RMIT Classification: Trusted

Week 3
Topic 5 – Meetings of Members 1
Chapter 7 – Member Decision
Making
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Member decision-making – learning objectives

Structural and
Member voting and Scope of member
constitutional
corporate control voting rights
decisions

Selecting the board Approving

Other decisions
and auditor transactions
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Relationship between member voting and

corporate control
ABC Pte Ltd

• Effects of
incorporation - SLE
• Constitution – rule Shareholders
book

Directors – s157A CA
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• The directors have the power to generally manage the

business of the company (s157A CA), and the
Corporate shareholders are only entitled to vote on limited
matters.
governance - • Organic Theory of the company: (Chapter 6-220)
• Board of directors and members in general meeting
separation of constitute two separate organs;
management • Each organ is sovereign with respect to decision
making, neither organ can control the other in
and decision making;
• Respective powers of each organ are determined
ownership by the law and the company’s constitution; and
• That power is a power to act as the company or to
delegate the power.
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• Automatic Self-Cleansing Filter Syndicate Co Ltd

Members v Cunninghame (1906)
Shareholders voted in an general meeting to
cannot direct the directors to sell company assets.
override the The court held that the directors did not have to
obey shareholders’ instructions to sell company
decision of assets if they thought it would not be in the
interest of the company to do so. The company
the board constitution gave directors power to make such
decisions.
(6-340)
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John Shaw & Sons v Shaw [1935]

• Majority of the Board of Directors resolved that
Members the company should commence litigation
against certain other directors to recover debts
cannot owed to company.
• Members in a general meeting, at the
override the instigation of the defendant directors, resolved
decision of that the litigation be withdrawn.
• Court held that the decision to commence
the board proceedings was within the board general
powers of management provided for in the
(6-340) company’s articles (now called constitution) and
that members could not override the board’s
decision, based on SLE.
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Google any Singapore public listed company Notice

of AGM and its related proxy form – try Singtel
Notice of AGM
So what 1. When is the company incorporated?
powers do 2. What is the date, time, place of meeting?
3. When was the Notice signed? By whom? Is the
members date important?
have? 4. What matters do members vote for?
5. What are resolutions?
6. Which ones are ordinary resolutions?
7. Which ones are special resolutions?
8. What are proxies? When must this form be
submitted? How many hours before the AGM?
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Declare
Dividend

Approve
Director’s
Fees

Appoint
or re-elect Issue
directors more
shares

https://www.singtel.com/content/dam/singtel/investorRelations/annualReports/2019/singtelar-19-
notice-of-agm.pdf
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Member Voting and

Corporate Control
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• Absolute control
• Voting rights vest in one person;
wholly owned subsidiary – 100%
• Special control
• Parties hold 75% or more of the
Member voting voting rights
and corporate • Majority control
• Majority or control over 50% of
control – how voting rights
much? • Effective control or “controlling
interest”
• Dependent on shareholding
structure and shareholder
participation in corporate decision
making
• Substantial shareholders
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• Concept of “Deemed Interests”

Member • Importance and rationale of deemed
interest provisions
voting and • Directors, CEOs, substantial shareholders
have interests in the company –
corporate important to maintain these registers –
they must disclose if their interests
control – change, some no later than the end of
deemed business day or on the following day
• Also for takeover purposes
interests • See Figure 7.1 p148 of textbook
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• When is a party deemed to have an interest in the shares

of a company held by another party?
• Directors and CEOs are deemed to have interest in the
shares held by their family members.
Member • S7(1A) CA - a person has an interest in shares if he has
authority (whether formal or informal, or express or
voting and implied) to dispose of, or to exercise control over the
disposal of, those shares
corporate • s7(2) CA Where any property held in trust consists of or
includes shares and a person knows, or has reasonable
control – grounds for believing, that he has an interest under the
trust, he shall be deemed to have an interest in those
shares.
deemed • Where the person has entered into a contract to
interests purchase a share
• Where the person has a right to have a share transferred
to himself to his order; to acquire a share or an interest in
a share under an option or
• Is entitled to exercise or control over a share that he does
not legally own
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• S7(4) CA – Person (natural or incorporated)

deemed to have an interest in shares held by a
company if the company or the board of directors
Member of that company take his instructions
• S7(4A) CA – person and or his associates - who is
voting and entitled to exercise or control the exercise not
less than 20% of votes attached to the shares in
corporate the company – that person is deemed to have
interest
control – • Board control – can control the company via
deemed board of directors
• Controlling interest – voting control in the
interests company
• Refer to Figure 7.1 on p148 of textbook for
deemed interests
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• Refer to Notice of AGM of Singtel

• Members have power to vote for
Member voting • basic changes to constitutional structures of
the company;
and corporate • Board composition – elect or remove
control – to directors.
• Need to strike a balance between allowing
what extent do directors to manage the business and the
members members’ control -
• Members are given power to compel
control directors to do certain things or to require
their approval before directors can do them;
companies? • Where members are given such voting
powers – need to exercise these powers in a
manner that facilitate full participation by all
members and balances the interests of
different classes of members.
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• In small companies, shareholders tend to

Member voting be directors – less divergence
and corporate • In larger unlisted companies, while not all
members have direct involvement in
control – how management, members are personally
much control do related to one another.
• In public listed companies – hard for
members have small investors to control the company to
in large listed control the company
• Takeover code – if acquire for than 30%
companies? of the shares – mandatory offer
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The Scope of Member

Voting Rights
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• Member voting rights:

