Part 11 Decision making and meetings
June 2011
The Companies Act 2006 is permissive legislation, in that, it recognises that many decisions, particularly in smaller companies, are taken informally. The decisions taken by a company are called resolutions.
A resolution is an agreement or decision made by the members, a class of members or the directors to carry out certain changes, for example altering the articles of association.
A resolution of members (or of a class of members of a private company) must be passed either by way of a written resolution or at a meeting of members [Note 1]. A written resolution cannot remove a director before the expiry of his/her period of office or to remove an auditor whilst in office [Note 2]. A resolution by the members of a public company must be passed at a meeting of the members [Note 3].
75.193 Resolution of directors
A resolution of directors may be passed by a written resolution or at a meeting of directors. See paragraph 75.64 for further details.
An ordinary resolution of the members (or of a class of members) is one that is passed by a simple majority. An ordinary resolution may be passed in writing (see paragraph 75.198) or at a meeting (see paragraph 75.214 and paragraph 75.216) [Note 4]. A special resolution of the members (or of a class of members) is one that is passed by a majority of not less than 75%. A special resolution may be passed in writing (see paragraph 75.198) or at a meeting (see paragraph 75.214 and paragraph 75.216) [Note 5].
75.195 Director’s written resolutions to be considered by members
Written resolutions proposed by the directors must be circulated to every eligible member. The written resolution should be accompanied by a statement explaining how to vote on the resolution, and the date by which it must be passed if it is not to lapse [Note 6]. Every officer who fails to comply with this section commits an offence [Note 7]. The date of the written resolution is the date it is circulated to members [Note 8]. The resolution may be circulated in hard copy, electronically [Note 9] or via the company’s website [Note 10].
75.196 A member’s written resolutions
Members of a private company can require the company to circulate a written resolution. A written resolution will not be considered if it would be ineffective, i.e. contrary to the company’s constitution, if it defamatory of any person or if it is frivolous or vexatious. The members can ask the company to send out a statement of not more than 1,000 words with the resolution. The company is required to send out the resolution and statement if requested to do so by members representing 5% of the total voting rights of the members entitled to vote. The company can reduce this figure by adopting such a clause in its articles of association [Note 11].
75.197 Circulation of a member’s written resolution
If the required number of members request circulation of the resolution, the company must send it and any statement to all eligible members either electronically, by hard copy or by means of a website. The notice must include guidance on how to vote for the resolution together with a closing date, after which the resolution, if not passed, will lapse. Every officer who fails to comply with this section commits an offence [Note 12]. The expenses for circulating the resolution must be paid by the members requesting the circulation unless the company decides otherwise [Note 13]. The company can apply to the court for an order that the resolution should not be circulated. If the company obtains such an order the members may have to pay the company’s costs [Note 14].
75.198 How a written resolution is agreed
A member, or his/her representative, sends to the company, an authenticated document clearly identifying the resolution and his/her agreement to it. The document can be sent by hard copy or in electronic form. Once a member’s agreement has been sent to the company it cannot be revoked. A written resolution is passed once a majority of members eligible to vote have indicated their agreement [Note 15]. In the case of a company having a share capital each member has one vote for each share held, or one vote for each £10 of stock held [Note 16]. The time allowed for voting, if not specified in the articles of association, is 28 days, after which the resolution lapses, if not passed [Note 17].
75.199 Resolutions at meetings
Private companies can pass a resolution either by written resolution or at a general meeting, see paragraph 75.192. A private company does not have to hold an annual general meeting (AGM). However every public company must hold an AGM within 6 months beginning with the day following its accounting reference date. The AGM is in addition to any additional meetings a public company convenes [Note 18]. A public company can pass a resolution at its AGM or at another meeting [Note 19]. A resolution is deemed to have been passed if notice of the meeting and of the resolution has been given and the meeting has been validly held and concluded [Note 20].
