Neither the Companies Act defines the term meeting nor have Courts provided a legal definition of a meeting. They appear to have adopted the ordinary meaning of the term. In the words of Lord Coleridge in Sharp V Dawes (1876)
“The word meeting prima facie means a coming together of more than one person”
The ordinary meaning of the term meeting is an assembly of persons. It therefore follows that one person cannot constitute a meeting. This is the rule in Sharp V Dawes where a single shareholder purported to hold a meeting to pass a resolution to make calls. The meeting was scheduled for 30th Dec 1874 and only 2 people attended; these two people were Sharp who was the Company’s Secretary and Silversides, a member. The latter acted as Chairman while the former took minutes. The meeting resolved that calls be made but the defendant member declined and was sued. It was held that no meeting had been properly constituted and the purported proceedings were null and void. The case is authority for the proposition that one person cannot constitute a meeting or a corporate assembly.
However in law, one person can constitute a meeting as well as quorum for the meeting, these are exceptions to the rule in Sharp V Dawes.
Exceptions to the rule in Sharp V Dawes:
1. Directors meeting.
Where a private company has only one director, that director constitutes a directors meeting for purposes of exercise of the powers conferred on the board by the Articles.
2. Class meeting.
Where the company’s capital has been divided into different classes of shares e.g. ordinary, preference or deferred, if all the shares of a particular class are held by one member such member constitutes a meeting of the holders of that class of shares, it was so held in East V Bunnett Bros.
3. Creditors meeting.
If in the course of winding up, only one creditor has proved his claim in accordance with section 309, that creditor constitutes a meeting of creditors for purposes of winding up.
4. Adjourned meetings.
This is the continuation of an earlier meeting. If a meeting summoned by directors has no quorum present within 30 minutes of the appointed time it stands adjourned to the following week on the same day, time and place unless the directors otherwise resolve. The adjourned meeting is duly constituted by one member, present in person or by proxy.
5. AGM’s summoned by or in accordance with the Registrar’s directions.
If a company fails to hold an AGM, any member may petition the Registrar to call or direct the calling of an AGM. Such meeting is duly constituted by one member present in person or in proxy.
6. General meeting summoned pursuant to a Court order.
If by any reason it is impracticable for a company to call or conduct a meeting in accordance with the Act and the Articles, the Court may on its own motion or application by a director or member or any member entitled to vote, order the calling and holding the general meeting in accordance with the Act and Articles. Such a meeting is duly constituted by one member present in person or by proxy.
Need for Company Meetings
Company general meetings are held from time to time in order:
a) To comply with statutory provisions which require certain general meetings to be held in order to transact specified business. Such meetings include the statutory meeting, the annual general meeting and class meetings.
b) To transact business that may only be transacted at a general meeting of the members or shareholders, such as alteration or reduction of the company’s capital.
c) To enable the directors and members to exchange views regarding the running of the company’s affairs or resolve some existing disputes.
d) To transact some business which may only be transacted at a meeting of a class of the company’s members, such as variation of a right attached to a class of shares.
Types of meetings
There are four kinds of meetings of members which may be held by a company:
a) The Annual General Meeting
b) General meetings at other times (Extra ordinary general meetings)
c) Class meetings
d) Director’s Meetings
e) The Statutory Meeting (under the previous Companies Act)
1. The Annual General Meeting (AGM)
Section 310 provides that every public company shall hold a general meeting as its annual general meeting within six months from and including the day following its accounting reference date in each year, whether or not it holds other meetings during that period. This is a meeting held by companies each year to consider ordinary business.
Notice of the AGM
A public company shall state in the notice convening an annual general meeting of the company that the meeting is an annual general meeting.
Private companies are not required to have an AGM each year and therefore their business is usually conducted through written resolutions. However, members holding sufficient shares or votes can request a general meeting or written resolution
An annual general meeting may be convened by shorter notice than that required by section 281(2) or by the company’s articles, if all the members entitled to attend and vote at the meeting agree to the shorter notice. Section 281(2) provides that in convening a general meeting, a public company, shall give in the case of its annual general meeting at least 21 days’ notice to members; or in the case of any other general meeting at least 14days’ notice to members.
The members of a public company may require the company to give to members of the company who are entitled to receive notice of the next annual general meeting a notice of a resolution that is proposed to be moved at that meeting.
A public company is not required to give notice of a resolution if:
• it would, if passed, be void (whether because of inconsistency with this Act or any other written law or the company’s constitution or otherwise);
• it defames a person; or
• it is frivolous or vexatious.
