Company meetings, Company Law, Kenya, Law of Business Associations II

COMPANY MEETINGS.GROUP 5.

ELLAINE KAVOSA ASSAVA.

TABUT J. VICTORIA.VALENTINE

KHAMINWA.

Reasons for holding company meetings.• Comply with statutory provisions.• Transact company business; Alteration or reduction of company’s share capital. Variation of rights attached to a class of shares.• Exchange of views on running of the company’s

affairs and any necessary measures taken thereon.

General Meetings

• There are four kinds;1. Statutory meeting2. Annual General Meeting3. Extra-Ordinary General Meeting4. Class Meeting

Statutory Meetings

• These meetings are governed by section 130 CA.

Every company limited by shares and every company limited by guarantee and having a share capital shall within a period of not less than one month and not more than three months from the date of the of commencement of business, hold a general meeting called statutory meeting. This meeting is held once during the lifetime of the company. A private company, an unlimited company or a company limited by guarantee having no share capital, is not required to hold a statutory meeting. The notice convening this statutory meeting must be given at least 21 days before the meeting, and must specifically state that the meeting is a statutory meeting.

Statutory report for Special Meetings – s130 CA1) Total shares allocated and the extent of payment.2) Cash received in respect of shares allocated. 3) An abstract of receipts and an account or estimate of the preliminary expenses.4) Personal information on Directors, secretaries and auditors.5) A list of members6) Particulars of any contract or the proposed modification to be submitted for the approval of the members at the meeting.7) The extent of company underwriting contracts.8) The arrears, if any, due on calls from any directors and the manager.9) Particulars of any commission or brokerage paid or to be paid to any director re: issue or sale of shares or debentures of the Co.

Annual General Meetings

s131 of the Company’s Act and summarized as follows:The first Annual General Meeting must be held within 18 months from the date of incorporation.

Every company must in each year hold Annual General Meeting. Gibson v Barton: January 1- December 31. The notice conveying the meeting must specify that it is re: the Annual General Meeting.

Section 133 of the Act provides that minimum notice required as follows: -• (a) In case of Annual General Meeting, 21 days notice in writing is

given.Every Annual General Meeting must be held during business hours and on working days.

The registrar may, for any special reason, extend the time for holding any Annual General Meeting by any given period; but no extension of time is granted for holding the first AGM.

S131(2) One member of the company present in person or by proxy shall be deemed to constitute a meeting.

Extra – Ordinary General Meetings

• S. 132(1) • All general meetings other than the annual

general meeting shall be called extra ordinary general meetings( Table A Article 48)

• Directors may convene an extra ordinary general meeting(Table A article 49)

• The directors are bound to convene on the requisition of 1. the holders of not less than one tenth of the

paid up capital carrying the right of voting at general meetings, or

2. of members representing not less than one tenth of the total voting rights; no share capital,

The Requisition

– Must state the objects of the meeting – Must be signed by the requisitionist – Deposited at the registered office of the Company

• If the directors do not convene a meeting within 21 days from the date of the deposit of the requisition, a meeting maybe convened by either; (s.132(2))1. The requisitionist, or2. any of the holders of shares or members

representing more than one-half of the total voting rights of all of them

NB: They must do so within 3 months from the date of deposit of the requisition

• The requisitionist is entitled to recover any reasonable expenses (s.132(5))

• A company’s article cannot deprive the members of the right to requisition a meeting. (S.132)

• This provision in the Act is however defective; the directors need not hold the meeting within any particular limit of time – Re: Windward Islands Enterprises (U.K.) Ltd.

