When one listens to the news, and companies are mentioned, terms such as directors and shareholders are often mentioned. These terms appear to be used interchangeably, however, they are two distinct different roles and functions. Companies are structured in a variety of manners. Larger corporations have a board of directors which oversee the long-term plans and management of the company and ensures that the owners and/or shareholders of such companies have their fiduciary rights satisfied. Shareholders buy shares in a company which entitles them, in certain instances, to voting power on the major decisions taken by the company, as well as, financial compensation for such purchase.
A share entitles the shareholders to rights in the company. As a result of such right, the Companies Act, as well as, the Memorandum of Incorporation (MOI) of a company prescribes certain decisions for the shareholders’ meetings or annual general meetings. These meetings are essential and as a result must follow a certain format, as well as, be recorded in order to be easily accessible when the contents thereof need to be applied.
- Shareholders’ meetings have certain requirements for such meetings to be valid and the decisions therein to take effect.
- The first requirement is that a quorum must be present. A quorum is a set amount of shareholders present at the meeting for votes taken therein to be deemed valid. This number is reflected in the MOI of the company.
- Another requirement is that of the meeting the relevant parties must be properly notified by the correct authority through a Notice of the time and place of the meeting. Again such authority and Notice format will be set out in the MOI.
- The shareholders meeting must be set at a time and place that is easily accessible by the shareholders so as to ensure that all shareholders have an opportunity to attend the meeting so that they may exercise their voting rights therein.
As previously mentioned the board of directors of a company play a role in this process as well. They are responsible for setting the date for the shareholders meeting. The directors also hold the power to determine which shareholders are entitled to receive Notice of a shareholders meeting, participate in the vote at such meeting, as well as, which shareholders may make decisions on matters by written consent or electronic communication should they be unable to physically attend such meeting.
A shareholders meeting has many procedural requirements and it is essential to ensure that your MOI accounts for all of these requirements. Failure to ensure that these requirements are clearly set out and observed may lead to a fatal flaw in such meetings and the decisions taken therein.
Should you require any assistance in any company law related matter, kindly contact us and we will gladly assist.