23 February 2024

The Lifecycle of a Business – General meetings – a step by step guide

Setting up and running your own business is an amazing achievement. It requires vision, creativity, motivation and stamina. On occasion, it can even bring you fame, riches and fortune. But it can also result in reams of paperwork and cause sleepless nights. And as someone once said to me about children “It doesn’t get easier, it just changes”, so the same can be said for your business throughout its lifecycle. From setting up to exit, it will force you to consider issues that you might not previously have known anything about and it will need you to make many decisions, sometimes very quickly. What it certainly is not is mundane.

With this in mind, the corporate team at Forsters, together with some of our specialist colleagues, has written a series of articles about the various issues and some of the key points that it may help you to know about at each stage of a business’s life. Not all of these will be relevant to you or your business endeavours, but we hope that you will find at least some of these guides interesting and useful, whether you just have the glimmer of an idea, are a start-up, a well-established enterprise or are considering your exit options. Do feel free to drop us a line or pick up the phone if you would like to discuss any of the issues raised further.

So far, we’ve covered initial considerations, directors and funding, so now let’s have a think about “Shareholders”.

General meetings – a step by step guide

While the board of directors of a company is responsible for the day-to-day, operating decisions of the company, there are various issues which, under the Companies Act 2006 (the Act), require shareholder approval. (A company’s articles of association (the articles) and any shareholders’ agreement which is in place may also set out matters which require shareholder consent.) For private limited companies incorporated in England and Wales, such approval is usually obtained by the passing of shareholder resolutions, either in an actual meeting of the shareholders or by written resolution.

Shareholder meetings

Meetings of shareholders are referred to as general meetings and any number of general meetings can be held throughout the year. Private companies may also hold an annual general meeting (AGM) once a year, at which, for example, directors may be elected, dividends declared and the annual accounts approved. Private companies are not required to hold an AGM under the Act, although their articles may provide otherwise.

Until recently, general meetings were usually held in-person but as technology has improved and become more widespread, there’s now the option to hold virtual or hybrid general meetings as well. There are pros and cons to such meetings, which pose additional factors to consider and as such, they fall outside the scope of this article.

Step 1: Calling the general meeting

General meetings are usually called by the board of directors and the calling of the general meeting, together with the form of the notice of the general meeting, should be approved by the directors.

Shareholders representing at least 5% of the paid-up voting shares in the company may also request the directors to call a general meeting. (The process for calling such a general meeting is a little different and is outside the scope of this article.)

Notice of the general meeting must be sent to all shareholders who are entitled to receive notice (plus the directors and company’s auditors (if any)) and the notice must include certain information. As a minimum, the notice must set out the date, time and location of the general meeting and the general nature of the business to be conducted. If any special resolutions are to be tabled at the meeting, the wording of the special resolutions must be included in the notice. Other, administrative information must also be provided, such as how a member can appoint a proxy to attend the meeting and vote on their behalf. In addition, the articles and any shareholders’ agreement must be reviewed to ensure that any provisions dealing with notice entitlement are complied with; this may be particularly relevant where, for example, there are different classes of shares in issue. Failure to send due notice will result in the meeting not having been validly convened.

It’s also important to consider what supporting information (if any) is required to be provided to the shareholders ahead of the meeting. For example, when an AGM is being called, a copy of the company’s annual report and accounts will need to be provided; these usually accompany the AGM notice.

Notice of the general meeting can be sent in hard copy form or, subject to certain requirements, in electronic form. Notice may also be placed on a website (again, subject to certain requirements).

Step 2: Ensure that the correct notice period is given

Under the Act, the length of notice required to be given for a general meeting called by the directors is generally a minimum of 14 clear days, although the articles may set out a longer period. (A longer period is also required where certain resolutions are being proposed.) Reference to “clear days” means that the day that the notice is given and the day of the meeting are not to be taken into account. When calculating the notice period, don’t forget about delivery. Under the Act, delivery by post or e-mail is deemed to occur 48 hours after posting or sending (non-working days shouldn’t be taken into account), although the articles may provide for a shorter deemed delivery period. So, for example, assuming that the articles are silent about deemed delivery, if notice is sent on Monday 25th March 2024, the earliest date that the general meeting can be held will be 11th April 2024.

