Legal guidance for golf clubs: General meetings

Seamus Rotherick
By Seamus Rotherick June 23, 2022 11:27

This is the first part of a guidance note covering information and advice on the conduct of general meetings for incorporated golf clubs. We will publish a further guidance note for the conduct of general meetings at unincorporated clubs in due course.

Prior to October 1, 2007, general meetings were referred to in the Companies Act 1985 as ‘extraordinary’ or ‘annual’. The phrases ‘extraordinary’ general meeting and ‘EGM’ are no longer used under the Companies Act 2006 (the ‘Act’) which now simply refers to ‘general meetings’ or ‘annual general meetings’ (or ‘AGMs’).

A resolution of the members of the company is validly passed in general meetings, if notice of the meeting (and of the resolution proposed) is given; and the meeting is held and conducted in accordance with the Act and the company’s articles of association (referred to as ‘articles’). When passing a resolution in a general meeting, it is important to ensure that the correct procedure is followed as well as obtaining the requisite majority to pass the resolution.

Status of AGMs

Under the Act, there is no longer a requirement for private companies to hold an AGM, although there is nothing to prevent a private company from holding an AGM if it so wishes. If a company’s articles require it to hold an AGM then it must continue to do so unless, immediately before October 1, 2007 that company had elected to dispense with AGMs pursuant to section 366A by elective resolution.

Who convenes meetings?

General meetings are usually convened and called by the board of directors (providing they consider such action is in good faith would be most likely to promote the success of the company for the benefit of its members as a whole. The members, courts or outgoing auditors could also requisition such a meeting in certain circumstances.

Under section 303 of the Act, the members have a power to require the directors to call a general meeting. However, to do so they must have at least five percent of the total voting rights of all members (having a right to vote at general meetings) and must authenticate the request and state the general nature of business to be dealt with at the meeting, in accordance with the requirements of the Act. The members cannot requisition a resolution which would be ineffective (by virtue of inconsistency with any enactment or the company’s constitution or otherwise), or if it is defamatory or frivolous or vexatious in nature).

In the event that the directors are required to call a meeting but fail to do so within the requisite time period, the members may themselves call the meeting at the company’s expense. The Act provides for the members to be reimbursed their reasonable expenses by the company, with the defaulting directors having such expenses deducted from their directors’ fees or other remuneration due to them.

Notice of meetings

A notice of a general meeting may be given in either hard copy form, electronic form or by means of a website or by a combination of any of these means.
The notice must be sent at least 14 clear days (excluding the day of the meeting and the day the notice was given) before the meeting, unless a longer notice period is specified in the articles of the company or in the case of a removal of a director or auditor where a ‘special notice’ of 28 clear days is required. Consequently, the company’s articles will always need to be checked in relation to notice periods for calling meetings. Thought should always be given to when a notice is deemed served to ensure the notice period requirement has been met (for example, documents sent by post or electronic means are, broadly, deemed delivered two working days after being sent and documents supplied by website publication are deemed received when first made available on the website or, if later, when the recipient is notified of availability on the website). These rules are subject to contrary provisions for any longer period in the company’s articles.

The Act permits the calling of general meetings by shorter notice if shorter notice is agreed by a majority in number of the members having the right to attend and vote at the meeting who together hold 90 percent (or such higher percentage as specified in the articles but not exceeding 95 percent) of the total voting rights at that meeting of all of the members entitled to vote.

Section 310 of the Act provides that the notice of meeting should be sent to every member and every director, unless its articles state otherwise. This means that a company could provide in its articles that it is not required to send notices of general meetings to members who are not entitled to vote or members who do not pay subscriptions or members for whom the company no longer has a valid address. A company’s auditor, if any, is also entitled to receive all notices of, and other communications relating to, any general meeting which a member of the company is entitled to receive.

The notice of the meeting must state the time, place and date of the meeting (and the general nature of the business to be dealt with at the meeting, subject to any contrary provisions in the company’s articles). The Act also provides that in every notice calling a meeting of a company there must appear, with reasonable prominence, a statement informing the member of his rights (under section 324 of the Act) to appoint a proxy to exercise all or any of the members’ rights to attend and vote at a meeting of the company, and any more extensive rights conferred by the company’s articles to appoint more than one proxy (if any). Failure to comply does not invalidate the meeting or any resolutions passed at the meeting but the directors in default are liable to be fined.

The full text of special resolutions must be included in the notice of meeting and the meeting must specify the intention to propose such a resolution as a special resolution: section 283(6). Failure to do so will invalidate the resolution. There is no legal requirement to set out the full text of ordinary resolutions but doing so can only be helpful to members.

Accidental failure to give notice

Section 313 provides that any accidental failure by the company to give notice to one or more persons of a general meeting or a resolution intended to be moved at a general meeting shall be disregarded for the purpose of determining whether notice of the meeting or resolution (as the case may be) is validly given. However, this basic rule can be overridden by provisions in a company’s articles other than in relation to notices given where the members have required a meeting to be called by the directors.

Conduct of the meeting and the role of the chairman

Where the company’s articles do not make provision for the appointment of a chairman of the meeting, the Act provides that ‘a member may be elected to be chairman of a general meeting by a resolution of the company passed at the meeting’.

To provide certainty, the Act provides that a declaration by the chairman in relation to a vote taken at a meeting on a show of hands that the resolution has or has not been passed will be conclusive evidence of that fact without further proof being required, such as a counting of the hands raised, unless a poll is demanded on the resolution. Unless the result is very obvious, the votes should be counted. An entry of the chairman’s declaration in the minutes of the meeting will be conclusive evidence of the fact of the declaration and if the demand for a poll is withdrawn, then the chairman’s declaration in relation to the resolution will stand (section 320(3) of the Act)). Members are prevented from challenging a chairman’s declaration as to the votes cast on a resolution at a meeting other than by demanding a poll in accordance with the provisions of the Act.

Chairman’s casting vote

Sections 281 and 282 of the Act require an ordinary resolution to be passed by a simple majority and, therefore, override a provision in the company’s articles of association granting the chairman of the meeting a casting vote where there is an equality of votes. It appears that this consequence of sections 281 and 282 was unintended. Accordingly, the Companies Act 2006 (Commencement No. 5, Transitional Provisions and Savings) Order 2007 (Fifth Commencement Order) introduced a saving provision where, if, immediately before October 1, 2007, a company’s articles provided for the chairman to have a casting vote in the case of an equality of votes, that article remains effective notwithstanding sections 281(3) and 282 of the Act. Paragraph 23A also provides that companies which have removed such an article since October 1, 2007 may validly reinstate the article and benefit from the saving provision.

For more advice on your club’s general meetings or any other legal matter affecting you club, please contact Alistair Smith, CEO of the NGCAA, on office@ngcaa.co.uk or 01886812943

 

Seamus Rotherick
By Seamus Rotherick June 23, 2022 11:27
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