A company is required to give notice of a resolution once it has received requests that it do so from:
• members representing at least 5% of the total voting rights of all the members who have a right to vote on the resolution at the annual general meeting to which the requests relate; or
• at least 100 members who have a right to vote on the resolution at the annual general meeting to which the requests relate and hold shares in the company on which there has been paid up an average sum, per member, of at least KES 10,000.
A request is effective for the purpose of this section only if:
• it is in hard copy form or in electronic form;
• identifies the resolution of which notice is to be given;
• is authenticated by the person or persons making it; and
• is received by the company not later than 6 weeks before the annual general meeting to which the request relates; or if later, the time at which notice is given of that meeting.
The Act does not provide for the business which may be transacted at the annual general meeting. However the ordinary business of an AGM includes:
i. Declaring a dividend
ii. The consideration of the accounts, balance sheets and the reports of the directors and auditors
iii. The election of directors in the place of those retiring
iv. The appointment of and the fixing of the remuneration of auditors
2. Extra-ordinary General Meetings (EOGM)
This is a General Meeting which a company may hold at any time when need arises. It generally considers special business and may be summoned by directors, requisitionists, or pursuant to a Court order.
Section 276 provides that the directors of a company may convene a general meeting of the company.
Section 277(1) provides that the members of a company may require the directors to convene a general meeting of the company.
Convening an EOGM by Directors:
The directors are required to convene a general meeting as soon as practicable after the company has received requests to do so from:
• In the case of a public company, 10% of the paid-up capital of the company as carries the right of voting at general or of total voting rights of all the members having a right to vote at general meetings.
• In the case of a private company, 5% of the paid-up capital of the company as carries the right of voting at general or of total voting rights of all the members having a right to vote at general meetings
A request for the directors to convene a general meeting is only effective if it states the general nature of the business to be dealt with at the meeting. However, such a request may include the text of a resolution that is proposed to be put to the meeting. A resolution may not be moved at a general meeting if:
• it would, if passed, be void because of inconsistency with any written law or the constitution of the company or otherwise;
• it defames a person; or
• It is frivolous or vexatious.
A request for the directors to convene a general meeting is not effective unless it is in hard copy form or in electronic form; and authenticated by the person or persons making it.
If requested to convene a general meeting of the company, the directors shall:
• do so within 21 days from the date on which request was made; and
• hold the meeting on a date not more than 28 days after the date of the notice convening the meeting.
If such a request includes a resolution intended to be moved at the meeting, the directors shall include in the notice of the meeting a copy of the proposed resolution.
Convening an EOGM by Members:
If after having been required to convene a general meeting under section 277, the directors fail to do as required by section 278, the members who requested the meeting or any of them representing more than one 50% of the total voting rights of all of them may convene a general meeting.
If the requests received by the company included the text of a resolution intended to be moved at the meeting, the members concerned shall include in the notice convening the meeting the text of the intended resolution.
The members concerned shall ensure that the meeting is convened for a date not more than 3 months after the date on which the directors were requested to convene a meeting.
The members concerned shall convene the meeting, as nearly as practicable in the manner in which meetings are required to be convened by directors of the company.
The company shall reimburse the members concerned for all reasonable expenses incurred by them because the directors failed to convene a meeting as required by section 278.
The company shall deduct from the remuneration payable to the directors who were in default the amount of expenses reimbursed to members.
Convening an EOGM by Court Order:
The Court may, either on its own initiative, or on the application:
• of a director of the company; or
• of a member of the company who would be entitled to vote at the meeting,
Make an order requiring a meeting to be convened, held and conducted in any manner the Court considers appropriate.
If an order is made the Court may give such ancillary or consequential directions as it considers appropriate. Directions given by the Court under subsection may include a direction that one member of the company present at the meeting be regarded as constituting a quorum.
A meeting convened, held and conducted in accordance with an order by the court is taken for all purposes to be a meeting of the company properly convened, held and conducted.
In Re El Sombrero Ltd (1958) the applicant held 900 of the 1000 shares in the company while the remaining shares were held as to 50 each by the two respondents who were its only directors. The applicant had twice requisitioned a meeting of the company for the purpose of exercising the power given by section 184 of the 1948 Companies Act to remove the directors by ordinary resolution but on each occasion the respondents had absented themselves in order to ensure that the quorum of two members as fixed by the articles was not present. He sought an order and a direction from the court that one person should be deemed to constitute a quorum at such meeting. The court overruling the decision of the registrar made an order accordingly.
3. Class Meetings
This is a meeting of holders of a particular class of shares of the company and can only be held if the company’s capital is divided into different classes of shares for examples ordinary, preference deferred.
