This document presents the views of Working Group A (‘WGA’) and Working Group C (‘WGC’) of the Corporate Law Reform Committee (CLRC). In line with the objectives of the Corporate Law Reform Program to facilitate business while maintaining corporate responsibility, this consultation document focuses on the simplification measures for companies in general and for private companies in particular in implementing the shareholder engagement process.
SECTION B - EXECUTIVE SUMMARY
Background
Proposals
The CLRC believes that the written resolution process for public companies should be expressly abandoned. The CLRC further recommends that section 145(1) be amended to allow one partner holding more than 10 per cent of the issued capital to call a general meeting of the company.
Other Issues
Right of members to request directors to call an EGM: The CLRC recommends that section 145 of the Companies Act 1965 be amended by dividing the current section into two separate sections dealing with the issues of the right to call a meeting and notice of a meeting. separately.
SECTION C - ENGAGEMENT WITH SHAREHOLDERS
SCOPE
CALLING A MEETING
Holding of General Meetings
A regime where private companies are not required to hold AGMs unless requested by shareholders - this is currently the practice in Australia. Do you agree that if private companies are not required to hold an AGM, individual members should be given the right to request that an AGM be held in a given year.
Location of the AGM
7 The Offshore Companies Act 1990 ('OCA') provides that directors of an offshore company may, subject to limitations in the memorandum and articles of association, summon members to meetings in any part of the world. The meeting should be held at the place specified in the notice of the meeting, which would be considered the primary place of meeting, but subsidiary or satellite participation should be permitted. 11UK Company Law Review Steering Group, Modern Company Law for a Competitive Economy - Company General Meetings and Shareholder Communications - Consultation Document URN 99/1144 (Oct 1999) paras 62-63; UK Company Law Review Steering Group Modern Company Law for a Competitive Economy, Completion of Structure Consultation Paper URN 00/1335 (Nov 2000) Chapter 5 - Corporate Governance: Shares and Shareholders, para 5.21, UK Company Law Review Steering Group, Modern Company Law for a competitive economy - Final report (2001), point 7.7.
12UK Company Law Review Steering Group Modern Company Law for a Competitive Economy, Completing the Structure - Consultation Paper URN 00/1335 (Nov 2000) Chapter 5 - Corporate Governance: Shares and Shareholders, Section 5.21. 13Corporate Governance Review of the Standing Committee on Company Law Reform, a consultation paper on recommendations made in phase II of the review (June 2003). a) to meet the convening of general meetings in two or more places.
Notice Period of General Meetings
Accordingly, in the case of a publicly listed company, the Listing Requirements of Bursa Malaysia Securities Berhad now require all listed companies' articles of association to contain a provision where the notice period is 21 days. In the case of a general meeting for the adoption of a special resolution, 21 days' notice is required. In the case of listed companies, a minimum period of 28 days' notice is required to be given notwithstanding anything in the company's constitution (section 249HA of the Australian Corporations Act 2001).
In the case of a general meeting, 21 days' notice is required to pass a special resolution (section 184(1) of the Singapore Companies Act (Cap 50)). a) the notice period for calling a general meeting in the Companies Act 1965 is increased from 14 days to 21 days. Do you agree that the minimum notice for the general meeting should be extended to 21 days.
Modes of Service
- SETTLING THE AGENDA : CIRCULATION OF SHAREHOLDERS’ PROPOSED RESOLUTIONS AND STATEMENTS
- THE USE OF WRITTEN RESOLUTIONS A. The Unanimity Rule
Any copy of the requisition filed less than 4 weeks must be circulated at the shareholders' expense. However, any copy of the requisition filed less than 4 weeks must be circulated at the shareholders' expense. Do you agree that a company is not required to give notice of any resolution or circulate statements unless a copy of the requisition signed by the requisitioner is deposited no later than 4 weeks before the meeting.
Thus, the effectiveness of the written liquidation procedure for private companies can easily be undermined due to the unanimity rule. Do you agree that shareholders with at least 5 per cent. of the ordinary shares can demand in writing that the company calls a general meeting as a safeguard against situations where dissenting shareholders are deprived of the opportunity to be heard.
The use of written resolution to replace annual general meeting
Neither section 152A nor section 143 contains the equivalent of the Singapore and Hong Kong provisions which allow companies to dispense with the requirement to hold a physical meeting in lieu of written resolutions. However, due to the CLRC's preliminary recommendation that private companies are not required to hold general meetings, the requirement to hold general meetings should be limited to public companies only. Nevertheless, the CLRC considers that in such cases it is beneficial to clarify that, in the case of private companies, matters that would normally be resolved at any meeting may be resolved by written resolution.
