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Shareholder meetings

Shareholder meetings

Contents

Types of shareholder meetings

Annual general meeting

A company may have an annual general meeting ('AGM') at which key information is presented to the shareholders ('members') and key issues decided on. However, private companies don't need to have an AGM unless their articles of association (the rules that govern a company) say so, or unless their shares are admitted to trading on a regulated market in an EEA state.

Standard ('model') articles for a private company limited by shares don't say it must have an AGM.

General Meeting

A meeting of members other than the AGM is called a general meeting.

Notice of meetings

In a private company, 14 clear days' notice is required for a general meeting unless the articles say otherwise. Clear days means that there must be 14 days not counting the date on which the notice is given and the date of the meeting. So, if the members receive notice on 1 March, the meeting can take place on 16 March. The 14 days does include weekends and public holidays.

An AGM for a private company can be called on 14 clear days' notice unless the articles provide otherwise.

In a private company whose shares aren't traded, shorter notice can be agreed by the majority in number of the shareholders who have the right to attend and vote at the meeting. However, they must also hold 90% or more of the shares. This means that if there are 5 shareholders with a right to attend and vote at the meeting, at least 3 should agree to the short notice. These 3 must together hold 90% or more of the company's shares.

A notice sent electronically or by post is deemed to arrive 48 hours after it was sent. It's therefore usual to add another 2 days to the notice period.

If special notice of a resolution is required, e.g. if a resolution is proposed to remove a director or auditor, this notice must be given to the company 28 clear days before the meeting. This, therefore, affects the earliest date on which the meeting to remove the director or auditor can be held.

Quorum

A quorum is the minimum number of members needed to attend a meeting for a resolution to be validly passed. They need to stay for the whole meeting, otherwise the meeting should end. The quorum for general meetings is 2 members, unless the company only has one member. In a company with more than one member, the quorum can only be reduced to one if the court allows this.

Representatives, or 'proxies', authorised to stand in for absent members can count as part of the quorum. However, the quorum can't be made up of one shareholder present as themselves and as proxy for another shareholder.

Under the model articles for a private company, members not in the same place as each other can attend the general meeting other than in person, e.g. by video conferencing, as long as they're able to communicate in the meeting.

Chairing the meeting

Under the model articles for a private company, a chairperson chosen to chair directors' meetings will usually also chair general meetings. If this person isn't present at the general meeting within 10 minutes of the start, someone else can be chosen to chair it. This person can be appointed by the directors present at the meeting or by the shareholders.

Which resolution to use?

Generally, members can act by ordinary resolution. In some situations, however, the law or the articles might require them to pass a special resolution instead. For example, by law, members need to use a special resolution to change the company's name or articles.

An ordinary resolution is passed when more than 50% of the shareholders present and voting at the meeting vote in favour. A special resolution is passed when 75% of the shareholders present and voting at the meeting vote in favour.

Voting

Members can vote at general meetings in 2 ways: either on a show of hands or on a poll.

If a vote is taken on a show of hands, each member has one vote. If a poll vote is taken, each member has one vote for every share they own. Proxies have as many votes as the member they represent.

The members usually vote by show of hands unless someone demands a poll. The articles usually state who can demand a poll vote. The model articles for a private company limited by shares state that a poll vote can be demanded by:

  • A director
  • The chairman
  • Any 2 shareholders
  • Shareholders holding a least 10% of the shares

An ordinary resolution requires over 50% of the shareholders to agree. If exactly 50% of the shareholders vote for the ordinary resolution, it'll be defeated. For companies formed under the Companies Act 2006, the chairperson at general meetings won't have a casting vote to change this position.

A special resolution requires 75% of the shareholders to vote in favour.

If there are 3 shareholders, on a show of hands 2 voting in favour can pass an ordinary resolution. However, on a poll vote, the 2 in favour must together hold more than 50% of the shares in order to pass an ordinary resolution. If the third shareholder owns 60% of the shares, the first 2 won't be able to pass an ordinary resolution on a poll vote on their own.

Written resolutions

Only private companies can use written resolutions. Written resolutions mean that members don't need to attend an actual meeting in order to vote.

A written resolution can't be used to remove a director or auditor from office.

They're usually proposed by the directors, but can be proposed by shareholders holding at least 5% of the voting shares of the company.

A copy of the proposed written resolution must be sent to every eligible member. These are the members who are entitled to vote on it. It must also be sent to the auditors.

The members must be told in the resolution or an accompanying statement how to agree to it, and the date by which they must agree (the 'lapse date'). The instructions for how to agree the resolution ('authentication instructions') might, for example, state that to show consent electronically, a member must sign, date and scan the resolution and then email it to the company. The articles might also contain rules as to how written resolutions can be agreed, e.g. by email to a specified email address and/or from a specified email address for that member.

The resolution is passed when the majority required for that type of resolution has returned an 'authenticated document' to the company. This is a document that identifies the resolution and indicates the shareholder's agreement to it. A document is authenticated by signing a hard copy. If it's in electronic form, it's authenticated by following the instructions given by the company. If no instructions were given, it's authenticated by providing a statement as to the identity of the sender.

An ordinary resolution is passed when more than 50% of the eligible members have returned an authenticated document to the company showing their consent. A special resolution is passed in the same way, but with 75% of the eligible members showing their consent.

The resolution will lapse if the company hasn't received the authenticated document approving the resolution by the lapse date. The lapse date is usually 28 days from the date the written resolution is given to the members unless otherwise specified in the articles. A member can't withdraw their agreement to the resolution once they've sent it to the company.

Dividends

Only the directors can recommend to the members at a general meeting how dividends are paid and how much. Dividends are then declared by the members who can vote to pay themselves that amount or less.

The directors can only recommend payments of dividends if there are profits available. Even if your company hasn't made a profit this year, you might still be able to pay a dividend if there are enough profits from previous years.