Companies Act 2006 – meetings and written resolutions

The statutory requirements for shareholder meetings and resolutions have changed significantly.

The main changes are:

• abolition of compulsory AGM for private companies, unless required by the Articles
• shortening of notice period for general meetings to 14 days, except for the AGM of a PLC
• abolition of extraordinary resolutions and elective resolutions
• written resolutions can now be passed by a majority
• electronic communications are encouraged - click here for more information

The FAQ’s below give you the details.

Is it in force?

Yes.

What is the length of notice I need to give to shareholders for a general meeting?

14 days, regardless of the type of resolution proposed to be passed at the general meeting, save for public companies where 21 days are required for the AGM, unless different arangements are specified in a company's articles. The period of notice excludes the day of the meeting and the day on which the notice is given.

Can we still call a general meeting on short notice?

Yes, provided that you obtain the consent of shareholders entitled to attend and vote at the general meeting who together hold 90% in nominal value of the shares (or the articles of association can require a higher percentage not exceeding 95%).   In the case of public companies the percentage required is 95% for most general meetings, or all members entitled to attend and vote for an AGM.

What about class meetings?

The new provisions also apply to meetings of a class of shareholders, notwithstanding anything in the articles.

I thought there were changes to the rules on use of proxies at shareholder meetings?

The main changes are that shareholders are now entitled to appoint more than one proxy, and proxies are entitled to speak at general meetings.

Do we still need to have an Annual General Meeting?

This is no longer a requirement for private companies, although there is nothing preventing them from holding an AGM if they wish.

Do I need to change my articles of association to comply with the new provisions on AGM’s and EGM’s?

If your articles expressly require the company to have AGMs (they will if your articles adopt the 1948 edition of Table A, but not if they adopt the 1985 Table A) then the company will still have to have an AGM unless your articles are changed. The fact that the articles may contain references to an AGM does not mean you have to hold one.

You should check your articles of association and consider amending them if you want to benefit from the shorter notice periods.

My articles require directors to retire by rotation at the AGM. What happens now?

If you hold a voluntary AGM, or if your articles require an AGM, the rotation of directors continues as before. If you do not hold an AGM, case law says that the directors due to retire cease to hold office on 31 December. It is not entirely clear whether this continues to apply, but we strongly recommend that any company whose articles include retirement of rotation of directors either continues to hold an AGM or changes its articles.

Can we use a written resolution instead of calling a general meeting?

Yes, unless the resolution relates to the removal of a director or auditors from office before the expiration of their term of office. The new procedure can only be used by private companies, although public companies can probably still pass written resolutions under the common law principle of unanimous consent. Written resolutions also cannot be used for the revocation, variation or renewal of the directors’ authority to allot shares under section 80A of the 1985 act, but  this directors’ authority will no longer be needed as of 1 October 2009.

What percentage of votes is required for a written resolution to be passed?

It depends on the resolution.  If it is an ordinary resolution, it will be passed by a simple majority of those eligible to vote. If it is a special resolution it will need a 75% majority of those eligible to vote.  Every member is deemed to have one vote in respect of each share, unless the articles of association say otherwise. You cannot have different voting rights on written resolutions to those applicable at general meetings.

What is the procedure for sending the written resolution to members?

It will depend on whether the directors or the shareholders propose the resolution. Common provisions include:

• A copy of the resolution must be sent to every eligible member at the same time (or if more practical, and without delay, to every eligible member in turn);
• A copy of the resolution must include guidance as to how members may signify their agreement to the resolution, and the date by which the resolution must be passed if it is not to lapse;
• Unless the articles of association say otherwise a written resolution will lapse if it is not agreed within 28 days of the circulation date of the resolution;
• The agreement to a resolution by a member is not revocable once it has been given;
• The agreement by a member after the requisite time period will be ineffective.

Do I need to change my existing articles of association to use the new written resolution procedure?

No.  The new provisions apply automatically.  Provisions in articles of association preventing a private company and its shareholders proposing and passing written resolutions are void.

What has happened to extraordinary resolutions and elective resolutions?

They are abolished. Elective resolutions are no longer necessary, as the things they could do become automatic for private companies, at least from 1 October 2009. The term “extraordinary general meeting” also disappears from the legislation, though many companies will continue to use it.