In my previous post, I shared some thoughts regarding the purpose of procedure. Last week's post initially started off as a piece on procedures relating to shareholders meetings. I digressed somewhat. Nevertheless what follows are some thoughts that I've had in relation to shareholders meetings, how they are called, how they are held and how they are recorded.
There's quite a bit to get through. In this post I will talk about the purpose of the meeting, the notice of the meeting, the agenda and the material to be considered. Next week I will set out some thoughts on proxies, quora and special resolutions.
The Companies Act contains detailed provisions relating to the manner in which meetings are called, held, conducted and reported upon. The purpose of this post is not to repeat a list of which corporate actions require special resolutions, the applicable quorum requirements and the like. Rather I'd like to take a step back and offer some commonsense thoughts on purpose of the procedure relating to the holding of shareholder meetings.
The purpose of a meeting
The first question one has to ask oneself is what is the purpose of the meeting?
The purpose of the meeting is not merely to talk shop. Meetings are held in order for decisions to be made, whether by shareholders or by directors, in terms of the applicable substantive rules. These rules are set out in the memorandum of incorporation, the shareholders agreement and in the Companies Act. It may be that certain rules are set out in regulations governing the conduct of companies operating within a particular sector.
In short, the purpose of a meeting is to make decisions.
You cannot have a meeting without people. Obviously. Before a meeting can be held, the shareholders must be invited. Obviously.
Broadly speaking, an invitation must be sent out to anyone who has an interest in attending the meeting and particularly an interest in the resolutions that are proposed for adoption. Here, I use the word interest in the narrow sense.
Whilst people may be interested (in the broad sense) in the proposed resolutions to be adopted by the shareholders of Anglo (because they are inquisitive), it is only the shareholders of Anglo who have an interest (in the narrow sense) in the resolutions in question.
Invitation must be in writing. It would be impractical for a notice to be given over the telephone. A telephonic invitation is appropriate for a dinner party, but in the case of company, this would be cumbersome and impractical. Moreover, along with the notice, one would want to give the invitees an idea of what the meeting will be about. Again, this is common sense. The notice should include the information one would expect to find in any invitation, such as the date, time and venue of the meeting.
Certain corporate processes require that preliminary steps be taken before the shareholder is entitled to attend and vote at the meeting. For instance, in relation to the appraisal remedy in section 164 of the Companies Act, a dissident is required to give notice of a vote against a proposal to give effect to fundamental transaction in order for that shareholder to qualify for the relief available to dissenting shareholders.
Once all of the decisions that are to be made at the meeting have been identified, an agenda must be drawn up for inclusion in the notice. An agenda will set out the order of business as well as the topics in relation to which the resolutions will be passed. An agenda gives structure to a meeting. Again this is common sense.
That said, it is not enough for the agenda to simply list the topics for discussion. For instance, were an agenda to simply record "funding" as an item to be considered, the recipient would be no less enlightened, and would be unable to properly prepare for the meeting.
"Funding" as an agenda item gives the recipient of the notice no indication of where the funding may come from, what the funding will be used for and what or who the source of the funding might be. Importantly, the agenda item does not disclose the amount of the funding required. As an aside, and in relation to funding, the source and nature of the funding in question may trigger particular provisions of the Companies Act, which require special majorities and particular board undertakings.
Since some meetings may be attended by a large number of shareholders, there may be rules applicable to the manner in which the business of the meeting is regulated in order to facilitate efficient and orderly conduct of proceedings.
The agenda should therefore give the recipient sufficient information in order for the recipient to formulate a view in relation to the resolution proposed.
Material to be considered
Certain decisions rely on complex considerations, which would need to be taken into account. It is common sense that a decision-maker would want to consider all of the facts relevant to the decision that he or she is required to make.
It would be irresponsible to make a decision about one's business without understanding, or having attempted to understand, the various factors informing the decision. Similarly, a decision-maker needs to be in possession of the facts in order to determine the likely consequences of a decision made one way or the other.
The facts underlying these considerations would ordinarily be set out in market reports, financial statements, management accounts and material generated by the management of the company. It may therefore be required that the various documents and reports be included in the meeting notice in order to give additional substance to the agenda.
Whilst this may seem obvious after reading this , you'll be surprised at how often common-sense is left at the front door. Next week: the quorum, special majorities and minutes of the meeting.