So here’s what you need to know about how shareholders (aka members) are able to participate in meetings and their meeting rights.
Our focus in this article is unlisted companies.
There’s a replaceable rule that says directors may call shareholder meetings - it’s in section 249C of the Corporations Act.
And as a refresher - because we are talking about a replaceable rule, it's not mandatory. You may use, vary or even create your own rules in your constitution about shareholder meetings.
Now, keep in mind, that while section 249C is a replaceable rule, the other sections below are not, so you can't opt out of them.
First, let's see what the Corporations Act 2001 says about general meetings below.
Directors must call and arrange a general meeting if a shareholder with at least 5% of the votes requests a meeting: s. 249D Corporations Act 2001.
And, below is what goes into the shareholder meeting request.
A shareholder meeting request needs to:
Shareholders may make separate copies of the meeting request document for member signatures, but the wording must be identical.
So, when's the meeting held?
The directors must call the meeting within 21 days after the meeting request is given to them.
And, the meeting needs to be held within 2 months after the request is given to the company.
Now, all these rules protect shareholders but where's the balance when it comes to company rights? we'll discuss this below.
So, larger company’s are not usually big fans of the above rights.
Because let’s face it, arranging meetings for a large company can be expensive.
So, can a shareholder simply call a meeting without good reason?
No, they can't and I'll explain why next.
Now, while shareholders may call meetings, directors don’t need to call a meeting that’s for invalid resolutions.
The case of DVT Holdings Ltd v Bigshop.com.au (2002) confirmed this.
Also, law does not stop a shareholder from furthering their interests by calling a meeting.
But... the meeting purpose must be genuine.
To clarify, there must be a genuine purpose to pass resolution(s). Shareholders simply cannot call a meeting harass the company or its director: Humes Ltd v Unity APA Ltd .
Now, what if, there is a genuine reason for the meeting to pass valid resolutions but the directors are delaying the meeting? We'll look at this next.
Also, if a company seeks to extend the time for holding a meeting by an adjournment without the courts permission, they are in breach of the Corporations Act 2001 and the court may make an order: Australian Securities & Investment Commission v NRMA Ltd (2002).
So, if a meeting needs to go ahead, 3 groups can call them:
Below we'll go through each.
So, if the director’s don’t call a general meeting, shareholders with more than 50% of the votes of all the shareholders who made a request for a meeting, may call and arrange to hold a general meeting if the director’s don’t do so within 21 days after the request is made to the company.
Below is the process for setting up the meeting.
Now, shareholders with 5% votes at a general meeting may order a meeting to be call and arrange to hold a general meeting.
However, these shareholders must pay the expenses of calling and holding the meeting.
Finally, a meeting a court order may prompt a meeting, as we'll see below.
Cordmay order a meeting of shareholders if its impractical to call the meeting any other way.
And, the court may call the meeting on application of a director or shareholder that would be able to vote at the meeting.