Management of Companies
Last Updated on Sunday, 10 January 2010 18:55
A Company is managed by its "Board of Directors". Shareholders or members do not manage the affairs of the company, instead relying on the Board of Directors to act in the Company's and in the Shareholders best interests. If shareholders are dissatisfied with the way the company has been managed they can remove individual directors or the entire board, but they cannot make the day-to-day decisions which involve the running of the company.
The powers confered on Directors are limited by the law and by the company's constitution. Decisions are made by the Board of Directors in meeting, agreed to by the majority of the board subject to the provisions of the articles. For decisions or resolutions of the Board to become effective a quorum must be met. (Quorum refers to the minimum persons present at a meeting of the Board). Unless a quorum is fixed by the Directors at the first Directors meeting, the law states that quorum shall be two.
External parties interacting with the company are safeguarded via the law which supports the validity of the acts of the Directors, notwithstanding any defect that may subsequently be discovered in the appointment of the Director or their qualification to be a Director.
Except from Director meetings which happen at regular intervals for the day-to-day management of the company, Member meetings (also known as general meetings) are also be held to inform shareholders on the affairs of the company and to ensure that shareholders interests are protected.
There are two types of general meetings
- an Annual General Meeting (AGM); and
- Extraordinary General Meetings (EGM)
In addition to general meetings every newly incorporated non-private entity must hold a general meeting of the members known as a "statutory meeting" within one (1) month of incorporation and no later than three (3) months after incorporation.
Notice of fourteen days (14) prior, is given to the members by the directors in writing. Together with the notice, and again no later than fourteen days (14) prior to the statutory meeting, the directors must forward to the members the statutory report which is certified by two or more directors.
The report is forwarded to the members of a newly incorporated entity fourteen (14) days prior to the statutory meeting. The report must state
- the total number of shares allotted; distinguishing shares allotted as fully or partly paid up and the consideration they have been allotted
- the total amount of cash received by the company in respect of all the shares allotted
- an abstract of the receipts of the company and of the payments made, up to a date of seven days from the date of the report, distinguishing between receipts from shares, debentures and other sources, payments, balances at hand and estimates of the preliminary expenses of the company
- the names addresses and descriptions of the directors, auditors (if any), managers (if any), and secretary of the company
- particulars of any contract, or modifications which need to be submitted to the meeting for approval
A certified copy of the report must also be sent to the Registrar.
An AGM is held once per year to table the company's annual accounts, to appoint or approve the ongoing appointment of its directors, and to appoint or approve the ongoing appointment of the auditors. The AGM is called by the Directors, and attended by directors and shareholders. A notice must be issued twenty-one (21) days prior to the meeting, in writing, accompanied by a statement that a member is entitled to appoint a proxy.
Objectives of the AGM
- Presentation and approval of the audited accounts
- Appoint new auditors or ratify auditors appointed by directors in between AGMs and/or approve ongoing appointment.
- Other items including, compensation of officers, confirmation of proposed dividend and any other issues raised by shareholders.
An EGM is called by members owning not less than 10% of the paid-up capital. A request, in writing, is served at the registered office of the company. The request, which must be made fourteen (14) days prior to the proposed meeting, must state the objects of the meeting and must be signed by all the members making the request.
If a special resolution is proposed at an EGM then notice of twenty-one (21) days notice is required to be served at the company's registered office.
Notice must also be given to the auditors of the company for every general meeting.
EGMs can also be convened by the directors whenever they think fit.
All general meetings of the directors and members of the company other than the AGM are called extraordinary general meetings.
Every company has to keep a minute book, in which all minutes of meeting are held. The minutes of each meeting are signed by the Chairman (any member/director elected by the members present at the meeting) of the meeting. The minute book is open to inspection by any member at the company's registered office without charge.
- A resolution to change the company's name
- A resolution to alter the memorandum of association of a company ceasing to be a public company following the acquisition of its own shares
- A resolution by the directors of an old public company to re-register as a plc
- A resolution to allow title (meaning the right to benefit from ownership) to be evidenced and transferred without a written document.
Ordinary resolutions
Used for all matters unless the Companies Law or the company's articles of association require another type of resolution. They are passed by a simple majority of members who are present and entitled to vote. Voting may also be allowed by a member's substitute or proxy. The length of notice required for an ordinary resolution depends on the kind of meeting at which the resolution is to be discussed. An ordinary resolution may be passed at short notice using the same arrangements as apply to special resolutions.
The following ordinary resolutions need to be filed with the Registrar:
- Resolutions to give, vary, revoke or renew an authority to the directors to allot shares
- Resolutions to give, vary, revoke or renew an authority to the company to make a market purchase of its own shares
- A resolution to prevent or reverse a directors' resolution to allow title of shares to be evidenced or transferred without a written document
- A resolution to authorize an increase of share capital. (this type of resolution must be sent with Form 123 - notice of increase in nominal capital)
- Special resolutions
- Extra-ordinary resolutions
- Resolutions agreed to by all the members
- Resolutions or agreements which have been agreed to by all the members of some class of shareholders
- Resolutions requiring the company to be wound up voluntarily due to the expiry of its duration or due to the occurrence of an event stipulated so by the articles
Extraordinary resolutions
These are required for certain matters, for example modifying the rights of classes of shareholders or winding-up a company. They are passed by at least 75% of the members who vote on the motion, in person or by proxy (where allowed) at a general meeting. The length of notice required for an extraordinary resolution will depend on several factors, including the type of meeting to be held. They may be passed at short notice under the same arrangements as for special resolutions.
Special resolutions
A special resolution requires a 75% majority and a notice of a minimum of twenty one (21) days. It is required for important matters such as alterations to the memorandum or articles of association, a change of name, or a reduction of capital.
