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Power Within A Company Notes

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Company Law Supervision III - Notes SHAREHOLDERS, DIRECTORS AND POWER WITHIN A COMPANY Division of Powers



Overarching principle one of contractarianism.
? I.e. powers of company are vested where articles say they are.
? Are only very limited mandatory rules imposed extraneously. Thus location of power determined by construction of the constitution.


Under Model articles, directors: i) Are responsible for management of company ii) may exercise all the powers of the company for this purpose Article 4: RESERVE POWER OF MEMBERS (1) Members may direct the directors to take, or refrain from taking, specified action.
? This must be done via special resolution (i.e. 75% majority amongst those voting) (2) However any special resolution of this kind CANNOT invalidate any action of directors before passing of resolution.
? i.e. members can only invalidate acts of directors prospectively, not retrospectively. Interference by Shareholders


The shareholders cannot interfere with a decision of the board, save where this is permitted by the articles or statute.
? Automatic Self-Cleansing Filter Syndicate [1906]

Thus members cannot pass resolutions or take action on behalf of company where articles vest this power in directors

1. e.g. Quin & Axtens Ltd v Salmon [1909]

2. Shareholders' agreements may act as evidence that members believe a particular power to be vested in board

1. Breckland Group Holdings [1989]
Exceptions i) ii) iii) iv) v)

1. Rights of members under Model Articles/Companies Act include: Appointment of directors (Art 17/20) Removal of directors (s.168) Change the company's constitution (s.21) Approval of certain "risky" transaction (see supervision 6) Ratification of director's breach of duty (s.239)




Members normally make decisions by means of a vote at general meeting; However they may in some circumstances act informally outside of a general meeting

General Meeting

1. Calling of Meeting




Public companies must hold AGMs on an annual basis
? Section 336
? although private companies need not do so Other meetings may be called either by:section 302sections 303-305section 306

ii) members iii) the court Notices


Section 310: Notice of meetings must be given.

1. Those who must receive notice include:

1. members

2. directors

3. auditors

2. Where shareholder does not receive any notice, resolutions passed at meeting are invalid

1. Colin Gwyer & Associates [2003] (NB case concerned board meeting)

Section 307:

1. Notice must be given at least 14 days before the meeting

2. However an AGM may be called at shorter notice if majority of those entitled to attend and vote, who also hold at least 95% of shares, agree to this. Nature of Notice


Section 311(2): notice must specify the general nature of business to be transacted

1. it must be fair and accurate in this regard

2. if notice is misleading or fails to make reference to any important business to be voted upon at meeting, resolutions passed at meeting may be invalid

3. Kaye v London Tramway [1898]

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