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Company meetings

Chapter 16


Company meetings


Chapter Contents


16.1    Annual general meetings


16.2    General meetings


16.3    Class meetings


16.4    Notice


16.5    Quorum at meetings


16.6    Chairman


16.7    Polls


16.8    Proxies


16.9    Electronic communications


16.10  Resolutions


16.11  Additional requirements for quoted companies


16.12  Disability Discrimination Act 1995


Summary


Self-test questions


Further reading



16.1  Annual general meetings


There are two types of members’ meetings: annual general meetings and general meetings.


Section 336 of the Companies Act 2006 provides that every public company must hold a general meeting as its annual general meeting within six months of the day following the accounting reference date. Failure to comply with this requirement is an offence committed by every officer of the company who is in default.


Section 337 provides that a notice calling an annual general meeting of a public company must state that the meeting is an annual general meeting.


Section 338 of the 2006 Act provides that the members of a public company may require the company to give to members of the company entitled to receive a notice of the next annual general meeting notice of a resolution which it is intended to be moved at that meeting. The company is required to give notice of a resolution once it has received a request to do so:


(a)  from members representing at least 5 per cent of the total voting rights of the members who have a right to vote on a resolution at the AGM to which the requests relate; or


(b)  from at least 100 members who have a right to vote on the resolution at the AGM to which the request relates, and hold shares in the company on which there has been paid up an average sum per member of at least £100 (s 338(3) CA 2006).


Section 339 provides that public companies must circulate resolutions that are submitted in accordance with the above conditions, and s 340 provides that the expenses in complying with the section are to be borne by the company if the resolution is submitted to the company before the end of the financial year preceding the meeting. Otherwise, the expenses in complying with the section must be paid by the members unless the company resolves otherwise and, unless the company has previously so resolved, it is not bound to comply with the section unless there is deposited with it not later than six weeks before the AGM to which the request relates, or if later, the time at which notice is given of that meeting, a sum reasonably sufficient to meet the expenses in complying with the section.


Prior to the 2006 Act, private companies could opt out of the requirement to hold AGMs if their members unanimously agreed. Since the 2006 Act, private companies are not required to hold AGMs at all, although they may do so if they wish.


16.2  General meetings


16.2.1 Members


Section 303 provides for the members’ power to require directors to call meetings. The directors are required to do so if members who hold at least 10 per cent of the paid-up capital of the company carrying voting rights at general meetings, except in the case of a private company where more than 12 months has elapsed since the end of the last general meeting, in which case the required percentage is 5 per cent.


Section 304 provides that it is the directors’ duty to call meetings that are required by members under s 303. They must call the meeting within 21 days of receiving the request and the meeting must be held not more than 28 days after the date of the notice convening the meeting (s 304(1) (a), (b) CA 2006).


Section 305 provides that the members may call a meeting at the company’s expense if the directors are required under s 303 to call a meeting and have not done so in accordance with s 304 CA 2006. The meeting must be called for a date not more than three months after the date on which the directors become subject to the requirement to call a meeting (s 305(3)). Any reasonable expenses incurred by the members requesting the meeting by reason of the failure of the directors duly to call a meeting must be reimbursed by the company (s 305(6)).


It should be noted that s 303 requires ‘members’ in the plural: one member will not satisfy the section; see Morgan v Morgan Insurance Brokers Ltd [1993] BCC 145.


16.2.2  The court


Section 306 provides for the court to order a meeting. The section applies if, for any reason, it is impracticable:


(i)  to call a meeting of the company in any manner in which meetings of the company may be called; or


(ii)  to conduct the meeting in the manner prescribed by the company’s articles or the Act (s 306(1) CA 2006).


The court may either, of its own motion or on the application:


(i)  of a director of the company; or


(ii)  of a member of the company


who would be entitled to vote at a meeting, order a meeting to be called, held and conducted in any manner the court thinks fit (s 306(2)).


A previous similar provision was often used in the case of deadlock where a company perhaps has two members and one member is refusing to attend a meeting; for example, see Re Sticky Fingers Restaurant Ltd [1992] BCLC 84. In this case, one member of the company had presented a petition claiming unfairly prejudicial conduct. The other member, Bill Wyman of the Rolling Stones, was allowed to hold a meeting with the quorum fixed at one for the purpose of appointing additional directors, provided that any such directors would not act to the prejudice of the other shareholder pending the outcome of the minority protection proceedings. The section was used in a similar way in Re Whitchurch Insurance Consultants Ltd [1993] BCLC 1359, where Mr Rudd wished to remove the other member, Mrs Rudd, as a director. In Re the British Union for the Abolition of Vivisection [1995] 2 BCLC 1, application was made to the court under s 306 to give directions for the calling of a meeting to avoid anticipated disruption. There had been disorder at a previous meeting and what was therefore sought was the convening of a small meeting consisting only of members of the committee, with no other members being entitled to attend in person but those absent to vote by postal means. This was so ordered.


