Lecture 5

BP26103 COMPANY LAW
LECTURE 5
Framework of discussion
A.
Decision-making and company management
Division of powers
Role of company officers
Corporate governance
A.
Meetings
Member meetings
types
Decision-making without a meeting

Procedural irregularities
scs/BP26103/Lecture 5
Decision-making and company

management
Making decisions about, among other
things:
the capital structure of the company
its operations (its business and activities)
its internal structure and the relationship
between participants
How does the law allocate that decisionmaking power, and regulate its exercise?
Division of powers
Power to make decisions is divided
between:
the members in general meeting
the board of directors
Division depends on the memorandum and

articles of association and general principles
of company law
Directors broad power of

management
Usually, directors have general power of
management: eg Art 73 of Table A.
Confers power on the board subject to the powers
that are required to be exercised by the general
meetings as stated in the Companies Act 1965 and
the the articles of association
But general meeting may instruct board as long as
not inconsistent with the Companies Act and the
articles of association
Members cannot override

directors
Two organs of the company
members in general meeting
board of directors
One cannot interfere with powers of other

Automatic Self-Cleansing Filter Syndicate v
Cunninghame; John Shaw & Sons
What options are available to members who

disagree?
Relationship between Ds and GM

Ds derive their powers and functions from Articles
in the event of dispute between D & S/h, thus refer to
articles
Isle of Wight Railway Company between Tahourdin
(1883):
if you want to alter the management of the affairs of the
company, go to GM, and if they agree with you, they
will pass a resolution obliging the Ds to alter their
course of proceedings
....cont
...cont
Hence, Ds are mere agents of the company in GM
Once the Ds have been appointed, they are entitled
to exercise their powers under the companys
articles until such time as the articles are properly
altered by special resolution
S.31 amend articles with s/r
S/h can instruct the Ds and have their authority

limited:
Pender v Lushington
....cont
Decisions of members of a company are embodied
in resolution
However, the directors could not be instructed to
sell by o/r (though it was pass by majority s/h), if
the cos articles provide for s/r:
Automatic Self-Cleansing Filter Syndicate Ltd v
Cunningham (1906):
...cont
Whether members decision may override
the BoDs decision?
It depends on the companys articles
Refer Art 73
10
Members personal right:

To have M&A observed;
To restrain UV & illegal acts;
To have access to the cos records and to
have certain information provided to them;
To attend and vote at GM;
To be fairly treated
11
...cont
Mere irregularities in management or
administration do not invalidate act of
members or Ds unless they amount to
abuse of power or oppression to minority
- Section 355 decision may be valid despite
irregularity but there must be no
substantial injustice
Mc Dougalls case
12
Corporate governance
The way companies are directed and
managed
In many smaller companies, the owners and
managers are the same people and (except
where relationships break down) do not
have divergent interests
13
Corporate governance (cont)

In larger companies and relationship
breakdowns, divergence is more likely
Corporate governance rules are rules to
minimise and manage that divergence
Many investors require companies to adopt
corporate governance practices that promote
accountability on the part of directors and
executives
14
Corporate governance (cont)

Balancing different considerations
performance and conformance
Do particular corporate governance
practices make companies more profitable?
What is good governance?
Corporate governance mechanisms
15
Corporate governance and listed

companies
Bursa Malaysia requires disclosure of main
corporate governance practices, eg:
executive and non-executive directors

procedures governing board membership
procedures for setting remuneration
use of and relationship with auditors
identification and management of risk
development of ethical standards
16
Composition of the board

Appointment member election or
approval may be required under the articles
or memorandum, eg
members elect the directors by ordinary
resolution.
17
Composition of the board (cont)

Members right to remove a director:
public company: sec 128 (ordinary resolution
with special notice)
Private company : method is to be followed
18
Types of Meeting
Shareholders Meetings:
Statutory Meeting;
Annual General Meeting;
Extraordinary Meeting;
Class Meeting
Directors Meetings
Board of Directors Meeting;
Committee Meeting
19
Statutory Meeting
Applicable only to public company with share capital
Its purpose: discuss matters concerning statutory
report (SR) and matters concerning incorporation and
formation of the company
Held only once in a lifetime of a company:
To be held not less than 1 month and not more than 3
months from the date of commencement of a company;
s.142(1)
D serves the SR to members of company not less than 7
days of commencing date of meeting; s.142(2).
20
cont
Statutory Report, s.142(3):
Certified by at least 2 Ds:
Contents of SR:
Amount of shares;
Cash amount received;
Details on cash received and cash in hand and
account
Contract which requires modification whereby
modification requires approval (eg pre-incorporation
contract)
21
Annual General Meeting

The purpose of AGM;
AGM to be held once in a calendar year,143(1),
the gap between subsequent and preceding AGM
must not exceed 15 months;
subject to the exemption in s.143(1) whereby company
held its first AGM within 18 months from the date of
incorporation;
A company may apply for extension from the Registrar
22
Who may convene AGM

D may convene an AGM
Failure to convene is an offence under
s.142(10):
Failure to convene an AGM is also a ground
to wind up the company, s.218(1)(b).
23
Matters to be discussed in AGM

Refer to Art 46:
Proclamation of dividend;
Companys audited account;
Directors Report
Auditors Report
Ds retirement
Appointment and remuneration of auditors
24
Procedure to convene AGM

