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Chapter 12 -13 (Chapter 12: Company Law Meetings & Resolutions…
Chapter 12 -13
Chapter 12: Company Law
Meetings & Resolutions
Annual General Meeting
Public companies must hold an AGM every calendar year
First meeting, no more than 18 months after incorp.
Subsequent, no more than 15 months after previous
Private company members can request an AGM
21 days notice
Ordinary Business(Purposes of meeting):
formal presentation of financial statements
reappointment of directors (by rotation)
reappointment of auditors (for another full year) but if new
auditor, 'special notice'; special business
Approval of dividend proposed directors
if not oridnary business, must be special business
Resolutions
Ordinary:
:
simple majorirty
ordinary business & some special
14 days notice
**
Special
special business
75% majority
14 days notice
Written:
Private companies only
any resolution (ordinary/special) except for
removal of auditor/director
auditor needs to approve wording
resolution passed on date required majority
is reached
Special Notice
28 days to company, 21 to members
Resolutions needing special notice:
remove director
remove an auditor
appoint new auditor other than retiring one
fill casual vacancy in office of auditor
overage director for plc
Director/auditor may write written representation of reasonable
length and not defamatory.
Points
Directors will determine agenda for meeting
But members may require resolution
Members must hold at least 5% of total voting rights or
not less than 5% in number of members, or
be not less than 100 members, holding on average not less
than £100 paid up share capital
Request must be delivered not less than 6 weeks before general
meeting
Requisitionists may request statement of around 1000 words be
circulate with the notice of the meeting
Proxies
Written statement authorising another person
to vote on behalf of an absent 'shareholder'
Can be anyone, doesnt have to be a member
and can speak at the meeting
Can vote on a poll and show of hands, and can
demand a poll
Companies provide two-way proxy forms so
absent member can indicate which way proxy should
vote; for or against each resolution
Proxy forms should be delivered to company no
less than 48hrs before meeting
A person may be appointed by more than
one member as their proxy.
Quorum
Is the minimum number of members who shall
be present at a meeting, before it can pass resolutions.
Minimum number is in constitution
Usually min. is 2, in person or by proxy
One member, who also hold proxy for another member not allowed, unless:
in a class meeting where all shares of that class owned by 1
person.
company is a private one, with only 1 member
court directs that a quorum shall be a single person
Voting
After discussion about a resolution, chair will call for a vote,
usually by 'show of hands'. So each member has one vote.
But members holding many shares may ask for a vote count - a poll. Polls can be demanded by:
not less than 5 members
Members holding not less than 10% of total voting rights
Members holding not less than 10% of paid-up share capital
The chair
Votes are counted, whether by show of hands or by poll.
Chair's decision about the result of the vote is final.
Abstententions are not counted, neither 'for' nor 'against'.
Chapter 13 - Company Law: Loan Capital
Loan Capital
Debenture is a written acknowledgement
of a debt of a company.
Loan stock, loan notes, company debt.
Can be secured/unsecured, a single(bank) or
series of debentures(invites public to lend money
with interest).
If a series, debenture holders rank
'pari passu inter se' (equally)
Charge may be fixed or floating
For charge to be valid, must be registered
within 21 days of its creation
If there are 2 charges over same property,
fixed takes precedence over floating
If there are 2 fixed charges, earlier one
takes precedence. Earlier one is one that is
registered first. (not created)
Debenture holders are creditors of the company,
not members. Paid before members!
Debenture holder is the lender. They keep debenture (written act).
Even if unsecure, debenture ranks higher in a liquidation that its highest shareholder.
Fixed Charges
Attached to specific assets, usually property. (tangible and not likely to be disposed of.
Company isnt free to deal/dispose of these charged assets
Fixed charge created within the 6 months prior to company commencing liquidation may be invalid. Liquidator will try to prove invalidity.
Receiver may prove validity if:
charge was granted in exchange for new money
company was solvent at date of creation of charge
In liquidation, fixed charge debenture holder ranks number one to sequence for asset distribution
Where floating charge exists over an asset, there may be a negative pledge clause - if company wants to change to fixed charge, lender needs to be notified first and may not allow it. this allows debenture holder to know if any other fixed charge over proposed asset.
Floating Charges
Are not attached to specific assets like Fixed
Charge on a class of assets of a company, present and future
Company may deal with these assets till charge crystallises
Usually applies to current assets of inventory & receivables
Floating charge will be invalid if created within the 12 months
immediately prior to commencement of liquidation, with same 2 exceptions as fixed charge (new money, solvent)
Debentures Compared with Shares
Fixed rate of interest
Payable even though no profits
No votes
Security (normally)
Preferential entitlement to return of money
(Paid before shareholders . Equity last in liquidation.
Possession of charged asset
Rights when company defaults:
apply to court for liquidation order
apply to court for administration order
Appoint a receiver (provided no administration order is in effect)
Debenture & preference receive same amount each year,
but equity amounts differ.