach of contract claim and the affected shareholder can claim against the breaching shareholders.

Question 24

What are ordinary shares?

Answer 24

Give the right to attend and vote at GMs; entitled to receive dividends if they are declared.

Increase in value in conjunction with the company.

Question 25

What are preference shares?

Answer 25

Enhanced rights over dividends; ordinary shareholders will receive the dividend after the preferential shareholders. Often not allowed to exert power by voting at GMs

Question 26

What is the difference between a cumulative and non-cumulative preference share?

Answer 26

Cumulative: If a dividend isn't called one year, the shareholder is entitled to an increased dividend the year after; Non-cumulative: If a dividend isn't called one year, the shareholder loses the right to that dividend.

Question 27

What is a derivative claim?

Answer 27

A claim instigated by the shareholder on behalf of the company against a director.

Question 28

What is an unfair prejudice petition?

Answer 28

Shareholder can apply for a remedy when the company has been run in a way that is unfairly prejudicial to the member. E.g. they didn't receive a dividend, or were not allowed to control the company. If a court assesses the claim to be a strong one, then the company can be ordered to buy back the shares from the shareholder at their market value.

Question 29

What are the stages of a derivative claim?

Answer 29

SH applies for permission - court only hears claims that have a prima facie case of success (SH must be acting in good faith and breach hasn't been ratified). If the director is liable, they may have to pay damages to the company or they can be removed from office.