l7 condensed more organised

legal nature

• capital companies are legal persons that exist seperately from their founders and shareholders

• however unlike natural persons they cannot think decide or act so require organs/bodies to function in reality

• company bodies have 4 essential roles

  • form the companies will= decide what the company wants to do

  • express the companys will= formalise decisions by passing resolutions

  • execute actions= impliment resolutions/decisions in practice

  • deal with third parties= represent the company externally ie customers and suppliers

• without these bodies the company would exist legally but could not operate in practice

madnatory bodies

every company must hav 2 essential organs

• the general meeting of shareholders is the main decision making body

  • composed of all shareholders

  • votes using the majority principle

  • discusses important matters

    • ie profit distriubtion/ appointment of directors

  • approves key decisions

    • ammendments to by laws, major strucrua changes

  • where the companys will is expressed and formed

• management body/directors are responsible for the management and representation

  • run the day to day operations

  • take operational and strategic decisions

    • ie pricing and hiring

  • represent the company externally

    • contract, legal proceedings, third party dealings

  • where the companys will is executed and represented

division of power

• the gm decides and creates the companys will

• the directors act/carryout the will and represent the company to third parties

GM definition

the gm is a formal gathering of shareholders, properly convened according to the law, to discuss and vote on company matters by majority rule

• it is an organ= part of the internal structure of the company

• internal body= it has no external representation powers to deal with third parties

• sovereign body= it is the highest authority in the company deciding on major matters affecting structure

  • it is not accountable to other organs; the directors are accountable to them

• ephemeral nature= it is a temporary ogan that only exists when convened and ceases after the meeting ends

powers of the gm

ordinary matters

• approval of accounts

• profit allocation ie dividends

• approval of management

corporate control function= appointment and removal of

• liquidators

• auditors

• directors

structural/consitutional powers

• amendments to the bylaws

• increase/decrease in share capital

• removal of premeption rights

• mergers, restrucutring and dissolution

assets and liquidation

• supervise liquidation and approve final balance

• approve aquisition/disposal of essential assets

limits to the gm

despite its power the gm must act within the law and company interests

• cannot act outside legal powers

• cannot breach bylaws

• cannot harm the company

• cannot act in private shareholder interest

• cannot interfere in directors day to day management

  • exception to seperation of roles=

    • the gm may give binding instructions to directors

    • the gm may require prior authorisation for directors decisions

types of general meetings

ordinary general meetings are mandatory and must b held within the first 6 months of the financial year

• must be convened by directors

  • if directors fail= shareholders request court clerk/commercial registrar

• must discuss mandatory agenda/ordinary matters

  • approval of accounts, profit allocation, review of management

extraordiary meetings are any other meetings that are called when needed

• must be convened if shareholders with more than 5% capital request it

• have a flexible agenda

universal general meetings do not require formal notice and can be held anywhere (exception to formalities)

• must have 100% capital present

• all shareholders must agree to hold tje meeting

• all shareholders must agree to the agenda

• majority voting unless unanimity is required

calling the gm

meetings are called to inform shareholders and allowing participation/voting in decisions

• who= directors must call the annual ordinary meeting + egm when needed/requested

  • if they fail= shareholders request court clerk/registrar

  • if no directors= clerk or registar directly

• method= company website

  • if there is no website= officiak gazette + newspaper

  • alternative=indidual written notice to shareholders

    • modern tools= email, online platform, sharehoder notifications

• notice period=

  • sa= 1 month in advance

  • sl= 15 days in advance

• types=

  • first call= initial meeting

  • second call= if firsts fails due to insuffcient attendance

  • there must be a minimum of 24 hours between the callings

    • if there is no shedules 2nd=new meeting must be cheduled within 15 days of the failed