A shorter notice period may be given if a majority in number of shareholders who, together hold at least 90% of the nominal value of the voting shares, agree. This percentage can be increased in the articles to a maximum of 95%.

Step 3: Is the meeting quorate?

The day of the meeting has arrived but in order to be valid, the meeting must be quorate. Generally, there must be two people present (and those people must represent different shareholders) for quorum to be achieved, unless the company only has one shareholder or the articles provide otherwise.

If the meeting isn’t quorate, the chair may choose to adjourn the meeting. Adjournment provisions are usually included in the articles.

Step 4: Running the general meeting

A chair will need to be appointed to facilitate and lead the meeting. This will usually be the chair of the board or another director, but a shareholder or a proxy can also take on this role. Depending on the size of the company and the nature of the business of the meeting, it may be advisable for the chair to use a pre-prepared script.

Shareholders, proxies and, usually, directors, as well as certain other persons, are able to speak at a general meeting and it’s advisable for the chair to let them do so. The chair can, however, take certain steps to stop obstructive behaviour, including adjourning the meeting and even removing the person(s) in question from the meeting, although removal should only be used as a last resort.

Step 4: Passing the resolutions

How the proposed resolutions are passed will depend on how the vote is taken and the type of resolution.

Votes can be taken on a simple show of hands (where each shareholder has one vote) or on a poll (where each shareholder has one vote for every ordinary share held). Votes will be taken on a show of hands unless a poll is specifically requested.

An ordinary resolution will be passed:

  • on a show of hands if it’s passed by a simple majority of the votes cast by the shareholders entitled to vote; or
  • on a poll if it’s passed by shareholders representing a simple majority of the total votes of the shareholders who vote on the resolution.

A special resolution will be passed:

  • on a show of hands if it’s passed by a majority of not less than 75% of the votes cast by the shareholders entitled to vote; or
  • on a poll if it’s passed by shareholders representing at least 75% of the total voting rights of the shareholders who vote on the resolution.

Step 5: Post-meeting matters

The end of the meeting doesn’t necessarily mean that the process is complete. Various formalities will need to be dealt with, for example, writing up the minutes of the meeting, making any requisite filings at Companies House and updating any registers of the company.

Written resolutions

Instead of holding a general meeting, the shareholders of private companies can also pass written resolutions for the majority of actions which require their approval. This is helpful for companies who have only a small number of shareholders and can be a much quicker way of obtaining shareholder approval. The procedure is set out in the Act and failure to follow this correctly can constitute a criminal offence.

The procedural specifics will depend on whether the directors or shareholders propose the written resolution but broadly, a written resolution must:

  • be sent to all shareholders entitled to vote on the date that the resolution is circulated (the circulation date);
  • state whether any proposed resolutions are special resolutions;
  • include directions as to how to approve the resolution; and
  • set out the deadline for when the resolution must be passed (28 days after the circulation date unless the articles say otherwise). If the resolution isn’t passed by the deadline date, it will lapse.

A copy must also be sent to the company’s auditors (if any).

If the shareholder agrees to the resolution, they must signify as such on the document and return it to the company. A written ordinary resolution will pass if shareholders representing over 50% of the total voting rights of the shareholders entitled to vote approve it. A written special resolution will pass if shareholders representing at least 75% of the total voting rights of the shareholders entitled to vote approve it.

Practical points

The steps to be taken to call and hold a general meeting are fairly formulaic, especially for companies with a smaller shareholder base. However, don’t forget to consider whether a written resolution may be a more practical option.

Thinking ahead, where possible, is advisable. Preparing the documentation required well in advance and being clear on the resolutions to be proposed and the voting process, will minimise the risk of errors and omissions.

Whether you choose to call a general meeting or circulate a written resolution, it’s important that the statutory procedure is followed correctly and that the articles and any shareholders’ agreement are checked to ensure that they are complied with. Getting this wrong could invalidate the meeting or even be a criminal offence. Your legal advisors will be able to assist if you’re unsure.

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