Purpose and Procedure of General Meeting after establish company in UK

01 Jun

Once how to form a company in UK is known, the purpose and procedural requirements of either annual general meetings or other meetings, must be understood. Hence the article serves this purpose.

Purpose of Meetings 

The structure and importance of meetings should be known when set up a new company UK. The purpose of meetings in a company is to provide a platform where new ideas can be shared with the members and any decision that has to be made can be voted upon by the members. Hence, passing resolutions is what meetings are intended for. Nevertheless, accounts and annual reports are discussed in general meetings. The general meetings may be held annually.

If the members give their assent to any resolution by the required majority, the resolution being voted upon is passed in the meeting. The board is then obliged to implement those actions in the form of act of the company.

Resolutions Types

There are two types of resolutions. Ordinary and Special Resolutions.

  • According to Section 281(3), an Ordinary Resolution is taken into consideration for every matter unless the articles suggest special resolution for any matter.
  • Where as Special Resolutions are for protecting minorities. For instance, a person having 25% votes can prevent the implementation of a special resolution.

Traditionally, there was a vote allotted to the Chairman for the prevention of gridlock. Nonetheless, the government is of the view that the definition of ordinary resolution in Section 282 annuls any resolution upon which the chairman has voted. However, Gower and Davies do not agree with it.

  • Section 282(3) states that voting done via show of hands allots vote to those who are entitled to vote and considers the vote and not weight of votes linked with the voters’ shares.
  • Section 282(4) states that in case of voting by poll the total votes linked with the shares of the entitled voters are considered.
  • The same regulations apply to the class in a meeting of a class according to s281.

It should be noted that the decisions unspecified in the act, must have lower, higher, weighted or any other condition as voting requirements specified by the company.

Procedural requirements for the Meeting 

As there are procedural requirements to set up a new company UK, there are procedural requirements for calling a meeting as well. A proper notice should be given for the meeting and resolution to be voted upon in that meeting. The meeting should be conducted upon the procedure outlined for it in the act and constitution. When these two conditions are met, the passage of resolution is considered valid.

  • The business’s general nature must be notified as per Section 311(2) CA
  • Section 312 of Companies Act, defines special notice to be sent 28 days before. It is required for any director’s removal (Section 168(2)) and auditor’s removal per Section 510(2)(b) / Section 511(1)
  • In case of a special resolution, Section 283(6) demands the text of the resolution, aim for it as a special resolution and notice for special resolution to be circulated amongst all the members.

Article 40 Model Articles allows for public companies permits modification of ordinary articles provided that the scope is not altered materially. Nevertheless, special resolutions can only be modified for grammatical or negligible errors. Nothing has been mentioned about the matter in Articles for private companies.

  • Consider the Re Moorgate case. Slade held that special resolutions cannot be subjected to amendments apart from clerical or grammatical mistakes and substitution of words with more formal words.

Gower & Davies are of the view that a modification is allowable merely in case the modification of resolution is done such that none of the members intending for not to attend and vote, and if intending to vote, adopts a different reaction to the modified version.  That is, their decisions must not change with the alteration of resolution.

According to Section 312 of Companies Act, this rule is also applicable to ordinary resolutions where “special notice” is mandatory. Therefore, no alteration of matter, can be made in the resolution mentioned in the special notice. 

  • Hence, a resolution for the removal directors or more than two auditors, may have any amendment to merely remove, as in, one is unallowable. According to Gower & Davies, this is method to weaken the power of members and unjustifiable to the directors whom the members are willing to retain.

However, an ordinary resolution may principally have amendments. Nevertheless, subjected to comments in Re Moorgate case according to Gower & Davies. The about Articles may limit the liberty of members by allowing the Chairman to deny the modifications that are not notified about 48 hours before via a written notice.

  • A resolution cannot be debated before the commencement of meeting. The law is different for AGMs and other shareholder meetings.

Annual General Meetings

After you open new company UK, the meetings should be organised on annual basis. As Section 336-340 is only applicable to public companies so annual general meeting is not compulsory.

  • According to Section 338A, if sufficient members agree, members may add new matters in the list of agenda of AGM.
  • Business transacted at AGM has no limits. If company fails to arrange an annual general meeting, then as per Section 336(3)-(4), every officer is liable to a fine.

 Non-AGM Meetings 

  • Section 302 allows the Board to arrange a meeting of Members whenever needed.
  • Section 303 states that if members own 5% of share capital, they can request a meeting. As per Section 303(4), the request should state business nature to be discussed and the relevant resolutions to be voted upon.
  • In case a company does not call for a meeting within 21 days, the members requesting for a meeting may arrange it themselves within 28 days. Moreover, the company must pay for the reasonable expenses as per Section 305. This is suitable for small scale companies. Likewise, in institutional investors in PLCS, however, small shareholder in PLCs may not go for this.
  • Articles can give more liberty to the Members to conduct meetings. However, it is less likely that too much interference is allowed with the management.
  • Section 306 states that the court has the power to order a meeting to be conducted either on its own motion, or on director or member’s application. Frequently implemented in the absence of quorum of directors to conduct a meeting.
  • There should be two persons per quorums at a meeting (Section 318(2)) unless it is a one-man firm or the Constitution demands greater number of quorums (s318(2)).

