During the 19th Century, it was generally believed that the general meeting was the company and that the directors were agents of the general meeting and their function was to implement resolutions of the general meeting. However, the position changed from the beginning of the 20th century where upon company law recognized the general meeting and the board f directors as the principal agents organs of the company. By 1948, the law had crystallized by recognizing the two and Table A, vested powers in both.
Some company powers are only exercisable by the general meeting while others can only be exercised by the board. The board is empowered to:
(vii) Recommend dividend
(viii) Recommend a bonus issue
(ix) Pay interim dividend
(x) Make calls
(xi) Forfeit shares
(xii) Appoint managing director and secretary etc The general meeting on the other hand is empowered to:
(i) Elect directors
(ii) Appoint auditors
(iii) Authorise a bonus issue
(iv) Declare dividend
(v) Alter the memorandum or articles
(vi) Remove directors or auditor from office
The law relating to division of powers is that if a power is vested in one organ, the other must not interfere, with its exercise unless:
(i) It is being abused
(ii) It is being exceeded
(iii) Exercised contrary to the articles
Each organ is bound to exercise powers vested in it by the articles.
The question as to which organ exercises which power is one of interpretation of the article. It was so held in Automatic self cleansing filter syndicate V. Cynninghome.
Under Table A, company management is vested in the board. Article 80 of Table A provides
„the business of the company shall be managed by the directors… and may exercise all such powers of the company, as are not by the Act or by these regulations required to be exercised by the company in general meeting”. This Article has been interpreted to mean that the directors and no one else are responsible for the company‟s management except in the matters allotted to the company in general meeting. It was so held in:
Alexander Ward & Co. V. Samyang Navigation
Courts of law have enforced the division of powers between the general meeting and the board. In Scott V. Scott the articles empowered directors t pay to members from time to time such interim dividend as was justified by the profits of the company. Shareholders in
general meeting revolved that the directors pay an interim dividend. The directors declined and were sued. It was held that they were not bound to implement the resolution since the power to pay interim dividend was vested in the board and the general meeting was interfering with its exercise.
In Shaw V. Shaw the articles of the company empowered the board to manage its monies. The board had resolved to institute proceedings against a party to recover certain monies owed to the company. The general meeting resolved that the action be discontinued. The directors refused and were sued. It was held that they were not bound to discontinue the action since the power to manage the company was vested in them and the general meeting was interfering with its exercise. In the words of Lord Greel “If powers of management are vested in directors, they and they alone can exercise those powers. The only way in which the general body of shareholders can control the exercise of the powers vested by the articles in the directors is by altering the articles, or if opportunity arises under the articles by refusing to re-elect the directors whose actions the disapprove. They cannot themselves usurp the powers which by the articles are vested in the directors any more than the directors can usurp the powers vested by the articles in the general body of shareholders”.
The division of powers between the two organs goes beyond the powers vested in either organ. If a power is vested in neither of them and either of them purports to exercise that power the other must not interfere with its exercise. However the general meeting appears more dominant in that:
(i) It is empowered to alter the articles
(ii) It is empowered to remove directors from office.
However, until such step is taken, directors are entitled to ignore instructions of the general meeting on how to exercise a power vested on the board by the articles.
Exceptions;
These are circumstances in which the general meeting exercise powers vested by the articles in the board.
(i) Litigation
If directors fail, refuse or neglect to sue on behalf of the company or to defend an action against the company, the power becomes exercisable by the general meeting as was the case in Marshalls Value Gear Company V.Manning Warlde.
(ii) Ratification of abuse of power by directors:
Whenever, the general meeting ratifies an abuse of power by directors, e.g. borrowing for an ultra vires purpose, it in effect exercises power vested by the articles on the board. In Bamford V. Bamford where directors were empowered to issue shares, but issued them foran improper purpose, and the general meeting ratified the issue, it became a valid act of the company, hence the general meeting was exercising a power vested in the board. A similar holding was made in Hogg V. Cramptorn
(iii) Deadlock in the management
If a company‟s B.O.D, cannot function in any material respect, by reason of a deadlock, its powers become exercisable by the general meeting. It was so held in Barron V. Parter. The company‟s Articles created 10 positions for directors. 2 years after incorporation, the company had only 2 directors, Barron and Porter who were not in talking terms. The power
to appoint additional directors was vested in the board and a quorum for board meeting was two. The board could not meet since Barron and Porter could not sit on one table. The company‟s management came to a standstill. It was held that in the circumstances, the power to appoint additional directors had become exercisable by the general meeting.
In conclusion, it may be argued that the old idea that the general meeting was the company and the directors as agents always subservient to the general meeting is no longer the law as it is certainly not the fact.