Legal advice: General meetings (part two)

This is the second part of a guidance note (see the first part here) covering information and advice on the conduct of general meetings for incorporated golf clubs.

Members’ rights to appoint proxies

All members have the right to appoint a proxy to exercise all or any of their rights to attend, speak, demand or join in demanding a poll and vote at general meetings as set out in the Companies Act 2006 (the ‘Act’). This overrides any contrary provision in the articles of the company. It is very common for companies to provide that members can appoint the chairman as their proxy. However, it is important to note that unless a poll is called, the chairman (if acting as proxy for more than one member) will only have one vote for or against (or if given conflicting instructions by the members for which he acts as proxy, one vote for and one vote against) the motion on a show of hands, irrespective of how many members he acts as proxy for. It is usual for the chairman to demand a poll if he believes the resolution would be defeated on a show of hands (but not on a poll) by virtue of his proxies. The Act is silent as to the chairman’s duties in this role and does not oblige the chairman to call a poll. However, common law provides that the chairman has a duty to ascertain the true sense of the meeting. This includes a duty to demand a poll (or join in a demand made by another shareholder) if he has been appointed as proxy for shareholders and he is aware that a poll vote may produce a different result to a vote on a show of hands.

If the chairman, acting as proxy, does not have specific voting instructions on a particular matter he should consider the member’s intentions. For example, if an adjournment is proposed and the purpose of the adjournment is to defeat a resolution, the chairman should cast those votes of the proxies who instructed him to vote against the resolution in favour of the proposal to adjourn.

In the case of amendments to resolutions, the chair, acting as proxy, should vote against an amendment if he was instructed to vote in favour of the resolution. The matter is more complicated if the chair is instructed to vote against a resolution as there is no way of knowing what the shareholder’s attitude would be to the amendment. In this case the chair often abstains as regards those votes. If he has been given discretion on how to vote on a resolution, this also applies to amendments.

Cut-off point for appointing a proxy

Companies are permitted to set a cut-off point by which time a member must have lodged his proxy appointment in order for it to be valid. Companies are likely to include a cut-off period in their articles.

Section 327(2) of the Act states that any provision of the company’s articles which requires any appointment of a proxy to be received by the company earlier than 48 hours before the time of the meeting, is void. When calculating this time, section 327(3) provides that no account must be taken of any part of a day that is not a working day.

Terminating a proxy appointment

Unless notice of termination of a proxy’s authority is received by the company before the meeting starts, the proxy’s actions at a meeting are valid. A longer period, of up to 48 hours before the meeting (excluding any part of a day that is not a working day), can be specified by the company’s articles.

Voting instructions

Proxy instruction forms must provide the options to vote ‘for’ or ‘against’ each resolution and may, but need not, have an option for the proxy to members to register their protest in relation to a resolution without actually voting against it allowing the company time to address significant concerns. The ‘vote withheld’ is not a vote in law and so should not be counted in the calculation of the proportion of votes for and against the resolution. Sometimes the ‘discretionary’ box is included to allow the proxy to vote as he or she sees fit. The proxy will have a discretion where no specific voting instruction has been given by the member in any event and so is still relatively unusual. The proxy must vote in accordance with his instructions. The content and delivery of proxy notices is usually set out in the articles of the company. The model articles adopt an approach of requiring certain information to be included in proxy forms and permitting the company to require use of a particular form, rather than prescribing the actual wording of forms.

Quorum

For the meeting to be valid (and the resolution put to the meeting to be validly passed) the meeting must be quorate. The Act requires that, unless the company is a single member company, in which case a quorum of one will suffice, at least two qualifying persons are required to attend a general meeting in order for that meeting to be quorate. The articles of a company can set quorum at a higher number if desired. The term qualifying persons includes an individual who is a member of the company and a person appointed as a proxy of a member. The Act therefore establishes that quorum can be met if two proxies are in attendance for separate members (although not if they are proxies of the same member), rather than the members themselves.

A company’s articles should include procedural provisions which deal with practicalities such as what would happen if no quorum was present when the meeting was due to begin. For example, if no quorum is present within half an hour of the scheduled time of the meeting, the meeting will be adjourned until either the same time and place the next week, or to such time and place as the directors determine.

Poll votes

Voting in general meetings can either take place on a show of hands or by poll.

The members have a right to demand a poll vote (rather than a show of hands) which increases the requirement to pass the vote from the required percentage of those in attendance at the meeting to a required percentage vote of all those present and voting in person and by proxy.

The Act provides that the articles must at least provide that the following persons may demand a poll:

1. Five members present in person or by proxy and entitled to vote; or

2. Any member or members present in person or by proxy with either not less than one-tenth of the total voting rights or not less than one-tenth of the total sum paid up on all shares giving rights to attend and vote (sections 321 and 329 of the Act).

A company’s articles can provide that the effect is no more restrictive to the membership rights, for example, it can allow others such as the chairman to demand a poll (that is, which he may prefer if he has been instructed to act as a proxy for more than one member). For example the model articles provide that two or more members have the right to vote on the resolution or the directors or the chair may also call a poll.

Record of the meeting

Section 355 of the Act requires companies to keep records comprising minutes of all general meetings for a period of ten years from the date of the relevant meeting (rather than for an indefinite period as was the case under the 1985 Act). The requirement also extends to minutes of class meetings (for example, the junior or ladies’ sections).

Where a company passes a special resolution (or a resolution affecting a company’s constitution), it must forward a copy of the resolution (and an amended print of the articles if amended by that resolution) to the Registrar of Companies within 15 days of the date on which the resolution was passed. If a company fails to do this, the company, and every officer of it who is in default, commits an offence.

Electronic communications

Members can also participate in the meeting using electronic means. For most golf clubs, the relevant means will usually be by email. The company can serve notices and members can send communications electronically where a company has given an electronic address (or number) in a notice calling a general meeting or in, in the case of a proxy, an instrument of proxy or proxy invitation. The company can also serve notice of the meeting by means of a website, provided members are notified of the presence of the notice on the website in accordance with certain formalities (set out in section 309 of the Act). Such notification can be made in hard copy, by email, where the member has specifically agreed to accept that form of communication.

Where a company has given an email address in a notice of meeting, it is deemed to have agreed that any document or information relating to proceedings at the meeting (including proxy forms) may be sent to that email address (subject to any conditions or limitations specified in the notice).

It is advisable to observe the following procedures when using electronic communications:

· Blank electronic proxy forms should not be posted on a company’s website as such proxies with unclear signatures are often rejected by registrars; and

· The company should alert members that elect to receive communications electronically that the company’s obligation is satisfied when it transmits an electronic message and that it cannot be held responsible for a failure in the transmission beyond its control. It also recommends that where the company is aware of a delivery failure (and subsequent attempts do not remedy the situation), it should revert to sending a hard copy of the proxy by mail to the recipient’s last known postal address within 48 hours of the original attempt.

· Electronic proxy forms should contain clear instructions as to the address to which the proxy form should be returned. The design of proxy forms should be considered carefully, and any electronic address (which extends to phone numbers) that appears in the proxy but is not intended for use by shareholders in communications back with the company (such as lodging proxies) is specifically limited in its application. ICSA suggests that a solution to this may be to ensure that such addresses (or phone numbers) do not appear on the proxy form.

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