CORPORATE MANAGEMENT (4)
. . . . . . MEETINGSGENERAL MEETING
We already know that under S. 63(1), the organs of a company are identified by the Act and their respective powers are such as contained in the articles. The GM therefore constitutes a key organ in corporate management which makes decisions affecting the company and the legal rights of the members.
How many types of GM do we have? Most of the issues we will be discussing are provided in the Act. What are the types of meeting a company may have? Basically, there are three types of company meetings: Statutory Meeting, Annual General Meeting and Extra-Ordinary General Meeting.
It is usually the first meeting that a public corporation holds after incorporation. It has to be held within (the first) six months of incorporation. Usually, it is held once in the lifetime of a corporation.
What would be dealt with in this meeting? Most of them would revolve around incorporation; things like pre-incorporation contracts and shares issued etc. would be discussed.
When a statutory meeting is to be held, a statutory report must be sent to shareholders at least 21 days before the date of the meeting. If there will be a statutory report, what then is the significance of this statutory report? What info should be in the statutory report? See S. 211 (3) - (4) for the content of the report. Please note that the report must be certified by not less than two directors or by a director and the secretary of the company. Please note S. 135-137 CAMA with regard to payment of shares. The law provides that the shares of a company and any premium on them shall be paid up in cash, or where the articles so permit, by a valuable consideration other than cash or partly in cash and partly by a valuable consideration other than cash. Such information must be contained in the statutory report. Professor Bolodeoku describes this meeting as housekeeping.
Statutory meetings are critical meetings which must be paid attention to.
Annual General Meeting
S. 213 CAMA provides that an AGM must be held in each year in addition to any other meeting. The implication of this is that it is possible for a company to have more than one general meeting but only one would be referred to as the AGM. But there is also a rule in terms of when to hold the first AGM. The law provides that there shouldn’t be more than fifteen months lapse from the date of the last one to the date of the next one. The law also provides that so long as you hold your first AGM within 18 months of incorporation, you need not hold it again that year or the following year.
Apart from the first AGM, the CAC may extend the time but won’t be more than three months. This means that if a company can’t hold its subsequent AGM within the specified time, it may apply to the CAC for extension of time but this extension can’t exceed three months.
The law provides that if there is any default in holding AGMs there could be a protest to the commission, the latter must intervene where a company is defaulting and there is a complaint to the commission. Where a corporation is not ready to hold it, a member may approach the Commission and the latter may direct it to hold it…
If a company was supposed to hold an AGM in a year but due to default, it holds it the year after, the effect is that such AGM would be deemed to be that of the first year and the company would still have to hold another AGM for the second year unless there is specific authorization by the members.
S. 214 provides that all businesses transacted in the AGM shall be deemed to be special business. But there are exceptions. The law also lists some category of businesses which are deemed to be ordinary businesses. Please read through. It is important to note those things the law considers as ordinary business; anything not regarded as ordinary business is special business.
Extraordinary General Meeting
We have seen from the above that AGMs are held once in a year in addition to any other meeting. However, there could be cases where it would be impossible to call an AGM because one has been held already. But there are businesses which the company needs to transact. What option is left open to the company? This is where EGMs are necessary to take care of things until the next AGM comes alive. This is why the law implies that a company could have as many EGMs depending on the circumstances. There is no stipulation as to how many a company may hold in a year.
Who may convene an EGM? The board may (in its own discretion) convene an EGM. Where there are not sufficient number of directors to constitute a quorum, a director may convene an EGM. Shareholders are also empowered to requisition an EGM. This means that shareholders may require the Board to call an EGM. To have this power of requisition, such member(s) must have up to 10 % of the paid up capital or 10% of the total voting rights of all members. The implication of this is that it is not all shareholders that can summon the Board to have an EGM. But please bear in mind that shares may be fully paid or partly paid. In the requisition of an EGM, the directors are entitled to know why the member(s) want(s) an EGM. For instance, where the Board has refused to take a particular action, the member(s) may call for an EGM so that the matter could be discussed and voted on.