Thus, if a Board having two people, with a restriction of two quorums may get gridlocked completely.

Solution to deadlock

Once you open new company UK, the company may have threat of a deadlock situation. Section 306 is used to break any deadlock created by quorums. As the general law of majority is frustrated by the condition of quorums’ presence in the meeting when the shares are 50:50. If the deadlock via quorum’s condition is intentionally created the rule must not be applicable.

For instance, Re El Sombrero. Gower & Davies believe that it is dependent upon the construction of articles. Unless the requirement of quorum is related to the class rights linked to shares of any of the parties, to be frustrated, the section should not be used.

Another situation where the section cannot be implemented is where the shares are held in unequal proportions by the shareholders.  The reason is that Quorum’s presence in the meeting becomes non-obligatory as the resolution can be passed via the consent of majority for written resolution without calling a meeting. Same is the case when court senses that any group intends to use votes for the prevention of an impactful meeting. The court may interfere via Section 306 as in Re British Union case. Personal attendance was set mandatory for voting by the articles. The general meeting was disturbed by minority. Hence, the court ordered to conduct a meeting to vote upon the resolution for the abolishment of personal attendance law.

Presence of all the attendees in meeting room:

Model Article 37(4)-(5) states that for private companies it is not mandatory for all members to be present at the same venue. However, they all should be able to use their power of vote and speak for their right.

Planning the Agenda

The Board conducts general meetings and plans the points to be discussed in the meeting.

  • Section 338 makes it mandatory for the members who have a 100 members or 5% representation and each of them have paid an amount of at least £100, to give a notice of their requested resolution for the next AGM to the company.
  • Whereas, Section 307, requires the notice to be given on 21 days.

Directors have the right to submit statements promoting their resolution. Members with at least shares of 5% or those 100 members who have given £100 each, can circulate a statement of 1000 words supporting their resolution (s314­316). To establish company in UK it should be known that the company must bear the circulation charges unless stated by the resolution.

A notice may be made mandatory by the articles of company for other causes as well. For instance, Articles may demand that nobody may get the directorship without the recommendation of Board at a notice of 14 days. Also along with the assent of appointee.

The members do not have the right to suggest any candidate as a substitute at the general meeting.

Substance of the Notice

Following are the things that must be included in the Notice:

  • Date, timings and venue
  • Statement demonstrating the general nature of the transaction or matter under consideration
  • Anything that the constitution makes necessary to be mentioned in the notice as stated in Section 311.
  • In case of a special resolution, Section 283(6) desires its text should be mentioned and the intention behind the proposal of the resolution.

CLR proposed the resolution to be submitted also attachment. However, the suggestion was not considered. Although a notice is enough for regular business, in case of a different and new matter, a circular must be attached with it. The circular must contain the justification for Board’s opinion in the matter. Resolutions will remain unconsidered if any false representation is given for the facts in the circular.

The members should be aware enough about the matter so as to decide about attending the meeting. It may require circulars to be sent to them. Hence this shows that the board has a strong position. As they can pass any statement for free. Whereas the members have to pay for it or gather a certain representation of shareholders who can in support of their resolution.

  • Gower & Davies state that this authority is comparatively ineffective and singular when it comes to practical scenarios. According to Section 310, it must be shared with every member as well as director.
  • However, articles have the authority of removal of any person as stated in Section 310(4).

Rules for Attendees

Harben case makes it compulsory for the attendance and voting to be done in person. The Rights Directives of shareholders makes it necessary for the MS to allow for voting through correspondence before the meeting takes place. However, the companies may or may not adopt this method.

  • As in Section 324­331, Members may appoint a proxy to attend and vote in place of them in the meeting. So they do not require to be at the meeting personally.
  • According to Section 324(2), different substitutes can be selected by members each for a different class of shares.
  • Section 327(A1)(b) of Companies Act states that, the company must be informed properly about the proxy and his identity.
  • As per Section 325, a notice should be shared with the members, telling them about their statutory rights. However, if it is not done, the resolution remains valid.
  • In Section 330, it is stated that, to consider a proxy’s vote invalid, there should be a notice given to the company about his termination. Else, the vote will be counted towards quorum. The notification should be sent at least 48 hours before the meeting (Section 330(5)-(7)).
  • According to Agency laws, before he votes, if he notify revocation ot the proxy it will be effective.
  • Proxy must follow the instructions given to him for voting (Section 324A). If he fails to abide by the instructions, he will have a judgement, to exercise faithfully. Then would not be answerable.
  • If another company is the member, Section 323, allows the company to ratify a person to represent the company at the meeting.
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