Formation of a Company - Decision Making Flashcards
(15 cards)
How are day-to-day decisions of a company typically made?
Through decisions of the board of directors, unless a power is delegated to a specific director or committee via company’s Articles
What is a board resolution an how is it passed?
It is a formal decision by directors, passed by a simple majority at a board meeting
Can directors pass resolutions in writing?
Yes, if all directors agree, a written board resolution may be used instead of a holding a board meeting
When might shareholder approval be required for director actions?
When an action is outside the board’s powers (e.g amending the Articles)
What are the 2 methods by which shareholders may pass resolutions?
- At a General Meeting
- By written resolution (private companies only)
What are the 2 types of shareholder resolution?
- Ordinary Resolution - passed by simple majority of votes
- Special Resolution - passed by at least 75% of votes
Is written resolution a third type of vote?
No - it is a method of voting, not a separate category of resolution
What voting methods may be used at GMs?
- Show of hands: 1 vote per shareholder present
- Poll vote: 1 vote per share
Shareholders may vote in person or via proxy
How can a poll vote be demanded under MA?
- In advance, or
- At the GM before or immediately after the show of hands result by either : - the Chairperson, the directors, 2 or more shareholders with right to vote on the resolution or shareholders/proxy with at least 10% of voting rights
Shareholders A-45%, B-20%, C-20% and D-15%. A and B support an OR. Can it pass without C or D?
Show of hands - need 3/4 shareholders so will need support from C or D
Poll vote: A+B=65% - Ordinary Resolution can be passed without C or D
Key Takeaway - Poll voting gives more power to majority shareholders by votes per share rather than per person
Shareholders A-45%, B-20%, C-20% and D-15%. B, C and D support Special Resolution - A is against. Can it be passed without A?
Show of hands - Yes 3/4 shareholders required
Poll vote - B+C+D= 55% - SR fails without A
Key Takeaway - minority shareholders with large shareholdings can block SRs using poll voting
How are votes counted on a written resolution?
Every shareholder has 1 vote per share
What are the thresholds for written resolutions?
- Ordinary resolution - passed by simple majority
- Special resolution - must state it is a special resolution and must be passed by 75% of total voting rights
Which resolutions cannot be passed in writing?
- Removal of directors
- Removal of an auditor
Shareholders: A – 45%, B – 30%, C – 20%, D – 5%. A and D support an OR. B votes against. C abstains. Is the OR passed?
- A+D = 50% - not enough to pass
- C’s abstention counts as a vote against - B+C=50%
OR is blocked
Key Takeaway - On a written resolution, abstention = vote against