Section 306 cannot be used to affect substantive voting rights or to shift the balance of power between different shareholders.


The Court of Appeal allowed an appeal in Ross v Telford and another [1998] 1 BCLC 82, where the judge had ordered a meeting which would have had the effect of enabling one 50 per cent shareholder and his solicitor to outvote the other 50 per cent shareholder. Ross and Telford, during the course of their marriage, had carried on business as electrical contractors through the medium of a small group of companies. They had equal shareholdings in one company (PLB), although Ross had effectively more shares in another company (L). The shareholdings in L were held as to 50 per cent by Ross and as to 50 per cent by PLB.


Ross alleged that Telford had forged his (Ross’s) name on company cheques. He caused the company (L) to start proceedings against Telford. He applied for, and obtained, an order under s 371 that a meeting of the board of L (Ross and Telford were the only directors) could be called, and that one member should be deemed to be a quorum. This was granted by court order, the judge ordering that a meeting be held for the purpose of considering and voting upon a resolution for the appointment of a representative of Ross’s solicitors as a third director of the company, and that the representative of the solicitors might attend at the meeting and vote on behalf of PLB.


The effect of the order made by the judge was to regulate the affairs of PLB by authorising a representative of Mr Ross’s solicitors to be appointed to represent the company at a general meeting of L. Such an appointment would normally be made at a board meeting of PLB. The effect of the order was to break the deadlock in PLB.


The Court of Appeal held that what is now s 306 did not empower the court to break a deadlock in this way at either a board or a general meeting of a company.


The court cannot make an order so as to permit a 50 per cent shareholder to override the wishes of the other 50 per cent shareholder.


This case is clearly distinguishable from cases such as Re Sticky Fingers Restaurant Ltd (1992), where the court was determined to prevent the quorum provisions from being abused by minority shareholders.


16.2.3  Directors


Section 302 provides that the directors may call general meetings.


16.2.4  Auditors


Section 518 CA 2006 provides that an auditor may deposit with a notice of resignation a signed requisition calling on the directors of the company forthwith duly to convene a general meeting of the company for the purpose of receiving and considering such explanation of the circumstances connected with the resignation as the auditor may wish to place before the meeting.


16.2.5  Serious loss of capital


The directors of a public company are obliged to call an extraordinary general meeting where the net assets of the company are half or less of its called-up share capital (s 656 CA 2006).


The directors must call a general meeting of the company to consider what steps, if any, should be taken to deal with the situation. They must do so not later than 28 days from the earliest day on which that fact is known to a director of the company. The meeting must be convened for a date not later than 56 days from that date.


Failure to convene a meeting as required constitutes an offence by any director who knowingly authorises or permits the failure, or after the relevant period knowingly authorises or permits the failure to continue.


16.3  Class meetings


In addition to meetings of the company, meetings may also be held of different classes of shareholders. Such meetings may be necessary, for example, to consider a proposed variation of class rights (see section 7.6). Most of the rules that apply in relation to company meetings also apply in relation to class meetings (ss 334–335 CA 2006).


16.4  Notice


The Companies Act 2006 lays down periods of notice required for general meetings.


Section 307 provides that the notice required for a general meeting of a private company is at least 14 days’ notice.


In relation to a public company, the notice required is in the case of an annual general meeting at least 21 days and in any other case at least 14 days (s 307(2) CA 2006).


Shorter notice may be agreed to by the members (s 307(4)), though this does not apply to an annual general meeting of a public company. In the case of an annual general meeting of a public company, all of the members must agree to the giving of short notice (s 337(2) CA 2006).


The waiving of full notice must be done purposefully and cannot be done simply by all of the members turning up to the meeting without realising that there should have been a longer period of notice provided to the members: see Re Pearce Duff [1960] 1 WLR 1014. Thus precedent was not cited in Re a Company (No 004377 of 1986) [1987] 1 WLR 102, where it was held attendance indicated acceptance of short notice.


In Schofield v Schofield and others [2011] EWCA Civ 154, on 25 February 2011, the Court of Appeal held that shareholders can treat a meeting as valid despite irregularities in the notice.


The shorter notice period must be agreed to by a majority in number of the members having the right to attend and vote at the meeting, being a majority who together hold not less than the requisite percentage in nominal value of the shares with a right to attend and vote, or, in the case of a company not having a share capital, together represent not less than the requisite percentage of the total voting rights at that meeting. The requisite percentage is:


(a)  in the case of a private company, 90 per cent or such higher percentage (not exceeding 95 per cent) as may be specified in the articles; and


(b)  in the case of a public company, 95 per cent (s 307(5) and (6) CA 2006).


Notice may be given in hard copy form, in electronic form or by means of a website (s 308 CA 2006). In relation to a website notice, s 309 provides as follows.


The website notification must:


(a)  state that it concerns a notice of a company meeting;


(b)  specify the place, time and date of the meeting; and


(c)  in the case of a public company, state whether the meeting will be an annual general meeting.


