Issued but unpaid (K2,000,000) A2
2. Categories of General Meetings
Section 137(1) classifies general meetings into three categories a) An annual general meeting;
b) An extraordinary general meeting; and c) A class meeting.
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The current Companies Act has abandoned the requirement of statutory meetings at with the company was required to transact certain pre-incorporation business.
(a) Annual General Meeting
Section 138 of the Act covers annual general meetings. An annual general meeting is an ordinary meeting, which every company is required to hold within three months after its financial year. In other words, it is a scheduled meeting. If a company fails to hold this meeting within 3 months, any shareholder can apply to the Registrar of Companies for the purpose of causing the meeting to be convened (section 138(2)). Note that it is an offence for a company to fail to hold its annual general meeting. However, section 138(4) entitles a private company to dispense with the holding of an annual general meeting in any financial year other than the first financial year.
(i) Length of Notice for Convening an Annual General Meeting
The type of meeting determines this. As far as convening an annual general meeting is concerned, the requirement is that 21 days notice must be given.
However, a company is entitled to give a longer notice period in its articles of association serve that such longer notice period should not exceed 30 days. It should also be noted that a shorter notice period would suffice if all the shareholders agree or consent.
Notice of an annual general meeting must be given in writing. Giving of notice is very important and if a member is not served with a notice of the meeting, he can apply to invalidate any resolution passed at such a meeting.
(ii) Who is entitled to receive notice of a meeting?
Section 142(1) of the Act provides that, “any person who is, on the day before the latest day on which notice of the meeting may be given under this Act –
a) A registered member having the right to vote at a meeting of that kind;
b) A person upon whom the ownership of a share devolves by reason of his being a legal personal representative, receiver or trustee in bankruptcy of such a member and of whom the company has received notice;
c) A director of the company;
d) An auditor of the company; or
e) A person entitled under the articles to receive such notice; shall be entitled to receive notice of the meeting.”
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In terms of section 142(2), the proceedings of a meeting shall not be invalid by reason only of the accidental omission to give notice of a meeting to a person entitled to receive notice; or the non-receipt of notice of a meeting duly sent to such a person. The use of the term “by reason only of” suggests that in order for the proceedings of annual general meeting to be invalidated on the basis of the two scenarios, there must be something more.
(iii) Entitlement to Attend an Annual General Meeting
Section 146 identifies the persons who are entitled to attend and to speak at an annual general meeting.
(iv) Place of Meetings
According to section 145 of the Act, in the absence of any provision to the contrary and in the absence of an agreement to the contrary by all the shareholders, a meeting of a company shall be held in Zambia. No person who is not a member will be entitled to vote at an annual general meeting. The manner of deliberations of an annual general meeting or extraordinary general meeting takes the form of plenary session so that all members take part in the deliberations because these deliberations will affect them all.
(v) Quorum
No business of a meeting can be transacted without the requisite quorum. In the absence of a contrary provision in the company’s articles, the quorum for a meeting of the company shall be two members of the company holding not less than one-third of the total voting rights in relation to the meeting (section 147(3)).
A company can provide in its articles that a member shall not be entitled to attend a meeting of the company unless all sums presently payable by him in respect of shares in the company have been paid (section 147(5)).
(vi) Right to Demand a Poll
A poll is a method of voting whereby each member can vote for or against a motion according to the number of shares he holds. Section 149 stipulates the circumstances when a poll can be decided at an annual general meeting.
(vii) Proxies (section 151)
A member of the company who is entitled to attend and vote at a general meeting is entitled to appoint another person to attend and vote in his stead. However, a shareholder of such a company is excluded from being appointed as a proxy.
(b) Extraordinary General Meeting
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An extraordinary general meeting is not a scheduled or planned meeting as the case is with an annual general meeting. An extraordinary general meeting is intended to transact specific business, which cannot wait until the time for an annual general meeting. An extraordinary general meeting is defined as a general meeting of the company, which is not an annual general meeting. The manner of convening an extraordinary general meeting is provided for in section 139(1) of the Act. The directors can convene the meeting whenever they think fit, by members, requisition; or if the articles so provide, by any other person in accordance with the provisions of the Act.
The length of notice for convening an extraordinary general meeting at which a special resolution is proposed to be passed is 21 days. Section 143 (3) provides that a shorter notice period may be adopted if not less than 95% of the members entitled to attend agree.
(c) Class Meetings
These are meetings of a class of shareholders. These meetings are restricted to members of that class to consider specific class rights, i.e. not open to every member of the company. Section 140(1) provides that, “unless the articles provide otherwise, a meeting of members of a particular class may be convened-
a) By the directors whenever they think fit; or
b) By two or more members of that class, holding, at the time of that notice of the meeting is sent out, not less than one-twentieth of the total voting rights of all the members having a right to vote at meetings of that class.”