75.200 Calling a general meeting
A general meeting can be called by its directors [Note 21]. A company’s members can ask the directors to call a general meeting. The directors must call a meeting if a request is received by members representing 10% of that part of the share capital which carries voting rights at general meetings. If a private company has called no general meeting within the last 12 months the required percentage is 5%. The request may be in hard copy or delivered electronically. The request must state the general nature of the business of the meeting and may include the text of a resolution [Note 22]. The directors are required to call a general meeting within 21 days of receiving the request. The meeting to be held not later than 28 days of the notice calling it [Note 23].
75.201 Members power to call a meeting
If the directors of a company fail to call a meeting after receiving a valid request, the members asking for the meeting may call a general meeting. The notice of the meeting must include the text of any proposed resolution. The meeting should be held within 3 months of the date the directors were required to call the meeting. The meeting should, as far as possible, be called in the same way as if the directors had called it. The reasonable expenses of the members in calling the meeting must be reimbursed by the company. The company can then deduct these funds from monies due to those directors in default [Note 24].
75.202 The power of the court to call a meeting
The court may order a meeting of the company to be called, held and concluded in any manner it thinks fit. The court may do this on its own motion or after receiving an application from the directors or members. The court may also give additional directions, for example, what would constitute a quorum. A meeting of the company called, held and concluded in accordance with a court order is valid [Note 25].
75.203 Time scale required for notice of a general meeting
The minimum notice of a general meeting that both a private and public company must give, unless it is an adjourned meeting, is 14 days. A general meeting for private and public companies may be called by shorter notice if agreed by the members. For private companies, such a decision must be supported by those members holding 90% of the nominal value of the shares giving the right to attend and vote at the meeting. The articles of association may increase this percentage to 95%. For public companies the decision must be supported by those members holding 95% of the nominal value of the shares giving the right to attend and vote at the meeting. The company’s articles of association may increase the period of notice beyond the 14 days [Note 26].
75.204 Time scale required for notice of an annual general meeting
The minimum period a public company must give for its AGM, unless it is an adjourned meeting, is 21 days [Note 27]. An AGM may be called with shorter notice if all members, entitled to attend and vote, are in agreement [Note 28]. The company’s articles of association may increase the period of notice beyond the 14 days [Note 29].
75.205 Notice of general meetings
A company may give notice of a meeting in electronic form, by hard copy, by means of a website or by a combination of those methods [Note 30]. The notice of a general meeting must state the time, date and location of the meeting together with an indication of the business to be dealt with [Note 31]. The notice should include details of any resolutions to be considered, see paragraph 75.199. A company must inform a member that it has placed the notice of a meeting on a website for it to be valid. The notice of the meeting must be available on the website from the date of notification until the conclusion of the meeting [Note 32]. In all other instances the notice must be sent to every member of the company and every director. The notice must also be sent to the personal representative of a deceased member and the trustee in bankruptcy in respect of a bankrupt member [Note 33].
75.206 Accidental failure to give notice to members
Where a company accidentally fails to give notice of a general meeting or a resolution intended to be moved at a general meeting to one or more persons the meeting will still be deemed to have been validly called.
If the notice was required by members, or the notice was of a meeting called by members, or the notice of resolutions proposed by members to be considered at an AGM, then an accidental failure to inform one or more persons will not invalidate the notice subject to the failure breaching a provision of the company’s articles of association [Note 34].
75.207 Circulation of members’ statements
A member of a company may be entitled to circulate to other members receiving notice of the meeting, a statement of not more than 1,000 words in respect of a proposed resolution or any other business to be dealt with at the meeting. A request to circulate the statement must be received at least one week before the meeting, it may be in hard copy or electronic form, it must identify the statement to be circulated and be confirmed as genuine by the person(s) making the statement. The company is required to circulate the statement if it has received the request from members representing at least 5% of the voting rights of those entitled to vote, or from at least 100 members who have the right to vote and an average paid up share value of £100 per member [Note 35]. The statement must be circulated to each member entitled to receive notice of the meeting in the same manner and at the same time, or as soon as possible after, as the meeting notice. An offence is committed by every officer that fails to circulate a statement that should have been sent to members [Note 36].
