Shareholders

MA13

Chairperson has deciding vote in board meetings

Formalities around company seals

Company seal not necessary, but can be adopted by board resolution under s45(1) and attested under MA 49, used to execute documents under s44 of CA 2006

Changing a company name

Special resolution under s77 CA 2006 and NM01 form to Companies House needed to change name

S282 of CA 2006

For an ordinary (shareholders’) resolution to be passed, over 50% of the votes must be in favour

s283 of CA 2006

For a special resolution to be passed, over 75% of the votes must be in favour

General meetings (excluding AGMs)

• Called by a board resolution (s302)

• Public companies must have a general meeting every year, no minimum requirement for private companies (s336)

• Companies formed under the CA 2006 will only hold general meetings

• Notice requirements (s301) and quorum must be met for the general meeting to be valid

Contents of the notice of general meeting

• Must be given to every shareholder and director (s310), potentially the auditor (s502), must be in either print or electronic form (s308)

• Must include nature (s311(2)), time and date and place (s311(1)), exact wording of special resolution if applicable (s283(6)) and the shareholder’s right to nominate a proxy to attend on their behalf (s325)

Notice period

• s307 and s360, must be 14 clear days from the day the notice is received, does not include day of general meeting

• Deemed “received” 48 hours after the notice was originally sent, 48 hours must be added to “14 clear days” (s1147(2) of CA 2006)

Quorum and voting

• S318 of CA 2006, quorum is 2 unless there is only one shareholder

• Voting on a show of hands (MA42)

• Two areas where shareholder vote is restricted

  • Resolution to buy back shares

  • Ratify director/shareholder breach of duty under s239

Poll vote

• Done on the basis of one vote per share owned, as opposed to one vote per person

• MA 44(2), poll vote can be demanded by the chair of the meeting, the directors, two or more persons having the right to vote on the resolution, or by someone with more than 10% voting power

• Can be called before or during the meeting and will override previous votes

Short notice general meetings

• Possible to call a meeting prior to 14 days (s307(4))

• s307(5)-(6), a valid general meeting on short notice must have the consent of a majority of shareholders who have 90% voting power (95% for public companies)

Written resolutions

• Allowed for private companies under s288, but not public companies

• Must be circulated to every eligible member (s291(2) of CA 2006)

• Details on how to signify agreement and lapse date must be included (s291(4))

• Unless stated otherwise, lapse date is 28 days after circulation (s297)

When are written resolutions passed?

• S296, written resolutions are passed when the required majority of eligible members have signified agreement to the resolution

• ss282(2) and 283(2), default is one vote per share owned

Shareholders’ request for the company to circulate a written resolution

• S292, anyone with more than 5% voting rights in the company are entitled to require the company to circulate a written resolution

• s292(5), can be reduced but not increased beyond 5% in company articles

• s292(3), done with a 1000 word statement, must foot cost of compliance (s294)

Requisitioning a general meeting

• S303, shareholders who either individually or together hold 5% of the paid up capital holding voting rights can demand general meeting, (4)(a), must state general business to be discussed

• s304(1)(a), meeting must be called within 21 days of the request

Post decision requirements for Companies House

• Certain decisions must be sent to Companies House, Registrar of Companies now has oversight power over filing under ECCTA 2023

• Includes all special resolutions and some ordinary resolutions

Post decision requirements for internal admin

Includes registers of members and directors, minutes for board (s248) and general (s355) meetings

Bushell v Faith (1970) clauses

Those who are both shareholders and directors have greater voting rights as a shareholder, may have a clause for shareholders to prevent shareholder/directors from being removed

Substantial property transaction

“A director, in their personal capacity, or someone connected with a director buys from or sells to the company a non-cash asset of substantial value.”

How is an SPT entered into?

• If the board wishes to enter into an SPT, an ordinary resolution is needed from the shareholders

• If the person connected is also a director of the company’s holding company, an ordinary resolution from the parent company is needed (s190(2))

Who is a person connected with a director?

• Set out in ss252-254

• Either a member of the director’s family or a company where a director/someone connected to them has at least 20% of shares and more than 20% of voting power

• Family: spouse/civil partner, (step)children, parents… (not grandparents)

What is a non-cash asset?

Any property or interest in property, other than cash (s1163)

What is classed as “substantial”?

• S191, two ways:

  • Value over £100k

  • Over £5k and more than 10% of the company’s net asset value (found on balance sheet)

Exception for need of ordinary resolution

• S192, transactions with members or other group companies

• Company is a wholly owned subsidiary of any other company

• Company and a member

• Holding company and wholly owned subsidiary

• Two wholly owned subsidiaries of the same holding company

Effect of breach

• Transaction is voidable (s195)

• Following people may have to indemnify company:

  • Any director with whom the company entered into the agreement

  • Anyone connected to the directors of both companies

  • Any director who authorised the arrangement

Loans to directors

• s197, cannot be done without ordinary resolution approval

• If also a director of holding company, this company must also pass an ordinary resolution

• s197(3), memorandum with terms of loan and company liability should be made available for inspection at least 15 days prior to general meeting

• If done without approval, it is voidable and need to indemnify may arise

• If affirmed within a reasonable time period, there is no liability

Exceptions for ordinary resolution requirement:

• Expenditure on company business

• Defending civil/criminal proceedings in relation to the company/an associated company

• Defending regulatory proceedings (personal and company)

• Business transactions under £10k

Payment for loss of office

• Any payments over £200 that the director is legally entitled to can only be paid after the passage of an ordinary resolution (s217 and s221 CA 2006)

• Requirement for an ordinary resolution is also needed for payments to past directors, people connected to directors, and anyone at the direction/for the benefit of a director or someone connected to them

• Also applies to premium share prices

• Memorandum is also needed and if included in a written resolution, it must be sent to all shareholders before circulation of written resolution (s217)

• If a payment is made in breach of s217, company must be indemnified and money held on trust for the company (s222)

• “Director” also means shadow director

Other liabilities

• Failure to maintain company records (fine under s1135), 2 year imprisonment if these are accounting records (s389)

• Fines given for failures to update Companies House (s30)

• Potential civil and criminal liability regarding financial records (s463)

• Up to 2 years imprisonment for breaches of Health and Safety at Work Act 1974

• Bribery Act 2010

• Making political donations without shareholder approval

• Civil and criminal liability under environmental legislation

• Note on wrongful trading: the test on whether wrongful trading has occurred is both objective and subjective

Disqualification of directors

• Company Directors Disqualification Act, court may disqualify a director for between 2 and 15 years

• Possible grounds: conviction for an indictable offence, persistent breaches of companies legislation, fraud on a winding up, conviction for failure to file required documents, being an unfit director of an insolvent company, finding of unfitness after an investigation, wrongful trading, breach of competition law

• Factors that work against a director: trading on Crown monies, paying excessive directors’ remuneration, recklessly trading while insolvent

• Factors that work for a director: employing qualified financial staff, taking professional advice, personal financial investment in company

Effects of disqualification

• Cannot be involved with the company at all without the leave of the court

• Contravening the order is a criminal offence

• The order is contravened if the disqualified director gets involved with the formation and management of any new or existing company

• Director is personally liable for company debts due to disqualification (s15 CDDA 1986)

Dividends

• Company can pay dividends if it has the profits available for it (s830)

• Calculated based on profit/loss

• MA 30, directors decide whether or not dividends should be paid

• Once a final dividend has been declared, it must be paid to the shareholders