      • requires 10 days notice

meeting agenda

the meeting agenda is a list of topics to be discussed at the meeting

• only the listed items can be voted on

• exception= can always vote for removal or liability actions against directors

• supplements can be made to te agenda in SA only due to open nature

  • shareholders with more than 5 % capital can request topics within 5 days of calling

minutes to the gm

minutes provide

• legal certainty to decisions making resolutions enofrceable

• proof of decisions/resolutions providing official certification

• protection of shareholder rights allowing shareholders to request certification at anytime

requirements

• must be recorded= mandatory for every meeting

• must be approved= immediately or within 15 days by the chair + 2 shareholder scrutineers

• must be signed= by the secretary

• must be entered= into the minutes book

• must be registered= within 8 days for registerable resolutions ie bylaws amendments

notorial minutes are minutes certified by a notory

• they provide higher evidentiary value

• mandatory if requested by

  • sa= 1% capital shareholders (more trapnsperency in open structure)

  • sl= 5% capital shareholders

• optional at directors request

valid consitution of meeting

1. proper calling procedure

2. correct place in registered office locality

3. an allocated chair to leed the meeting/maintain order

4. attendance list dscribing who is present and who is represented

attendance

who can attend

• mandatory= directors

• volunatry= shareholders

• optional=non shareholders can attend but not vote ie lawyers and auidtors if permitted by the blaws

right to attend

• sl= cannot be restricted due to personal nature

• sa= can be restricted due to large number of sjareholdings

  • minimum share capital

    • SA= 0.01%

    • listed= 1000 shares

  • idenitty veriffication

  • share deposit

  • registration 5 days prior

SA ONLY attendance quorom due to open shareholder nature

• ordinary matters=

  • 25% capital for first call

  • 2nd call= no minimum

• special matters require increased participation

  • 50% first call

  • 25% second call

representation

shareholders may appoint 1 representative to attend the meeting and vote on their behalf

• revocable at anytime

  • cancelled if the shareholder attends personally

• sa= anyone

  • reflecting open nature of company

• sl= restricted to family members, another shareholder or a legal representative

  • reflecting closed nature

formalities of proxy

• sa= a new written/electronic document required for each meeting

  • felxible exception= a family member/general power of attorney is valid for all meetings

• sl= a new written electronic document required for each meeting

  • stricter exception= if proxy is notirised its valid for all meetings

grouping of shares

shareholders can combine their shaires to meet min attedance requirements common in large companies

• appoint 1 representative to act on behalf of all

• public request for proxy= if one proxy represents more than 3 shareholders their document must include

  • the meeting agenda

  • voting instructions

  • default voting rules if no instructions

voting structure

seperate voting requirements= must be voted for indidually and cannot be grouped together

• appointment.removal of directors

• bylaws ammendments

conflict of interest=shareholders cannot vote when affecting their shares

• authroising share trasnfers

• releasing them of obligations

• providing them with financial assistance

• waiving their duty of loyalty

voting basis= based on % share capital not on the number of shareholders

• majority rules principle

• more shares more power

sa voting is more flexible focusing on the majority in attendance

• ordinary matters= simple majority (more votes in favour than against)

• special matters=

  • if 50% of capital is present= absolute majority (more than 50% of votes cast)

  • if 25-50% present= 2/3rds of votes cast

sl voting is more strict focusing on total capital participation not attendance

• ordinary matters= 1/3 of total capital

• special matters=

  • bylaws and capital changes= 50% of total capital

  • strucutural changes= 2/3rds total capital

challenging resolutions

gorunds to challenge

• contrary to laws

• contrary to bylaws

• harms the company including abuse of majority power for shareholder interest

limits to grounds

• already annuled or replaced

• minor procedural defects not changing outcome

• non decisive errors not changing the outcome

who can challenge

• in serious cases there is no time limit

  • directors

  • third partys

  • sbareholders

• in other cases there is 1 year from the resolution

  • directors

  • third partys

  • shareholders prior to the meeting with 10%capital

• small shareholders with less than 1% cannot challenge directly but can claim damages if effected