75.208 The costs of circulating the statement
In a private company the costs of circulating the statement must be borne by the members. In a public company the members must pay the costs of circulating the statement unless it is the company’s AGM and the request is received before the end of the financial year preceding the meeting [Note 37].
A court, on the application of the company or another person, may order that a members’ statement need not be circulated if it believes circulation would be an abuse of the procedure. The court may also order that the members pay the company’s costs [Note 38].
75.210 The appointment of proxies
A member of a company is entitled to appoint another person as his/her proxy to exercise all or any of his/her rights to attend, speak and vote at a meeting. If the company has a share capital the member may appoint more than one proxy provided that each proxy is appointed to exercise the rights attached to a different share or shares [Note 39]. The notice calling the meeting must state that a member has the right to appoint a proxy or proxies. A failure by the company to include this right is an offence which is committed by every officer who is in default [Note 40]. For a proxy to be valid it needs to be received by the company at least 48 hours before a meeting or adjourned meeting, at the time a poll is demanded if it is to be held within 48 hours and 24 hours if the poll is taken 48 hours after it was demanded [Note 41].
75.211 Representatives of corporations
A corporation, see Part 1, that is a member of the company may appoint a person or persons to act as it representative at meetings. An individual representative has the same powers as the corporation. If more than one individual is appointed as a representative then the corporation needs to provide specific instructions as to how they are to exercise their powers [Note 42].
In the case of a company with one member a quorum consists of one qualifying member. In every other case, subject to the articles of association, two qualifying people constitute a quorum. However if the qualifying persons are acting as a representative of the same corporation or act as proxy for the same member then the meeting does not have a quorum. A qualifying person is either, an individual who is a member of the company, a person acting as a representative of a corporation or a person appointed as a proxy [Note 43].
If the chairman of a general meeting is not specified in the articles of association then a member, or proxy [Note 44], may be elected by the meeting as chairman [Note 45].
75.214 Voting by show of hands at a meeting
In a vote by show of hands every member present, or represented, has one vote, unless the articles of association specify otherwise [Note 46]. The chairman in declaring the result, either for or against, provides conclusive evidence of the vote, as does an entry in the minutes of the meeting [Note 47].
75.215 Members can demand a poll
With the exception of votes for the appointment of a chairman or an adjournment of the meeting, members dissatisfied with the result on a show of hands can demand a poll. A poll of votes must be held if not less than 5 members having the right to vote, or a member or members representing not less 10% of the total voting rights, or by a member or members holding at least 10% of the paid up share capital of the company demand one [Note 48].
On a poll taken at the meeting every member present, or represented, has one vote in respect of each share or each £10 of stock held by him/her, unless the articles of association specify otherwise [Note 49]. A member entitled to more than one vote need not use them all or cast all his/her votes in the same way [Note 50].
75.217 Decisions by a sole member
Where the member takes any decision that may have been taken in a general meeting he/she must provide the company with the details. If the member fails to provide details of the decision it does not affect its validity but he/she commits an offence [Note 51].
75.218 A public company’s annual general meeting
A public company must hold its AGM in the period of 6 months beginning with the day following its accounting reference date. A public company that gives notice specifying a new shorter accounting reference date complies if the AGM is within 3 months of the notice. The company and every officer in default commits an offence if an AGM is not held within these time limits [Note 52]. The notice of the meeting must state it is the AGM [Note 53].
75.219 Records of resolutions and meetings
Every company must keep a record of all resolutions passed by members other than at meetings, minutes of all proceedings at general meetings and decisions provided to the company by a sole member. The records must be kept for at least 10 years. If the company fails to keep these records, it and every officer in default commits an offence [Note 54]. The records kept by the company must be available for inspection by any member of the company without charge. Copies may be requested by a member at his/her own expense. A member may apply for an order of the court to compel immediate inspection or that copies are provided [Note 55].
The Companies Act 2006 makes provision for the holding of meetings of members having different classes of shares. The Act introduces additional requirements for the holding of a poll for quoted companies. These sections of the Act have not been analysed as the principles underlying the sections are similar to those already mentioned. If the official receiver requires any further advice concerning these matters he/she should contact Technical Section.
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