(d) Types of Business to be transacted
1. Annual General Meeting (section 151(5)): The business of an annual general meeting is to transact ordinary business. Specifically, the business to be discussed is the following: -
a) Directors’ lay before the company annual accounts and reports for the most recent financial period.
b) Auditors’ term of office ends at the annual general meeting, so they must be re-appointed or new auditors re-appointed.
c) Directors’ recommendation for dividend to be paid to shareholders will be voted on.
d) The articles may provide that directors are to retire in rotation. Some directors will retire at the annual general meeting and must be re-appointed or replaced.
e) Resolutions may be required to fix directors’ and auditors’ fees (now normally fixed by contract).
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f) Shareholders may have their own resolutions placed on the agenda.
Although traditionally an annual general meeting transacts ordinary business, if the requisite notice is given, it can transact special business.
2. Extraordinary General Meeting (section 156): The business to be transacted at an extraordinary general meeting is special business, i.e. any business other than ordinary, or anything that says ‘by special resolution’.
3. Resolutions
There are three types of resolutions which a company can pass at any time, namely ordinary resolution, extraordinary resolution and special resolution (section 156).
i. An Ordinary resolution (sections 2 & 156(1)). A resolution shall be an ordinary resolution if it is passed by a simple majority of votes cast by such members of the company as, being entitled so to do, vote in person or by proxy at a meeting duly convened and held (section 156(1)). It is a type of resolution passed by a simple majority, i.e. 50% + 1 of such members of the company entitled to attend and vote at a duly convened and held meeting of the company. “By resolution” or “by ordinary resolution” is reference to ordinary resolutions. 14 days notice is sufficient to convene the meeting where an ordinary resolution is to be passed (section 143(1)(c)).
ii. Extraordinary resolution (section 2 & 156(2)). A resolution shall be an extraordinary resolution if it is passed by a majority of not less than three-fourths of the votes cast by such members of the company as, being entitled so to vote in person or by proxy at a meeting duly convened and held (section 156(2)). 14 days notice is sufficient to convene the meeting where an extraordinary resolution is to be passed (section 143(1)(c)). An example of the type of business to be transacted is scheme of arrangement under section 234.
iii. Special resolution (section 2, 156(3) & 158). A resolution shall be a special resolution if it is passed by a majority of not less than three-fourths of the votes cast by such members of the company as, being entitled so to do, vote in person or by proxy at a meeting duly convened as a meeting at which the resolution will be moved as a special resolution, and duly held (section 156(3)). The only difference with an extraordinary resolution is that the notice for the meeting has to indicate the proposed motion to be passed, apart from the notice period being restricted to 21 days.
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If the resolution is described in writing as a special resolution, it shall be deemed to be a special resolution for the purposes of the Act (section 157(4)0. There are different types of businesses which the company must pass by special resolution to validate the decisions of the company.
Examples of business to be transacted include amendment of articles (section 8), change of company name (section 40), reduction of share capital (sections 75 & 76), alteration of share capital (section 74), variation of class rights (section 62), conversion of company from one type to the other (sections 30, 33, 34 & 35), and voluntary winding-up (section 305(2).
iv. Resolution by Circulation
The members of a private company may pass a resolution in writing without holding a meeting, and such a resolution shall be as valid and effective for all purposes as if it had been passed at a meeting of the appropriate kind duly convened, held and conducted (section 157(1)). The resolution shall be signed by each member who would be entitled to vote on the resolution if it were moved at a meeting of the company, or by his duly authorized representative. The resolution takes effect when the last member entitled to sign actually does so.
v. Registration of Special Resolution
There is a general requirement for every special resolution to be registered with the Registrar of Companies within 15 days from the date of such resolution (section 158(1)). However, there is inconsistence in the way the law is framed as when the special resolution relates to alteration of capital and conversion or change of name of a company registration should be within 21 days. The best approach therefore, is to register within 15 days so that you avoid the inconvenience of being told that you are time barred.
49. WINDING-UP (Part XIII of the Companies Act)
Winding-up is the same as liquidation. The term “winding-up” is associated with the ending of a company’s life. It is a process by which the assets of a company are collected in, realized or sold and then used to discharge the liabilities of a company. In the event that there is net surplus or residue, that net surplus or residue will be distributed to the members in accordance with their rights as set out in the articles of the company. It is only after this process has been undertaken that the life or existence of the company can finally be terminated by a process known as dissolution.
(a) Modes of Winding-Up (section 263 (1))
There are basically two procedures or methods of winding-up, namely compulsory or involuntary winding-up and another procedure known as voluntary
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winding-up. A voluntary winding-up can take either of two forms, namely a members’ voluntary winding-up or a creditors’ voluntary winding-up. The denominator is that in both instances, it is the company itself, which will have intended the winding-up to commence.