• Questions to ask are:
• How is the power to vote granted? – by law
or by agreement between parties that can
The scope of exclude or remove these powers?
• Type of power granted to members – to
member compel company to take some actions
against directors’ wishes or only to approve
voting rights some actions proposed by directors?
• Percentage of members who must agree with
resolutions – ordinary or special? and
• Effect of majority’s decisions – what rights do
dissenting minority have?
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• Adoption of amendment to the company’s

constitution
• Changes of company name and type
Scope of • Variation of class rights,
• Certain transactions affecting hare capital (share
member issue, share buy-back, reduction in capital)
• Composition of board choice and company auditor
voting rights (appointment, election, removal, remuneration and
– what issues benefits)
• Right to veto some transactions – transactions
to vote on: cannot proceed unless obtain members approval –
interested person transactions; sale of company or
certain take over and reconstructions
• Initiate members voluntary winding up
• Pass resolutions where board unable to act or to
ratify directors’ duties
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Structural or
Constitutional Decisions
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Structural and constitutional decisions

Amending the constitution: Changing type of company and name:

Special resolutions are required – s26 CA
Must be initiated by members or directors
Binding on company and directors even if
directors disagree
Both require special resolution of members
S28 CA for changing the company’s name
S31 CA – change from private to public and vice
versa
S30 CA – change from unlimited to limited
liability and vice versa
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• Varying class rights

• Company entitles to issue shares with
different rights attached to them – dividend
rights, priority for repayment of capital,
Structural and participation in surplus assets on a winding
up
constitutional • Require approval of members whose rights
decisions are affected
• S74 CA – holder of not less than 5% of
shares in that class can apply to court to
cancel the variation or abrogation of rights
• Refer to chapter 16
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• Approving certain corporate actions affecting share capital

• Members approval required for:
• The issue of new shares – s161 CA – directors have power to
issue shares but seek prior approval of members usually at AGM
subject to certain limits
Structural and • Share buy-backs – generally not allowed; but certain share-buy
back are allowed provided that the company is not insolvent
(chapter 17)
constitutional • Reductions in capital – can reduce capital by special resolution,
provided company complies with certain procedures. In other
decisions cases, where constitution allows, company may by ordinary
resolution at a general meeting make other alterations to its
share capital (chapter 17)
• Financial assistance – generally not allowed, but may be
allowed under specified circumstances where a company assists
a person to acquire its own shares or in its holding company’s
shares if by unanimous resolution or a special resolution
(chapter 17)
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Selecting the Board

and the Auditor
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• Appointment of directors - s149B CA - ordinary

resolution
• Depends on type of company and terms in
constitution, members have different powers to
appoint and or to remove directors
Selecting • Private company –
• some directors have nominated other directors,
board and or may have power to appoint other directors
• S152(9) CA and Regulation 73 of Model
auditor Constitution or Reg 69 of Table A allows members
to remove directors by ordinary resolution and to
appoint another director in the stead.
• Regulation 72 of Model Constitution - directors
can appoint other directors to fulfil vacancy from
time to time, but total number cannot exceed the
max allowed under the constitution.
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• Public company –
• Some directors have power according to the
constitution to appoint persons to the board
until the next AGM at which time the newly
appointed director will have to seek election
Selecting by members
• S152 CA – members of public company
board and always have a right to remove directors by
auditor ordinary resolution, notwithstanding
anything in the constitution or in any
agreement between the director and the
company (special procedures required,
chapter 10) - special notice of 28 days given
to the company and notice for directors to
defend themselves
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• Directors remunerations and benefits

• Section 169 – members must approve directors’
remuneration in ordinary resolution in general
meetings
• Directors’ remuneration is also provided for in
Selecting most company’s constitution – to be determined
at a general meeting.
board and • Section 168 – members’ resolution required for
auditor certain payments to directors on their retirement
from office; transfer of property of the company
(special procedures apply – chapter 10)
• Appointment and removal of auditors
• S205(2), 205AF(1) and 205(4) CA – provide for
appointment and removal of company auditors
in a public company – chapter 15
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Approving Certain
Transactions
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• Interested person (director, CEO, controlling

shareholder) transactions:
• Governed by Chapter 9 of SGX Listing Rules
• Member approval required for certain
transactions (see p151) - financial assistance,
acquisition or disposal of assets, provision or
Approving receipt of services, grant of shares, joint
ventures etc
certain • Significant transactions:
• S160 CA in relation to disposal of company’s
transactions undertakings
• Listed companies
• Chapter 10 of SGX Listing Manual
requires member approval for major
acquisitions and disposals of assets
• Take-overs and reconstructions
• Require members’ approval
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Other Decisions
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Initiative a members’ voluntary winding

up (chapter 22) –

• by special resolution s290 CA

Making decisions under general law of

voting powers:
Other • Where board is unable to act – in very limited
decisions circumstances, where the board of directors are in
conflict and deadlocked to the extent of being
unable to act, members can exercise powers that
normally belong to the board; or in situation
where the board lacks a quorum and it is not
possible to appoint additional directors.
• Ratification of breach of directors’ duties -
members choose to condone or excuse directors
from breach of duties.
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Challenger’s Minority Shareholders

blocked resolution
disgruntled-minority-shareholders-rise-defeat-it-retailer-challengers-delisting-bid
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Tutorial Question
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Discussion Question for Chapter 7

Large Goods Ltd has been having secret negotiations with BBL Ltd to
sell its transport and logistics business. This business accounts for 25%
of Large Goods Ltd‘s assets and 20% of it‘s revenues. Would the sale of
this business require the approval of Large Goods Ltd‘s shareholders?