General Meeting and Shareholder Powers

Question 1

How does the Companies Act 2006 define shareholders?

Answer 1

Shareholders are those who appear on the register of members (s112).

Question 2

In what four ways may you acquire shares?

Answer 2

1. As a subscriber
2. As part of a share issue
3. By way of transfer
4. By transmission ie following death or bankruptcy of a member.

Question 3

Can a company own shares in itself according to the common law?

Answer 3

No (Trevor v Whitworth). This means a company cannot repurchase or transfer shares in itself to its subsidiaries.

Question 4

How many general meetings must a company have each year?

Answer 4

Public companies are required to have an annual general meeting (s336), but private companies are not required to have a meeting.

Question 5

How many days notice is required to call a general meeting?

Answer 5

14 days (s307)

Question 6

How many days notice is required to call an AGM?

Answer 6

21 days notice (s307)

Question 7

Who must call a general meeting or annual general meeting?

Answer 7

The directors (ss303 and 302).

Question 8

Within what time-frame must the AGM be called?

Answer 8

Six months before the end of the financial year (s336).

Question 9

Who can force a general meeting to be called if it hasn’t been called?

Answer 9

5% shareholders (s305) unless the meeting is not the right arena for the decision (Rose v McGivern). The court can also call a general meeting (s306).

Question 10

If the notice for a general meeting is given with less than 14 days notice how many of the shareholders are required to be present at the meeting?

Answer 10

95% if the company is public and 90% if private (s307).

Question 11

What is the default procedure for voting at general meetings?

Answer 11

Show of hands (s284(2) CA 2006 and Arts 42-43 Model Articles).

Question 12

What is the alternative procedure for voting at general meetings?

Answer 12

Poll (s284(3)).

Question 13

What difference is there between counting votes by hands and by poll?

Answer 13

By hand each person has one vote. By poll each share counts for one vote (s284(2) and (3)).

Question 14

If a member has the ability to cast multiple votes at a general meeting must he vote in the same way for all of them?

Answer 14

No, he may split his votes in multiple ways (s322).

Question 15

Is it possible to enhance your voting rights as a member so that one share could be the equivalent to three shares for example?

Answer 15

Yes, the court upheld a provision of this kind that was in the company’s articles. The provision gave the director who was subject to a resolution asking for his removal x3 the amount of shares he actually owned (Bushell v Faith).

Question 16

Is it possible to vote by proxy?

Answer 16

Yes, and your proxy can be anyone (s324 confirmed in Re Cousins International Brick Co Ltd).

Question 17

Is it possible for members to demand a vote by poll?

Answer 17

Yes, if they meet the minimum requirements (s321(2)).

Question 18

What is the result if a meeting is called by a person who does not have authority to call the meeting?

Answer 18

Any decision taken is void unless it is clear the same decision would have been taken at a valid meeting (Browne v La Trinidad).

Question 19

What is the default resolution if the articles does not specify?

Answer 19

Ordinary resolution (s281(3)).

Question 20

Which decisions require special resolutions according to the CA 2006?

Answer 20

1. Amendments to articles (s21(1));
2. Disapplying members’ pre-emption rights when shares are issued (ss569-571);
3. Reducing share capital (s641);
4. Redeeming the company’s own shares (s716(1));
5. Winding-up the company voluntarily (s84(1) IA 1986);
6. Variation of class rights (s633).

Question 21

What percentages are required to pass ordinary resolutions and special resolutions?

Answer 21

50%+1 to pass an ordinary resolution (s282).

75% to pass a special resolution (s283).

Question 22

Is it possible to amend the percentages required to pass resolutions?

Answer 22

Yes, but only upwards. It is not possible, for instance, to reduce the percentage of a special resolution to anything below 75%.

Question 23

What do we understand by a written resolution?

Answer 23

It is a resolution that is circulated to the members (ss290-295) and a decision is passed without a meeting.

Question 24

Which type of companies are able to take decisions by written resolution?

Answer 24

Only private companies can take decisions this way (s288).

Question 25

Which decisions cannot be taken by written resolution?

Answer 25

Removal of director or auditor (s288(2)).

Question 26

What majority is required to pass a written resolution? How does this differ to resolutions passed at a meeting?

Answer 26

Simple majority of all eligible members are required for written resolutions, while simple majorities of members present at the meeting are required for ordinary resolutions at meetings.