The notice must be available on the website throughout the period, beginning with the date of the notification and ending with the conclusion of the meeting (s 309(3) CA 2006).


Notices must be sent to every member of the company and every director (s 310(1) CA 2006).


In relation to members this includes any person entitled to a share in consequence of death or bankruptcy of a member (s 310(2) CA 2006).


The notice of a general meeting of a company must state:


(a)  the time and date of the meeting; and


(b)  the place of the meeting.


Notice of a general meeting of a company must state the general nature of the business to be dealt with at the meeting (s 311 CA 2006).


16.4.1  Special notice


Where, by any provision of the Companies Act, special notice is required of a resolution, the resolution is not effective unless notice of the intention to move it has been given to the company at least 28 days before the meeting at which it is moved (s 312(1) CA 2006).


The company must, where practicable, give its members notice of any such resolution in the same manner and at the same time as it gives notice of the meeting. If that is not practicable, the company must give its members notice at least 14 days before that meeting:


(a)  by advertisement in a newspaper having appropriate circulation; or


(b)  in any other manner allowed by the company’s articles (s 312(2) and (3) CA 2006).


It is provided that if after notice of the intention to move such a resolution has been given to the company, a meeting is called for a date 28 days or fewer the notice has been given, the notice is deemed to have been properly given though not given within the time required (s 312(4) CA 2006) (see also section 10.6).


16.4.2  Accidental failure to give notice


Section 320 CA 2006 deals with the accidental failure to give notice of a resolution or meeting.


Where a company gives notice of:


(a)  a general meeting; or


(b)  a resolution intended to be moved at a general meeting,


any accidental failure to give notice to one or more persons shall be disregarded for the purpose of determining whether notice of the meeting or resolution (as the case may be) is duly given.


It is important to realise the effect of this provision. The accidental failure to send a notice where there was an oversight did not render the meeting invalid in Re West Canadian Collieries Ltd [1962] Ch 370. The error arose here because the dividend payment had been made separately to certain members and their addressograph plates had therefore been kept in a separate place. They were, therefore, omitted when notices were sent out. By contrast, the failure to send notice in Musselwhite v Musselwhite & Son Ltd [1962] Ch 964 was quite deliberate. It was considered that the members concerned did not have a right to vote at the meeting as they had agreed to sell their shares. This was a genuine mistake but the failure to send notice was deliberate and therefore the meeting was invalid.


16.4.3  Members may require statements to be circulated


Section 314(1) provides that the members of a company may require the company to circulate to members of the company entitled to receive notice of the general meeting a statement of not more than 1,000 words with respect to:


(a)  a matter referred to in a proposed resolution to be dealt with at that meeting; or


(b)  other business to be dealt with at that meeting.


A company is required to circulate a statement if it receives a request to do so from:


(a)  members representing at least 5 per cent of the total voting rights of all members who have a relevant right to vote; or


(b)  at least 100 members who have a relevant right to vote and hold shares in the company on which there has been paid up an average sum per member of at least £100.


If a company fails to circulate a member’s statement under s 314, then an offence is committed by every officer of the company who is in default (s 315 CA 2006).


The expenses of circulating members’ statements need not be paid by the members who requested the circulation of the statement if:


(a)  the meeting to which the requests relate is an Annual General Meeting of a public company; and


(b)  requests sufficient to require the company to circulate the statement are received before the end of the financial year preceding the meeting (s 316(1) CA 2006).


Otherwise the expenses of the company in complying with the section must be paid by the members who requested the circulation unless the company resolves otherwise. Unless the company has previously so resolved, it is not bound to comply with that section unless there is deposited with it, or tendered to it, not later than one week before the meeting a sum reasonably sufficient to meet its expenses in doing so (s 316(2) CA 2006).


A company is not required to circulate a statement under s 322 if, on an application by the company or another person who claims to be aggrieved, the court is satisfied that the rights conferred are being abused (s 317(1)).


The court may order the members who requested the circulation of the statement to pay the whole or part of the company’s costs on such an application, even if they are not parties to the application (s 317(2) CA 2006).


16.5  Quorum at meetings


Section 318 provides that in the case of a company limited by shares or guarantee, and having only one member, one qualifying person present at a meeting is a quorum (s 318(1) CA 2006).


In any other case, subject to the company’s articles, two qualifying persons present at a meeting are a quorum, unless:


(a)  each is a qualifying person only because he is authorised under s 323 to act as the representative of the corporation in relation to the meeting, and they are representatives of the same corporation; or


(b)  each is a qualifying person only because he is appointed as proxy of a member in relation to the meeting and they are proxies of the same member (s 318(2) CA 2006).


Problems sometimes arise over the matter of a quorum. The Oxford Concise English Dictionary defines a meeting as ‘an assembly of people for a purpose’. This implies that there should be more than one person present and that they should be in each other’s physical presence. Each of these features tends to cause problems.


At common law, a meeting must be made up of more than one person. In Sharp v Dawes