Art. 45: At least 14 days notice and members are
informed the place, day, time and venue of
meeting;
Art. 47: Quorum at least 2:
Inquorate: after hour thus member may propose
postponement
Distinguish postponement and adjournment.
25
Extraordinary General Meeting

Any other meeting apart from AGM, Art. 43,
Table A;
EGM may be held at any time in a year depending
upon companys needs:
However, audited account shall not be tabled at EGM
Who may convene EGM:

D, Art 44
Member. S.144
Courts order, S.150
26
Securities Class Meeting

Mentioned indirectly in s.65(1) & Art. 4
Company may offer different class of shares that
entail different rights and interest ( referred to as
class rights) to the shareholders of the company:
Ordinary share;
Preference share
Member of each class of shares may convene

meeting among themselves:
- eg: if a company is issuing new preference shares,
members of this shares may convene a meeting as there
will be variation or modification to the members rights
27
Board of Directors Meeting (BoD)

BOD: make decision and implement
To convene a BOD meeting within a month from its
incorporation:
Appointment of Chairman of BOD;

Appointment of MD
Ds remuneration
Ratification of M&A , Certificate of Incorporation etc
allotment of share
Determination of financial year
Auditor to be appointed
Appointment of CS
Opening of bank account
Any matters concerning incorporation of company
28
cont
The rules concerning the proceedings of
BoD meetings are flexible:
eg refer to Art. 79, Art 80
29
Committee Meeting
Depends on the AoA: Bod may delegate its power

and authority to a specified committee, Art. 86
Committee is set up, for instance, to view the viability
of certain projects. Thus their authorities are limited to
the scope specified.
Its establishment is only for a specific purpose.
The findings are reported to the BoD and the Bod has
final say upon the decision
Similar procedure with BoD meetings, Art. 88
30
Calling a meeting
Usually, meetings are called by the board.
Art 44 authorises a single director or board
collectively to call meetings.
The Court may order a meeting on
application of a director or member if it is
impractical to call otherwise: sec 150
-refer to case: Re El Sombrero- refer Aishah Bidin
p.236
31
Calling a meeting (cont)

Directors must call a meeting when requested to
do so by members holding not less than 10% of
paid up capital: sec 144. If the directors fail to call
the meeting within 21 days, the members can do
so and the company must pay their reasonable
expenses
Two or more members with at least 10% of issued
share capital or for a company not having a share
capital: not less than 5% in number of members
may call a meeting, at their expense: sec 145
32
Members Requisition
Refer to s.144(1)
33
Procedure to Convene a Meeting
Notice
Agenda
Quorum
Proxy
Chairperson
Minutes of meeting
34
Notice of meeting
General rule 14 days. Consent to short
notice is possible: sec 145(3)
For passing special resolution: sec 152
(21 days)
Notice must be given to members, directors
and auditor
Contents of notice: sec 152 and Art 46.
35
Notice of meeting (cont)

Notice must contain sufficient information
to enable members to decide whether or not
to attend the meeting and how to vote
Must not be misleading, and must fully
and fairly inform and instruct the
shareholder about the matter on which he or
she will have to vote: Devereaux Holdings
Need to balance information presented:
Fraser v NRMA scs/BP26103/Lecture 5
36
Agenda
Only matters that have been included in the notice
of meeting can be considered at the meeting
other than matters stated in Art 46 of Table A
Usually, where the directors are calling a meeting,
they will determine the agenda
Members can request the inclusion of resolutions
for consideration by the meeting: sec 151
37
Conduct of meetings
Quorum
Use of technology
Proxies and corporate representatives
Conduct (role of the chairperson)
38
Quorum
Check the AoA;
Art. 47 provides minimum requirement for
quorum is 2, but the quorum may vary in
each respective company;
39
Proxy
Member has the right to appoint proxy to
attend and vote on his behalf at the meeting;
S.149(1)(b)unless the AoA provides otherwise,
a member is not entitled to appoint a nonmember as his proxy, unless the proxy is an
advocate and solicitor, auditor or a person
approved by the registrar.
Read on representative of corporate

members
40
Minutes
Must be prepared and entered within 14
days from the date of meeting
Signed by the chairman
Kept at the registered office
41
Informal agreement
If all members have unanimously agreed on
the matters listed in the agenda, thus
company need not convene a meeting
Re Express Engineering Re Dromatic
42
Further readings
Read on the role of the chairperson in a
meeting
What is the effect of procedural
irregularity?
43

Lecture 5

Uploaded by

Document Information

Original Description:

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Lecture 5

Uploaded by

Copyright:

Available Formats

BP26103 COMPANY LAW

Decision-making and company management

Decision-making without a meeting

Decision-making and company

Division depends on the memorandum and

Directors broad power of

Members cannot override

One cannot interfere with powers of other

What options are available to members who

Relationship between Ds and GM

S/h can instruct the Ds and have their authority

Members personal right:

Corporate governance (cont)

Corporate governance (cont)

Corporate governance and listed

executive and non-executive directors

Composition of the board

Composition of the board (cont)

Annual General Meeting

Who may convene AGM

Matters to be discussed in AGM

Procedure to convene AGM

Extraordinary General Meeting

Who may convene EGM:

Securities Class Meeting

Member of each class of shares may convene

Board of Directors Meeting (BoD)

Appointment of Chairman of BOD;

Depends on the AoA: Bod may delegate its power

Calling a meeting (cont)

Procedure to Convene a Meeting

Notice of meeting (cont)

Read on representative of corporate

You might also like