(1982)

• If it is impracticable to call or conduct a meeting, the court, on its own motion or on application by any director or member entitled to vote at the meeting, may order a meeting to be called, held and conducted. (s.135(1))

Re:El Sombrero Ltd. (1958)

• Facts:– The applicant held 900 f the 1000 shares of the

company– The remaining shares were split equally between

the two respondents who were its only directors– The applicant had requisitioned for a meeting

twice for the purpose of removing the directors as directors by ordinary resolution

Re: El Sombrero

• On each occasion, the respondents had absented themselves in order to ensure the quorum of two members, as fixed by the articles, was not satisfied

• The applicant sought an order under s. 135 and a direction that one person should be deemed to constitute a quorum at such a meeting

Holding

• Registrar has mistaken himself on a question of law

• The evidence as to the reason of not convening the meeting was not accepted as bona fide

• Parry J. acceded to the application and directed that a meeting be held under the power given by s.135

Class Meetings

• Not provided for by the act• It may be held pursuant to a company’s articles

of association• A company may vary rights attached to any

class of shares – if consented to in writing by the holders of three-

fourths of the issued shares of that class, or– If sanctioned by a special resolution passed at a

separate general meeting

• Holders of other classes of shares may attend the meeting but cannot vote

• Carruth v Imperial Chemicals Industries Ltd. (1937) AC 707• Facts:• the directors convened an EGM of the company and two meetings of

different classes of shares to be held on the same day and at the same venue to approve a reduction of capital.

• As one meeting finished, the next meeting was started and each meeting was attended by each of the different classes of member.

• The resolution of one class of members was challenged on the ground that people who were not members of that class were present at the meeting.

Held

• The resolution was held to be valid and Lord Russell said:“There are many matters relating to the conduct of a meeting which lie entirely in the hands of those persons who are present and constitute the meeting. Thus it rests with the meeting to decide ….whether representatives of the Press, or any other persons not qualified to be summoned to the meeting, shall be permitted to be present, or if present, shall be permitted to remain.”

Convening meetings.• General rule: General meetings are normally convened

by the board of directors.• Company’s articles, Table A, Art 49.• EGM may be convened;By any director, or any two members of the company if

there is no sufficient directors to form a quorum within Kenya.

• Table A, Art 49.By members holding not less than 1/10th of paid up

capital of a company or not less than 1/10th of total voting rights of all members, if directors fail to do so despite requisition. [Section 132(2).]

Cont…• Default rule: section 134 (b).• 2 or more members with not less than 1/10th

of issued share capital or not less than 5% in number of members of the company may call a meeting.

• The company secretary or other officer of the company has no power to call a general meeting.

• Re: State of Wyoming Syndicate.

Good faith.• No malicious intent.• Directors must act in good faith when calling a

meeting.• Cannon v Tasks.• Once a meeting is called, directors cannot postponed

or cancel it. The proper recourse is for the meeting to be held and, with consent of majority of present voting members to adjourn it.

• Smith v Paringa Mines Ltd.

Length of Notice

Statutory Requirements of Notice Proper length of notice must be provided by statute or articles. Section 133 of the Act provides that minimum notice required for company meetings, other than the adjourned meeting is as follows: -(a) In case of Annual General Meeting, 21 days’ notice in writing is given.(b) In case of a meeting other than AGM or a meeting of passing a special resolution, 14 days’ notice in writing and 7 days in case of unlimited company.

Any provision contained in the articles shall be valid in so far as it provides for the calling of a meeting by a short notice than it is provide by this section.

Section 133(3) – a shorter period of notice is permitted if all members agree (AGM) or if a majority agree for other meetings. Re: Pearce Duff & Co. Ltd – No implied agreement through member attendance of a short notice meeting.

Service of Notice

• Unless provided otherwise by the AOA, notice of the meeting shall be served on every member of the company in the manner in which notices are required to be served by Table A.

• A failure to give notice to a single member would render the meeting a nullity at common law

• Re: West Canadian Collieries Ltd. • Re: East Norfolk Tramways Co ( Barber’s Case)

• The common law rule applies whether the failure to give notice was deliberate or unintentional

• Table A, Article 51 The accidental omission to give notice of a meeting to any person entitled to receive notice shall not invalidate the proceedings at that meeting

Re: West Canadian Collieries Ltd.

• Facts: • The registrar of Western Canadian Collieries Ltd.. In

sending out notices of a special resolution for the reduction of capital to be proposed at the annual general meeting inadvertently omitted to send notices to 9 of the members

• The omission was due to the fact that the addressograph(machine for printing addresses on envelopes) plates of these 9 members were kept in a separate place to ensure that dividend warrants were not sent out to them; in the past, warrants had been returned or not cashed

Re: West Canadian Collieries Ltd.• Article 75 of the company’s articles of association

was similar to article 51 of Table A• The special resolution was passed and the company

petitioned the court for confirmation of the reduction of capital.