However, as public companies are still required to hold an AGM, the CLRC recommends that the written resolution procedures should be expressly excluded in the case of public companies. 28 Sections 111 and 116B of the Hong Kong Companies Ordinance allow companies not to hold an AGM with the adoption of resolutions by unanimous consent of members of a company.
Cross Jurisdictional Study United Kingdom
- CONDUCTING THE MEETING A. Appointment of Proxies
46Section 175A of the Companies Act (Cap 50) provides that a resolution at a general meeting must be passed by all members entitled to vote or by their proxy. For special resolutions, the voting percentage by written resolution is 75 percent of the shareholders or a larger majority if the company's articles of association so require. Do you agree that section 152A of the Companies Act 1965 be clarified to state that for private companies, issues that would normally be resolved at a meeting can be resolved by written resolution?
There are views that categorical restrictions serve to ensure that only qualified professionals with good knowledge of the mechanics of a company can be appointed as representatives. The CLRC is of the view that the current categorical restrictions on the types of persons who can be appointed as representatives are too restrictive and should be removed from the Companies Act 1965.
Disclosure of Proxy Voting Information
The independent person may also be required to retain proxy voting forms after the meeting for a period determined in the legislation. One view is that directors should not have access to this information, as the information is not directly related to the function of managing the company, as these matters are within the powers of the shareholders, not the directors. In some cases, the directors may use their current powers to obtain proxy voting information that is not publicly available to solicit votes or otherwise attempt to influence the outcome of shareholder proposed resolutions by publishing a progressive count of proxy voting instructions.
Hampel's committee recommended that a summary of the meeting's discussion be prepared, indicating the vote numbers on any poll or proxy count where a vote was not called, and that this summary be sent to members only upon request. However, given the potential value of voting information to investors, the CLRC recommends that the issue of disclosure of proxy voting information be considered as part of a set of best practices.
Voting In Absentia and Electronic Voting
They recommended supplementing the provision with provisions requiring reasonable notice periods and sufficient disclosure of information to give shareholders the opportunity to decide how to vote. Those who vote by post or electronic voting believe that shareholders should be encouraged to participate and vote effectively at general meetings of shareholders through the use of modern technology. The CASAC recommends that the Corporations Act 2001 allows directors of a listed company to provide for direct absentee voting, subject to any restriction in the company's articles68.
It has been recommended that Hong Kong's Companies Ordinance (Chapter 32) be amended to allow electronic voting rather than compel it, while listing rules should encourage such voting69. The CLRC's position is that the first absentee vote recorded by the person collecting the absentee votes should be a valid vote, with no opportunity for shareholders to change that vote.
Voting By Show of Hands or Poll
The rationale for retaining voting by a show of hands is weakest for publicly listed companies. The CLRSG does not propose to exclude voting by show of hands by statute. However, the CASAC supports the retention of voting by a show of hands as a method to deal with non-contentious cases quickly and cheaply73.
It was recommended by the CASAC that there should be no legislative ban on voting by show of hands. If the current law on voting by hand is maintained, voting by show of hands must be expressly allowed for proxies.
Bundling of Proposed Resolutions
A view often taken is that proposed resolutions that are joined together may limit the opportunity to debate individual component parts of the proposed resolution. Furthermore, the CLRC believes that the merger may result in the 'hiding' of important details specific to controversial proposed resolutions. The first is to allow the merger practice, apart from the appointment of directors, to be voted separately under section 126 of the Companies Act 1965 (ie retaining the current application of the Act).
As such, due consideration should also be given to general categories of proposed resolutions that may be grouped together (for example, recurring related party transactions incidental to the company's business). Do you agree with the view that banning the practice of 'merging' should be governed by best practices.
Role of the Meeting Chair
- RIGHT OF MEMBERS TO REQUISITION THE DIRECTORS TO CALL AN EGM
CASAC has also discussed whether there should be a general formulation of the functions and duties of the chairman of a meeting87. However, the general formulation of the Chairman's functions and duties is recommended to be included in the Listing Rules and not in the Companies Ordinance90. However, the Chairman must not at any time allow the procedures and formalities to prejudice the achievement of the objectives of the meeting.
The Meetings Act has addressed the issue of the chairman's conduct. This is to clarify that a single member who owns more than 10 per cent. of the issued capital, must be allowed to call a company meeting.