In the words of Bowen L.J in Sovereign Life Assurance V Dodds
“The term class is vague and must be restricted to persons whose rights are not so dissimilar as to make it impossible for them to consult”
The rules or principles which govern the calling, quorum and conduct of class meetings are prescribed by the Articles.
Section 321of the 2015 Companies Act provides that the provisions of the Act apply with necessary records of resolutions and modifications, in relation to resolutions and meetings of:
• holders of a class of shares; and
• in the case of a company without a share capital, a class of members, as it applies in relation to resolutions of members generally and to general meetings
4. The Director’s Meeting
This is a meeting of members of the board and may be held at any time when need arises.
The meeting may be summoned by a director or the company or the Company Secretary if instructed by a director. Notice need not be written or sent to a director outside Kenya. Quorum for such a meeting is fixed by the directors failing which it is two.
The meeting must have a Chairman within 5 minutes of the appointed time.
Directors meeting may be held in very informal circumstances provided all directors are present and they agree to transact the company’s business. It was so held in Barron V Porter where the directors had a casual meeting on the streets.
Directors meetings enable the board to exercise the powers conferred upon it by the Articles such as:
• Recommending dividend
• Payment of interim dividend
• Appointment of the Managing Director
• Appointment of Company Secretary.
The Articles generally gives directors the power to delegate their powers to committees of one or more directors.
5. Statutory General Meeting
Section 41 of the 6th schedule to the Companies Act 2015 provides that an existing company that was required by section 130, 131 or 132 of the repealed Act to convene and hold a general meeting and has not convened and held that meeting before the repeal of the relevant section, that section continues to have effect in respect of the company and the meeting as if that repeal had not taken effect.
The implication here is that any existing company which had not yet held a statutory general meeting under the Companies Act 1948 has to meet the requirements of the repealed Act in the stated sections. However, for companies registered under the 2015 Act there is no requirement that this meeting be held.
A Statutory Meeting is considered a special meeting held by public companies once in their life time whose agenda is the statutory report.In the course of the meeting the directors must display a list of all members and the number of shares held. Such list must be accessible to all members.
Members are free to discuss matters relating to the formation and promotion of the company or arising out of the statutory report. The meeting may be adjourned from time to time.
Failure to hold the meeting under CAP 486 rendered every director or officer in default liable to a fine not exceeding KES 1000.
According to Section 130 of the repealed Act every public company limited by shares and every public company limited by guarantee and having a share capital was required within a period of not less than one month nor more than three months from the date when the company is entitled to commence business, hold a general meeting of the members of the company, which shall be called the statutory meeting.
The statutory meeting was held for the specific purpose of enabling the members of the company to consider the statutory report. Section 130(3)of the repealed Act provided that the statutory meeting shall be characterized by the Statutory Report. This is a report prepared by director for submission to members at the statutory meeting. It is the agenda of the meeting and must be certified by at least 2 directors of the meeting. The Statutory Report shall state:
a) The total number of shares allotted, distinguishing shares allotted as fully or partially paid up otherwise than in cash, the consideration for which the shares have been allotted and, in the case of shares partly paid up, the extent to which they are so paid up;
b) The total amount of cash received by the company in respect of all the shares allotted, distinguished as aforesaid;
c) An abstract of the receipts of the company and of the payments made therein, up to a date within seven days of the report, exhibiting under distinctive headings the receipts of the company from shares and debentures and other sources, the payments made and particulars concerning the balance remaining in hand and an account or estimate of the preliminary expenses of the company;
d) The names, postal addresses and descriptions of the directors, auditors, if any, managers if any, and the secretary of the company; and
e) The particulars of any contract the modification of which is to be submitted to the meeting for its approval, together with particulars of the modification or proposed modification.
f) An Auditor’s Certificate on the shares allotted, cash received and the abstract of receipts and payments.
By Section 130 (2) a copy of the statutory report was to be forwarded by the directors to every member of the company at least 14 days before the day on which the statutory meeting was to be held. The directors were required to cause a certified copy of the statutory report to be delivered to the registrar for registration forthwith after the sending thereof to the members of the company.
ESSENTIALS OF MEETINGS
1. Convening of Meetings& Notices
General meetings are normally convened by the Board of Directors as provided for under Section 276 and 277 of the Act. The company secretary or any other officer of the company has no power to call a general meeting. It was so held in Re State of Wyoming Syndicate where the secretary of the company without the authority of the directors summoned the meeting.
The directors must act in good faith when calling a meeting, thus, in Cannon v Tasks, the directors called the annual general meeting at an earlier date than was usual for the company to hold it. Their intention in doing so was to ensure that transfers of shares to certain persons who were likely to oppose some of their proposals would not be registered in time so that they would be unable to vote. An injunction stopping the meeting from being held was granted.