The law provides that businesses conducted at the EGM are deemed to be special business(es).
S. 216 CAMA provides that all statutory and annual general meetings shall be held in Nigeria. The implication of this is that the EGM may be held within or without Nigeria.
Notice of Meetings
The notice required for all types of general meetings shall be 21 days from the date on which the notice was sent out. But suppose notice was issued less than 21 days, what is the legal effect of this? The law provides that where a shorter notice is given, an AGM would be deemed to have been duly called if it is so agreed by all members entitled to attend and vote thereat. But in the case of any other general meeting, the would be deemed to have been duly called if 95% of the members have agreed.
Contents of Notice
The notice of a meeting shall specify the place, date and time of the meeting, and the general nature of the business to be transacted thereat in sufficient detail to enable those to whom it is given to decide whether to attend or not, and where the meeting is to consider a special resolution, shall set out the terms of the resolution.
But please note that no business may be transacted at any general meeting unless notice of it has been duly given.
Persons entitled to receive notice of Meetings
1. Every member;
2. Every person upon whom the ownership of a share devolves by reason of his being a legal representative, receiver or a trustee in bankruptcy of a member;
3. Every director of the company;
4. Every auditor for the time being of the company; and
5. The Secretary.
Please note that apart from these persons, no other person shall be entitled to receive notices of general meetings. It stands to reason that creditors are not entitled to receive of meetings. But in what way can the creditors be entitled to receive notice of meetings; by contract. Thus, a creditor may state when advancing money that must be on the Board so as to know how his money is dealt with. In such case, he is entitled to notice.
S. 221 CAMA is about failure to serve notice. The meeting would be invalidated where notice was not given. But please note that failure to serve notice may not invalidate the meeting where such failure is an accidental omission on the part of the person(s) giving the notice. It is important you read this section with S. 266 CAMA and the case of Longe v First Bank (supra). If you can remember in that case, one of the issues before the court was that the director was never served notice as required under S. 266 CAMA and it was on this ground that he sought the assistance of the court to invalidate the outcome (his removal) of the meeting.
S. 222 CAMA talks about additional notice. The effect is that in addition to the required notice of meeting given to those entitled, every public company must advertise a notice of such meeting 21 days before any general meeting, in at least two daily newspapers.
S. 223 CAMA deals with the (discretionary) power of the court to order meetings (whether General Meeting or meeting of the Board of Directors) as prescribed by the articles of the Act. This order may be made where it is impracticable for such meeting to be called. The court may make such order either of its own motion or on the application of any member or director of the company. The meeting shall be conducted in such manner as the court thinks fit, and where any such order is made, may give such ancillary or consequential directions as it thinks expedient. The court may direct that a member appear in person or in proxy in the case of a meeting of the company or a director in the case of a Board meeting. Such a meeting would be deemed duly called, held and conducted.
Voting (S. 224 CAMA)
There are two ways of taking decisions in a general meeting; a show of hands or a poll is demanded. Where a resolution to vote is put forward, the vote shall be determined by a show of hands unless a poll is (before or on the declaration of the result of the show of hands) demanded by:
(a) the chairman, where he is a shareholder or a proxy;
(b) at least three members present in person or by proxy;
(c) any member or members present in person or by proxy and representing not less than one tenth of the total voting rights of all the members having the right to vote at the meeting; or
(d) any member or members holding shares in the company conferring a right to vote at the meeting being shares on which an aggregate sum has been paid up equal to not less than one tenth of the total sum paid up on all the shares conferring that right.