• The petition was unopposed

Held:

• Plowman J. was satisfied that the omission was accidental

• It therefore did not invalidate the proceedings at the meeting

• Held that the notice of the meeting was duly given and the resolution in question was duly passed. Consequently the reduction was confirmed

Musselwhite v C.H. Musselwhite & Son Ltd.

• It was explained that a deliberate failure to give notice of a meeting to a member on the mistaken ground that the member was not entitled to the notice would not be regarded as an accidental omission within the relevant article since it was a mistake of the law. The meeting was therefore declared null and void

Musselwhite v C.H. Musselwhite & Son Ltd.

• Facts:• A company failed to give notice of an AGM to the

two plaintiffs who had sold their shares to the two defendants but had not been paid and remained on the register of members.

• The directors believed the two plaintiffs were not entitled to notice.

• The plaintiff claimed successfully that the meeting was a nullity and that they had the right to decide how their shares should be voted until full payment had been received.

• Table A, Article 134; notice of a general meeting shall be given to– Every member of the company except those

members who have not supplied to the company an address within Kenya

– The personal representative or trustee in bankruptcy

– The auditor for the time being of the company

Method of Service

• Not governed by the actA notice may be given by the company to any member either personally or by sending it by post. (Art 131 Table A)

• Where it is sent by post, service is deemed to be effected at the expiration of 72 hours after letter of notice is posted

• Notice may be given to the joint holders of a share by giving it to the joint holder first named in the register of members.(art 132)

• Notice may be given to the personal representative or trustee in bankruptcy by sending it through the post in a prepaid letter. (Art. 133)

Contents of the Notice

• Must be clear and explicit so that the person receiving may be in a position to decide whether or not he ought in his own interest to attend the meeting

• This is a fundamental legal requirement• In practice the articles generally specify some of the

items that have to be stated in a notice

Tiessen v Henderson(1889)

• Facts:• The Violet Consolidated Gold Mining Co. Ltd. was in difficulty

and meetings were summoned to put before the shareholders alternative schemes for reconstruction

• The scheme approved was one in which certain directors had a strong financial interest but this fact was not disclosed in the notice convening the meeting

• The notice merely stated that the guarantors of the new scheme were to have a right of call or share option on 50,000 of new shares without telling the shareholders that three of the directors were interested as such guarantors.

• Kekewich, J. held the resolution invalid.

Kaye v Croydon Tramways Co. (1896)Bailie v Oriental Telephone & Electric Co. Ltd. (1915)

Quorum.

• Quorum is the minimum number of person required to be present for a meeting for the proper transaction of the business which the meeting was called for.

• The minimum number may be require in order to commence the meeting or continue an already commenced meeting.

• Table A, Article 53.• Re: Hartly Baird Ltd.

Cont…

• S.134 (c).• Private companies- two members present in person

or by proxy.• Table A, part II, Article 4.• Public companies- three members who are

personally present.• Table A, Article 53.

Exceptions.• General rule: quorum must constitute at least two

persons, this is the connotation of the term “meeting”. (Sharp v Dawes.)

• A valid meeting may constitute of one person if; The registrar calls an annual general meeting with

this effect. • Section 131 (2). If this by virtue of a court order.• Section 135 (1).• Re: El Sombero Ltd.

Cont… Variation of rights of shares where all shares are held

by one member.• East V Bennet Brothers Ltd. Adjourned meeting where the articles are to this

effect. Sole director intends to declare the nature of his

interest in a proposed contract.• Section 200.• Re: Neptune (Vehicle Washing Equipment) Ltd 1995.

Adjournment

• Within half an hour from the time appointed for the meeting a quorum is not present, the meeting if convened upon the requisition of members, shall be dissolved.