However, once the directors have called the meeting they cannot postpone or cancel it. For example, in Smith v Paringa Mines Ltd, a notice was issued purporting to postpone the holding of a general meeting of shareholders which had previously been duly convened. One of the directors of the company who was in disagreement with the remainder of the board attended the meeting together with several shareholders. It was held that resolutions passed at the meeting were valid and effective. The purported postponement of the meeting was inoperative since the articles pursuant to which the meeting had been convened did not give specific power to postpone a convened meeting. The proper course is for the meeting to be held and, with the consent of the majority of those present and voting, adjourned.
Section 281 provides that in convening a general meeting (other than an adjourned meeting), a private company shall give at least 21 days’ notice.
In convening a general meeting, a public company, shall give
• in the case of its AGM at least 21 days’ notice -to members; or
• in the case of any other general meeting at least 14 days’ notice to members.
The company’s Articles may require a longer period of notice than that specified above.
A general meeting may be convened by shorter notice than that otherwise required if it is agreed to by the members. The shorter notice refer is valid only if it is agreed to by the required majority of members. The majority in question is in the case of a private company 90% or such higher percentage, not exceeding 95%, as may be specified in the company’s articles; or in the case of a public company ninety-five percent of nominal value of the shares giving a right to attend and vote at the meeting or in the case of a company that does not have a share capital the percentage of total voting rights at that meeting of all the members.
It was explained in Re: Pearce Duff & Co. Ltd that the mere fact all the members are present at the meeting and pass a particular resolution, either unanimously or by a majority holding 95% of the voting rights, does not imply consent to short notice. Anyone who voted for the resolution can, therefore, change his mind afterwards and challenge it.
If a provision of the Act requires a special notice of a resolution to be given, the resolution is not effective unless notice of the intention to move it has been given to the company at least 28 days before the meeting at which it is moved.
The company shall, if practicable, give its members notice of any such resolution in the same manner and at the same time as it gives notice of the meeting. If it is not practicable to give that notice, the company shall give its members notice of the resolution at least 14 days before the meeting:
i. by advertisement in a newspaper having a wide circulation in the area in which the company carries on business; or
ii. in any other manner allowed by the company’s articles.
Section 282 provides that a company shall give Noticeof a general meeting:
• in hard copy form;
• in electronic form;
• by means of a website; or
• partly by one such means and partly by one or more of the other such means.
In notifying its members of the presence on a website of a notice convening a general meeting, a company shall state that it concerns a notice of a company meeting; specify the place, date and time of the meeting; and in the case of a public company, state whether the meeting will be an annual general meeting.
The company shall ensure that the notice of the general meeting is available on the website throughout the period from and including the date of that notification and ending with the conclusion of the meeting.
A company shall send a notice of a general meeting of the company to each member of the company; and each director.
The reference to a member includes any person who is entitled to a share in consequence of the death or bankruptcy of a member, if the company has been notified of their entitlement.In Re West Canadian Collieries Ltd Plowman, J. stated: “It is well settled that as regards a general meeting, failure to give notice to a single person entitled to receive notice renders the meeting a nullity”.The primary purpose of the common law rule appears to be to imposed on the company’s officers who are entrusted with thepower of convening its meetings the obligation of acting fairly towards every member of company. They must invite all themembers to the meeting and not just those whom they believe are likely to support their views.
The common law rule applies irrespective of whether the failure to give notice of the meeting was deliberate or unintentional. However, it is competent for the company’s members to reflect on the matter and, if they deem it appropriate, amend the company’s articles by incorporation, therein of a suitable provision. For example, a provision that “the accidental omission to give notice of a meeting to…. any person entitled to receive notice shall not invalidate the proceedings at that meeting”. In such acase, notice of the meeting would be deemed to have been given despite an “accidental omission” to give the notice.
In Musselwhite v C. H. Musselwhite & Son Ltd it was explained that a deliberate failure to give notice of a meeting to a member on the mistaken grounds that the member was not entitled to the notice would not be regarded as an “accidental omission” within the relevant article, since it was a mistake of the law. The meeting, was therefore, declared null and void.
Note however that section 288 provides that if a company gives notice of a general meeting; or a resolution intended to be moved at a general meeting, an accidental failure to give notice to one or more persons is to be disregarded for the purpose of determining whether notice of the meeting or resolution has been duly given.