If it is by a show of hands, the law provides that it is the chairman of the meeting that will declare the result. The implication of this is that the chairman is not bound to state the correct result; he may declare another section as the winner. Thus, voting by show of hands gives way for the chairman to manipulate the results and his declaration is final. However, it is possible that before the man declares the result, a person may request for a poll (voting by shares). Can a company attach more than one votes to a share? The answer is Yes and No. With regard to ordinary shares, no, but with regard to preference shares, yes. The position before now is that companies could issue weighted votes, such provision allowing weighted shares was valid. In Bushell v Faith, a property company called Bush Court (Southgate) Ltd owned a block of flats. There was £300 capital, 100 shares held by Mr. Faith and the other 200 by his two sisters, Mrs. Bushell and Dr. Bayne. Article 9 of the company constitution said that under a resolution to remove a director, that directors’ shares would carry three votes each. When the two sisters tried to remove him, Mr. Faith recorded 300 votes and the other two, 200 votes together. The House of Lords held that the provision was valid, because there was no express indication by Parliament that it intended otherwise.
The right to demand a poll is so important that not even the article can take it away. However, the company’s articles may be used to exclude the right to demand a poll at a general meeting on questions on election of the chairman of the meeting or the adjournment of the meeting. Where the articles exclude the right to demand a poll on any other question, such article would be declared null and void to the extent of its inconsistencies. However, there shall be no right to demand a poll on the election of members of the audit committee under section 359 of this Act. This is a mandatory provision and the company’s articles need not provide same.
Have you ever heard of ‘repugnancy test’? Are you aware that the test applies to company law? When you look at the provision of S. 542 (1)(a)(b) CAMA, we have the issue of repugnancy under CAMA. The effect of this section is that MEMAT must be consistent with the Act. But also beyond the issue of consistency, it provides that companies’ MEMAT, agreement or resolution repugnant to the provision of the Act are void to the extent of their repugnance. It is the submission of this writer that where a company’s article…..is inconsistent or repugnant to the Act, it is not the whole MEMAT….that becomes void. In other words, it is only the part of the MEMAT repugnant or not consistent with the Act that becomes or is void. The question may even be asked whether there is a distinction between ‘repugnance’ and ‘inconsistence’ as used in S. 542 of the Act. While it is easy to determine when a document is not consistent with the provision of the Act, it is not clear where the question of repugnance would arise.
S. 230 (Proxies)
They are persons appointed by shareholders to represent these shareholders at meetings. Consequently, we may say that proxies are representatives of the shareholders in a meeting. By virtue of being representatives of the shareholders, they can do anything a shareholder can do including the right to demand a poll.
S. 231 CAMA deals with a situation where a corporation is a shareholder in another corporation. The law provides that corporations may appoint any person (as it thinks fit) to represent it at meetings as long as such representation is authorized by the directors or other governing body.
Quorum (S. 232 CAMA)
The business of a meeting shall not commence until the requisite quorum is present. The statutory quorum is one-third of the total number of members or 25 members (whichever is less). For the purpose of determining a quorum, all members or their proxies shall be counted.
Where a member or members withdraw from the meeting for what appears to the chairman to be insufficient reasons and for the purpose of reducing the quorum, and in fact the quorum is no longer present, the meeting may continue with the number present, and their decision shall bind all the shareholders and where there is only one member, he may seek direction of the court to take a decision.
Where there is a quorum at the beginning, but no quorum later due to some share‐holders leaving for what appears to the chairman to be sufficient reasons, the meeting shall be adjourned to the same place, and time, in a week's time, and if there is no quorum still at the adjourned meeting, the members present shall then be the quorum and their decision shall bind all shareholders and where only one member is present, he may seek direction of the court to take a decision.
Please it is important to state that with regard to S. 232(1)(2) CAMA, companies are not bound to comply with the provision of the law. In essence, a company may alter its articles to suit its ‘taste’. This is why it is important to note the distinction among mandatory, enabling or empowering and default provisions under the CAMA. A lawyer is expected to know all this under the Act.
Resolution (S. 233-238 CAMA)
There are two main types of resolution and they are:
A resolution is ordinary when it has been passed by a simple majority of votes cast by such members of the company as, being entitled to do so, vote in person or by proxy at a general meeting.
The circulation of revolution: it could come from members as well.
Some resolutions require special notice before they can be passed. What even constitutes special notice?
Also, read S. 240-242 CAMA.
Please note that the giving of notice of meeting is not the same as giving notice of general meeting.