Members Should Receive Adequate Notice of the Matters to Be Considered

Introduction

Notice calling a meeting is one of the important proceedings that must be complying by a company before having a meeting. The notice of the meeting is a communication to the shareholders of as company informing them that a shareholder meeting will take place and the items that are on the agenda for that meeting.

Under Section 148(1) Companies Act 1965, every member shall not withstanding any provision in the memorandum or articles have a right to attend any general meeting of the company and to speak and vote on any resolution before the meeting:

provided that the company’s articles may provide that a member shall not be entitled to vote unless all calls or other sums personally payable by him in respect of shares in the company have been paid.

According to the Common Law, a meeting is consider prima facie if the member didn’t receive the notice of meeting from the company but there are different between the Companies Act 1965 which under Section 145(5) the accidental omission to give notice of a meeting to, or the non-receipt of notice of a meeting by, any member shall not invalidate proceedings at a meeting.

If the shareholders are unable or unwilling to attend the shareholder meeting, he or she can gives another the authority to vote in the shareholders meeting by filling up the proxy form. The shareholder giving the proxy may indicate how he wants the proxy holder to vote.

The terms that we going to discuss as follow included the requirements of notice, types, length and contents of notice and also method of services.

Requirements of Notice

A key principle of the law governing is that members should receive adequate notice of the matters to be considered at the meeting. To that end the law imposes requirements on:

Who must receive the notice of meeting, and the effect of failure to provide notice to a member or members;

The period of notice that must be given;

The content of the notice; and

The matters that may be dealt with at the meeting (in particular, through restricting the matters that may be considered at the meeting to those of which adequate notice has be given).

Who must be given the notice of meeting?

Written notice of a proposed meeting of members must be given individually to each member entitled to vote at the meeting and to each director. [1] If the company has appointed and auditor, the auditor must also be given the notice of meeting. [2]

Sometimes, due to an administrative error, the company may fail to give the notice of meeting to one or more members. Section 355 provides that accidental omission to give notice of the meeting to a person, or non-receipt by any person of notice of the meeting, does not invalidate the meeting unless the person applies to the Court for a declaration that the proceedings of the meeting are void.

Types

The type of notice being sent depends on the type of association in which companies reside and the type of meeting the board plans to call. The following is the examples of types and length of the notice:

(i) The owners’ meeting

Generally, an association only has one owners’ meeting per year.  This is the annual meeting at which time the board members are elected.  Another owners’ meeting could be for the discussion of proposed rules and regulations or the removal of board members.  All notices of owners’ meetings must be mailed or delivered to all owners no less than ten and no more than thirty days prior to the meeting.

(ii) Board meetings

Board meetings are the most prevalent.  Technically, a board cannot make a decision unless it is at a board meeting. Board meetings must be open to the unit owners.  At the board meeting, the board makes decisions regarding the administration and operation of the association.  Notice of the board meeting must be delivered to all board members at least 48 hours prior to the date of the meeting.  In addition, notice must be posted in conspicuous places throughout the property to advise the owners of the date of the board meeting.

(iii) A board meeting to adopt the budget or special assessment

Although the board adopts the budget or any special assessment for the association, at a board meeting, notice must be mailed or delivered to all owners no less than 10 and no more than 30 days prior to the meeting. In addition, the budget must be mailed or delivered to all owners no less than 30 days prior to the board meeting at which the board plans to adopt the budget.  If the board is adopting a budget, they could do so with one notice provided it is sent exactly 30 days prior to the meeting.

(iv) Rules and regulations

As stated above, the rules and regulations must be discussed at an owners’ meeting.  Under the statute, a proposed draft of the rules and regulations must be mailed or delivered to all owners no less than 10 and no more than 30 days prior to the date of the meeting at which the board plans to discuss the rules and regulations with the owners.  Once the owners’ meeting is concluded, the board should call a board meeting to adopt the proposed rules.  The board meeting may be held directly after the owners’ meeting or at a later date.  At this board meeting, the board may adopt the rules and regulations as is or with any changes suggested by the unit owners.

Length

The period of the notice that must be given is prescribed by the companies act. The proper period for the notice to be served on all members entitled to attend and vote at a meeting depends on the type of meeting to be convened as well as the type of resolution to be passed at the meeting.

Ordinarily, under Section 145(2) Companies Act 1965, a meeting of a company or a class of members, except a meeting to pass a special resolution, requires at least 14 days notice for the convening of the meeting.

The articles may provide for a longer period.

This notice period can also be reduced by the agreement of members:

if the meeting is the annual general meeting, unanimous consent of all members entitle to attend and vote at the meeting:

For any other meeting, the majority of the members entitled to attend and vote at that meeting, the majority at least 95% of the nominal value of the shares giving the right to attend and vote at the meeting. If the company does not have a share capital, the member with at least 95% of the total voting rights at the meeting of all the members can agree to reduce the statutory period.

