Summary LPC Business Law and Practice Workshop 05 revision notes

BLP WS 5
Members’ Decision-making
Decisions within the control of shareholders
The most important decisions impacting the company are reserved to shareholders, including the following:

 Changing the COMPANY NAME by special resolution, provided no other procedure is set out in articles: s77(1)
 Amending the COMPANY ARTICLES by special resolution: s21(1)
 Approving a substantial property transaction (SPT) by ordinary resolution: s190
 Approving a DIRECTOR’S SERVICE CONTRACT for a fixed term over TWO years by ordinary resolution: s188
 Approving compensation to a director for loss of office by ordinary resolution: s217
 Authorising directors to ALLOT NEW SHARES by ordinary resolution: s551(1)
 Disapplication of shareholders’ PRE-EMPTION RIGHTS by special resolution: s569(1), s570(1) and 571(1)
 Approving contract to BUYBACK company shares by special resolution: s694 and payment to buy back company
shares out of capital by special resolution: s716(1)
 Ratify a director’s BREACH OF DUTY by ordinary resolution: s239(1)
 Authorising political donations by ordinary resolution: s366(1)
 Deciding to register private company as public one by special resolution: s97(1)(a)
 Removing a director against his will by ordinary resolution: s168(1)
 Removing an auditor of the company by ordinary resolution: s510(2)
 Direct board of directors how to act by special resolution: MA4(1)
 Wind company up under IA1986


Decision making procedures for shareholders

The shareholders of a private company with more than one shareholder
will take decisions in one of two ways: (they are mutually exclusive)

 by passing a resolution at a shareholders’ general meeting (FULL OR SHORT); or
 by a shareholders’ written resolution.

Thresholds of shareholder decision-making power

Shareholding What shareholders can do (subject to articles)
Any Shareholder  Vote (if the shareholder’s shares have voting rights).
 Receive dividends (if declared).
 Receive notice of GMs
5%  Circulate a written resolution (s292).
 Requisition a GM (s303).
 Circulate a written statement (s307(5) & (6)).
10%  Right to demand a poll vote (MA 44)
Over 25%  Block a special resolution.
Over 50%  Pass an ordinary resolution.
Though weighted voting rights may alter this in articles.
75%  Pass a special resolution.
Though weighted voting rights may alter this in articles.
100%  Pass all resolutions at will.




General meeting
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, BLP WS 5

Steps of a general meeting
Who can call?  Directors (s302) – by board resolution (Browne v La Trinidad (1887) 37 ChD 1).
More common in practice – what we cover on course
 Shareholders (must own more than 5% of the share capital) (s305(1)) – may force
directors to hold BM – not covered on course, very rare in practice
 The court (s306)
 Auditors (s518)
Notice To whom must  s310 CA 2006: Notice must be given to:
notice be given?  All shareholders.
 Every director.
 To the PR of any deceased shareholder.
 To the trustee in bankruptcy of a bankrupt member.
 The company’s articles may make alternative provision (s 310(4)).
 Notice must also be given to the company auditors (s502(2)(a)).

 APPLICATION: Who are the parties, on the facts, who must receive notice of the
meeting? Who are the shareholders? Who are the directors?

Form of notice  s308 CA 2006:
 Hard-copy form
 Electronically (eg by e-mail or fax)
 Via a website.
 Or by a combination of these methods
 Hard copy notices must:
Be handed to the shareholders personally, or be sent by post, or publication on
company’s website.
Content of the Must include:
notice  Name of company
 Time, date and place of the meeting (s311(1))
 General nature of the business to be dealt with (s311(2)).
o This provision may be amended by the articles (s311(2));
 A statement of rights to appoint a proxy (s325(1)
o If a shareholder cannot attend he is entitled to appoint someone else to
attend and vote in his place.
 The general words of any ordinary resolution proposed - can be amended, but
not so radically that it would make the notice of the meeting ineffective (Betts v
MacNaughten)
 If a special resolution is proposed: The full text/wording of the resolution and an
intention to propose this at the forthcoming meeting must be included in the
notice (s283(6)(a)) – this cannot be amended

 APPLICATION:
 When will the meeting be held, having regard to the minimum length of
notice (see below)?
 Are there any ramifications of delaying the decision that long?
 What special resolutions are proposed, if any?
Length Must give 14 “clear days” notice unless the requirements enabling “short notice” are met.

 Statutory 14 clear days = 16 days (CA 2006, s307(1))
o “Clear days” means not including the day of the meeting, or the day on
which notice is given (s360)
o (i.e. the earliest the GM can take place is 16 days after the notice is
given). Includes weekends.
o So, if notice is given on 1st January, the earliest day the meeting can be
held is the 16th January.

 Deemed Delivery Provisions (s1147 CA 2006):
o A document is deemed to be received by the intended recipient 48 hours

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