• In any other case it shall stand adjourned to the same day in the next week at the same time and place or to such other day and time and place as the directors may determine

• Table A, Article 54

Proxies

• Any member entitled to attend and vote at a meeting shall be entitled to appoint another person, whether a member or not, as his proxy to attend and vote in his stead(s.136(1)

• A proxy appointed to attend and vote for a member of a private company shall also have the right to speak at the meeting.

• S. 136(1)– No proxy shall be appointed by a member of a

company not having a share capital– A member of a private company shall not be

entitled to appoint more than one proxy to a attend on the same occasion

– A proxy shall not be entitled to vote unless on a poll

• Every notice of a meeting must contain a statement alluding to the fact that every member is entitled to appoint a proxy or proxies and that a proxy need not be a member. (s.136(2))

• Default in complying with this provision makes every officer of the company liable to a fine not exceeding Ksh. 1000

• The requirement contained in a company’s articles that an instrument appointing a proxy be received by a company or any other person 48 hours before a meeting, in order to make the appointment effective, has been rendered void (s.136(3))

Chairman “Chair”

• Conducts a meeting.• Must be informed as the business and objects of the

meeting,• Formulating discussion questions and decision issues• He is the presiding officer.• Time keeper and oversees decorum. • Keeps order and conducts the meeting. National

Dwellings Society v Sykes.

• Must give members present a reasonable chance to discuss any proposed resolution.

• Should not adjourn the meeting without the consent of the members.

• Here’s member feedback and adjudicates on objections e.g. – regarding a voter’s voting eligibility.

• Section 134(d) – any member elected by the members present at a meeting may be chairman thereof.

Resolutions

• A meeting reaches a decision by passing a resolution• Two kinds of resolution;– An ordinary resolution– A special resolution

• An ordinary resolution is passed by a simple majority of votes cast; defined in Bushell v Faith as “a resolution depending for its passing on a simple majority of votes validly cast in conformity with the articles”

• A special resolution has been passed by a majority of not less than three-fourths of such members being entitled to vote in person or where proxies are allowed, by proxy, at a GM of which notice specifying the intention to propose the resolution as a special resolution has been duly given (141(1))

Ordinary Resolution Special Resolution

Intention to pass must not be set out in the notice nor described as an ordinary resolution

Intention to pass a special resolution must be set out in full in the notice convening the meeting and must be described as a special resolution (S.142)

No need to deliver a signed copy of each resolution to the registrar

Signed copy of every special resolution must be delivered to the registrar for registration(s.143)

•The main differences between an ordinary resolution and a special resolution

• The prescribed 21 days’ notice for special resolution may be waived with the consent of a majority of the members holding not less than 95% in nominal value of shares carrying voting rights on in case of a company not having share capital, 95% of the total voting rights.

• A special resolution is required for major decisions in the company such as – Change in name– Alteration of objects or of the articles– Reduction of share capital– Winding up the company voluntarily– Presenting a petition by the company for an order

of compulsory winding up

Minutes

• May be defined as a record of the business transacted at a meeting of the company

• Every company shall cause minutes of all proceedings of general meetings to be entered in the books. (s.145(1))

• The books containing the minutes shall be kept at the registered office of the company and shall be open to the inspection of any member, without charge, during business hours for at least 2 hours in each day. (s. 146(1))

• A member may require copies to be provided within 14 days of request on payment of ksh. 1 for every hundred words. (s146(2))

• If the company fails to comply, the court may order an immediate inspection of the minutes or direct that the copies be sent to the person requiring them. (s.146(4))

• Minutes when signed by the chairman of the meeting or the next succeeding general meeting, shall be evidence of the proceedings. (144(2))

Registering of resolutions

• A printed copy of the following resolutions shall, within 30 days after passing thereof, be delivered to the registrar for registration: (s.143(1))– Special resolutions– Resolutions agreed to by all the members which

would otherwise not have been effective unless passed as special resolutions

– Resolutions agreed to by all members of a class of shareholders

– Resolutions requiring a company to be wound up voluntarily

• Where a resolution is passed at an adjourned meeting of:– A company– The holders of any class of shares in a company– The directors of a company

the resolution shall be treated as having been passed on the date on which it was in fact passed and shall not be deemed to have been passed on any earlier date.