If the meeting is to consider a special resolution, the notice must be at least 21 days notice. [3]

However, if it is agreed by the majority of the members entitled to attend and vote at the meeting, the majority being the holders of not less than 95% of the nominal value of the shares giving the right to vote or if the company does not have a share capital, the member with at least 95% of the total voting rights at the meeting of all members, a special resolution may be passed with less than 21 days notice.

For resolutions effecting the removal of a director of a public company [4] or the removal of an auditor of a company [5] , special notice is required. Under Section 153 Companies Act 1965, a resolution requiring special notice is a simple resolution passed at a meeting where notice of the resolution has been given to the company at least 28 days prior to the meeting at which the resolution is to be moved.

We have made a summarized of the period of notice as below:

Determined by Statute for Companies Meeting.

Annual General Meeting S143 (1) CA. [6]

Not more than 15 months from last meeting.

All general meetings other than AGM shall be called Extraordinary General Meeting (EGM).

14 days notice for AGM and EGM where ordinary resolutions need to be passed.

21 days notice for AGM and EGM where special resolutions need to be passed.

28 days notice for AGM and EGM where ordinary resolutions requiring special notice need to be passed.

Contents

The contents of the notice are prescribed by the common law. The usual contents of a notice calling a meeting are:

The place, date and time for the meeting;

The general nature of the meeting’s business;

If a special resolution is to be proposed, the intention to propose the resolution and the text of the resolution; and

Details about the procedure (if any) for the appointment of proxies.

Where the meeting is to consider ordinary business, these ordinary businesses need not be specified in the notice. [7] Ordinary business includes the following:

Consideration of the financial report, accounts and balance-sheets, directors’ report and auditor’s report;

Election of directors in the place of retiring directors;

Appointment of the auditor;

Fixing the auditor’s remuneration; and

The declaration of dividends.

Other matters other than the ordinary business are considered as special business of which notice of these matters to be discussed at a meeting must be given. Matters to be transferred at the extraordinary meetings except the ordinary business are also special business for which notice must be given.

In addition to these specific requirements, the general law imposes duties on the directors of the company to inform the members fully and fairly about the matters on which they will have an opportunity to vote. The notice of the meeting should include sufficient information so that a member, on the reading the notice, can decide whether or not to attend the meeting (in person or by proxy) and, if so, whether to vote for or against the proposed resolution.

The information provided in the notice must be “substantially full and true”, but at the same time it must be intelligible to reasonable members of the class to whom it is directed. This can create a difficult balancing exercise for directors, who must prepare a notice of meeting that contains all relevant information but in not so detailed or technical that it cannot be understood by those to whom it is addressed.

The modern test of whether a notice of meeting is adequate has been expressed by one judge in the following terms:

“One asks what effect the information provided will have on the ordinary shareholders who scans or reads the document quickly, not as a lawyer, but as an ordinary man or woman in commerce or as an ordinary investor. One asks, viewed in such a way, will the information fully and fairly inform and instruct the shareholder about the matter upon which he or she will have to vote? ”

The members’ right to receive a truly informative notice of meeting is a personal right that can be enforced directly by the member. [8]

We have made a summarized of the contents of notice as below:

Name and co number of Company.

Type of Meeting.

Date, day and time of Meeting.

Place of Meeting.

The business of the meeting as set out in the agenda.

Date of the Notice.

Signature and name of Convener

Notes to the Notice on Proxy.

Method of Service

The notice may be given personally, by post, facsimile or email, or by any other means permitted in the articles. [9]

Can the meeting deal with matters not set out in the notice?

Reflecting the requirement that adequate notice be given of all matters to be considered at the meeting, it is a rule that the meeting can only deal with matters of which notice has been given. The exception to this rule is consideration of what is referred to as the ordinary business of an annual general meeting of a public company under Art 46, Table A, of the Companies Act.

Otherwise, only those matters set out in the notice of the meeting can be considered, unless all the company’s members attend the meeting and agree to vary the agenda. [10] This protects the interest of those members who, in light of the notice of the meeting, have decided not to attend the meeting. Minor variations to the text of resolutions included in the notice are permitted, but the substance of the resolution cannot be change.

What is the effect of a failure to give proper notice?

Although the law seeks to protect the position of members by requiring that adequate notice of the meetings be provided to them, defects in the notice will not necessarily invalidate the meeting. Section 355 Companies Act 1965 provides that a “procedural irregularity” including a “defect, irregularity or deficiency of the notice or time” in relation to meeting will not invalidate the meeting” unless the court of the opinion that the irregularity has caused or may cause substantial injustice that cannot be remedied by any order of the court and by order declares the proceeding to be invalid”.