Question 27

Is it possible to hold a meeting with just one person present?

Answer 27

Yes, if the company is limited and only has one shareholder (s318 c/f Sharp v Dawes).

Question 28

Is it necessary to be in the same physical location to be in attendance?

Answer 28

No (Byng v London Life Association Ltd).

Question 29

Who has the power to propose resolutions?

Answer 29

1. Directors; | 2. Sufficiently large group of members ie 5% or at least 100 members with £100 paid-up value each (ss338-338A).

Question 30

Is it possible to pass resolutions informally?

Answer 30

Yes, as long as the decision is unanimous (s281(4)(a) confirming Re Duomatic). Also see Re D'Jan.

Question 31

Is it possible to pass amendments to shareholder agreements informally?

Answer 31

Yes, the Duomatic principle applies (Euro Broker Holdings v Monecor).

Question 32

Is it possible to pass a resolution informally if not all members have explicitly agreed?

Answer 32

Yes, if the resolution only requires members to acquiesce and a member does not explicitly disagree, it will be taken that he has assented (Re Bailey, Hay and Co Ltd).

Question 33

Does the Duomatic principle apply to special and extraordinary resolutions?

Answer 33

Yes (Cane v Jones).

Question 34

Does the Duomatic principle apply to decisions required by a group or class of shareholders?

Answer 34

Yes (Re Torvale Group Ltd).

Question 35

Is it possible to ratify breaches of directors' duties by the Duomatic principle?

Answer 35

Yes (Progress Property Co Ltd v Moore).

Question 36

Who must be notified of any resolutions passed?

Answer 36

The Registrar at Companies House (s30) within 15 days of their being passed.

Question 37

What limitations are there on a members' voting right?

Answer 37

1. Shareholder agreements (Puddephatt v Leith) 2. Court may direct in exceptional circumstances (Standard Chartered Bank Ltd v Walker) 3. Court may set aside decision of the majority if it is oppressive against the minority (Clemens v Clemens Bros) 4. Shareholders must act bona fides when altering the articles (Allen v Gold Reefs of West Africa Ltd confirmed in Citco Banking Corpn NV v Pusser's Ltd) ie reasonable men could come to the decision of the shareholders (Shuttleworth v Cox), and amendments made which disadvantage the minority but which are passed bona fides cannot be overturned (Sidebottom v Kershaw, Leese & Co).

Question 38

What statutory powers do shareholders have?

Answer 38

1. Appointment/removal of directors (s168); 2. Amending articles (s21); 3. Winding-up (s84(1)(b) IA 1986); 4. Reduce share capital (s641); 5. Direct the directors in exceptional circumstances (aka 'residual power') (Art 4 Model Articles); 6. Petition the court (see Shareholder Protection) (ss260 and 994 and s122(1)(g) IA 1986).

Question 39

In what circumstances may the shareholders exercise their residual powers under Art 4 of the Model Articles to direct the directors?

Answer 39

Alexander Ward & Co Ltd v Samyang Navigation Co Ltd gives three situations: 1. If it is not possible for the directors to act (Foster v Foster); 2. If there is dead-lock in the board (Barron v Potter); 3. If the board has ceased to exist or fallen below the required number (Barron v Potter)

Question 40

Does the shareholder have a duty to vote?

Answer 40

No (Kuwait Asia Bank EC v National Mutual Life Nominees Ltd).

Question 41

Does the shareholder have any duties?

Answer 41

Apparently not according to Lord Maugham in Carruth v ICI Ltd but shareholders must still vote bona fides for the company (Allen v Gold Reefs).

Question 42

What is the authority that states it is not possible for members to direct directors by passing an ordinary resolution?

Answer 42

Automatic Self-Cleansing Filter Syndicate Co Ltd v Cuninghame.

Question 43

What majority is required to remove a director?

Answer 43

Simple majority.

Question 44

Do shareholders have the power to sue in the name of the company?

Answer 44

Generally the power is reserved for the board (Breckland Group Holdings Ltd v London & Suffolk Properties Ltd) as the proper claimant is the company (Foss v Harbottle), but if the wrongdoers are the directors then the rule in Foss v Harbottle permits the majority to sue, and if the majority of shares is owned by the directors the minority may bring a derivative action.