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Proxies, Quora, Resolutions, Voting and Minutes

Last week... 

I left off with the material to be considered at the meeting. I will take up this afternoon proxies, special majorities, quora, adjournments and minutes.

Proxy

It may be that a shareholder is unable to attend the meeting. It is only fair that a shareholder who is unable to attend should be able to send someone in her place to vote on her behalf.

The notice of the meeting therefore should let the shareholder know that she is allowed to send a proxy. If there are particular rules relating to the manner in which proxies may participate in meetings, those rules should be notified to the proxy and the person appointing him beforehand.

Special Resolutions ...

Some of the decisions that need to be made may have far-reaching and fundamental effects on the company and its business. For that reason certain decisions may require greater support than others. Whilst some decisions may be passed with a simple majority, more important decisions may require a special majority. If this is the case, the notice should set this out.

The Companies Act requires that meetings at which resolutions pursuant to the implementation of fundamental transactions have specific requirements regarding the manner in which special resolutions are passed. The votes controlled by an acquiring party or persons acting in concert with them are not counted. There is a good reason for that.

The purpose of this particular restriction is to introduce a minority protection of sorts, that would prevent a conflict of interests of dominant Shareholders in an interested transaction. This ensures that a fundamental transaction is entered into on an "arms length" basis. 

... and the Quorum

The notice of the meeting should also set out the minimum number of people who should be present at the meeting with sufficient interest, in order to lend validity to the proceedings. If for instance there are 100 shareholders, and only four arrive it doesn't seem just that three people (a special majority of that meeting) should be allowed to adopt resolutions that have a fundamental and far-reaching effect on the company.

As above, particularly in relation to fundamental transactions, the quorum is determined without reference to votes controlled by persons with an acquiring interest. This peculiar quorum requirement seeks to achieve the same purpose referred to above in relation to the manner in which a special resolution is passed.

Adjournment

That said, if a number of people choose to obstruct the business of the company they may choose to absent themselves from the meeting in order to preclude the taking of certain decisions. What they would do is absent themselves from meetings so that a quorum could never be achieved.

It does not seem fair that shareholders who disagree with a proposed resolution should be able to withhold their participation from a meeting in order to render a meeting inquorate. It is usually the case that rules provide that if a quorum is not present at the meeting, the meeting is adjourned, until a specified date, time and place and in respect of which the shareholders then present constitute a quorum.

At the meeting, the agenda set out order of business. Usually the shareholders present at the meeting allowed to address the meeting through the chair and articulate their views in relation to the proposed resolutions. Everyone should be given a chance to speak.

Voting

In the ordinary course, voting is conducted by a show of hands. For obvious reasons, this is not always the most optimal way to achieve "shareholder democracy". Unlike social democracy, where every person has exactly the same human rights, "shareholder democracy" recognises that "might is right". I say this with tongue firmly in cheek. Nevertheless, the "might is right" principle is valid to a degree, but it is subject to minority protections built into most corporate frameworks. 

To illustrate the point: it may be that a shareholder holds 30 voting rights, unlike his four other fellow shareholders, who hold one voting right each. It shouldn't be the case that, on a show of hands, the four shareholders are able to outvote the shareholder who holds the 30 voting rights. Whilst voting by a show of hands is convenient and straightforward, a critical disadvantage of voting in this way has the effect of disguising the opposition or resistance to a particular resolution. 

In our example, a vote by show of hands would show that only one person is opposed to the particular resolution. However, it may be that the holder of the 30 votes exercises those votes on behalf of a multitude of people who have individually expressed opposition to the proposed resolution, and have instructed the holder of the 30 votes to oppose the motion. 

In the circumstances, votes may be taken by "poll". The Companies Act states that in certain circumstances a polled vote must be held on a particular matter if demand for such a vote is made. When voting on a poll, voting papers are given to the shareholders, who whether their vote is for or against the motion. The shareholder is then able to indicate on the voting paper the number of shares in respect of which he or she is voting.

Minutes

Once everyone has had a chance to speak a vote should be taken. And once the vote is taken, the results should be recorded. Again, this is common sense.

Importantly, the results of the vote should be published, particularly for the benefit of people that were unable to make the meeting, and who have an interest in the outcome of the vote.

Adam Pike
Author: Adam Pike
Adam Pike holds BA, LLB and LLM degrees from the University of Cape Town. His LLM, attained from the School of Advanced Legal Studies at the University of Cape Town, focused on commercial and corporate law, particularly corporate governance and securities. Adam specialises in the implementation of corporate actions and transactions.

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