Contents of the Notice
Section 285 provides that in giving notice of a general meeting, a company shall specify:
a) the time and date of the meeting;
b) the type of the meeting;
c) the place of the meeting; and
d) the general nature of the business to be dealt with at the meeting (proposed resolutions, whether ordinary or special)
In Tiessen v, Henderson it was held that the notice convening a meeting must be clear and explicit so that the person receiving it may be in a position to decide whether or not he ought in his own interest to attend the meeting. In this case the violet consolidated mining company ltd was in difficulty and meetings were summoned to put before the shareholders alternative schemes for reconstruction. The alternative scheme which was approved was one in which certain of the directors had a strong financial interest but his fact was not disclosed in the notice convening the meeting. It was held that the resolution was invalid.
If the meeting is the annual general meeting the notice must specify the meeting as such. If the meeting is convened to pass a special resolution the notice must specify the intention to propose the resolution as a special resolution. In Kaye v. Croydon Tramways Co the court invalidated a resolution because the notice convening the meeting contained the text of the resolution to approve the sale of the company’s business but did not mention that the directors were to be paid a substantial sum as compensation for loss of office. The notice by reason of the omission did not fairly disclose the purpose for which the meeting was convened.
2. Proceedings At Meetings
A Quorum is the minimum number of persons who must be present at a meeting in order that the meeting may commence, or having commenced, continue so as to validly transact the business for which it was convened.
Section 292(1) provides that in the case of a company limited by shares or guarantee and having only one member, one qualifying person present at a meeting constitutes a quorum.
Section 292(2) provides that in any other case, (subject to the articles of the company) two qualifying persons present at a meeting are a quorum, unless:
i. each is a qualifying person only because the person is authorised under section 297 to act as the representative of a body corporate in relation to the meeting, and they are representatives of the same body corporate; or
ii. each is a qualifying person only because the person is appointed as proxy of a member in relation to the meeting, and they are proxies of the same member.
It is the duty of the Chairman of the meeting to determine whether a quorum of member is present by the time the meeting proceeds to business.
The quorum must be effective i.e. only persons who are entitled to participate are counted.
In Re Hartley Baird Ltd it was held that the quorum is required only at the time when the meeting commences. There need therefore be no quorum after the meeting has begun and it may be legally continued provided there are at least two persons present who would constitute a valid meeting at common law.
Where the articles prescribe a quorum of at least two members, and there is no quorum, there would also be no valid meeting. This is so because as was explained in Sharp v Dawes, “the word `meeting’ prima facie means a coming together of more than one person”. Please note the exceptions to the rule in Sharp v Dawes also apply.
A meeting with no quorum is a legal nullity (it is null and void) and so are its purported proceedings.
If within half an hour from the time appointed for the meeting a quorum is not present, the meeting, if convened upon the requisition of members, shall be dissolved, in any other case it shall stand adjourned to the same day in the next week, at the same time and place or to such other day and at such other time and place as the directors may determine.
An adjourned meeting is a continuation of an earlier meeting.
A meeting may be adjourned for various reasons including disorder or inadequacy of space. In these two cases, the Chairman has power to adjourn the meeting without the concurrence of members but he must exercise the power in good faith. In other circumstances, consent of the meeting is necessary.
A meeting adjourned for lack of quorum is duly constituted by one member present in person or in proxy.
A meeting adjourned for more than 30 days requires a new Notice. An adjourned meeting has the same powers as the original meeting in that it can only transact the unfinished business of the other meeting.
Resolutions passed by an adjourned meeting are deemed to have been passed on the date of the adjourned meeting as opposed to the date of the earlier meeting.
Proxy refers to the form by which the shareholders appoint another person to attend a meeting on his behalf as well as the person so appointed to attend the meeting.
Any member entitled to attend and vote at a general meeting may appoint another person who need not be a member to attend and vote on his behalf. The appointment of a proxy is effected by the completion and submission of a proxy form to the company.
There are two types of proxies:
• The general proxy – This is a proxy empowered to vote as he wishes having regard to the discussion at the meeting.
• Special proxy – This is a proxy appointed to vote either for or against a particular resolution before the meeting.
Once appointed, a proxy enjoys certain rights:
• The right to attend the meeting.
• Right to join other proxies or member to demand voting by poll.
• Right to vote by poll.
• Right to speak in the case of a private company meeting.
Section 298 provides that a member of a company is entitled to appoint another person as the member’s proxy to exercise all or any of the member’s rights to attend and to speak and vote at a meeting of the company.
A member of a company that has a share capital may appoint more than one proxy for a meeting provided each proxy is appointed to exercise the rights attached to a different share or different shares held by the member.
In every notice convening a meeting of a company, the company shall include a prominently displayed statement informing the member of the member’s rights under section 298; and any more extensive rights conferred by the company’s articles to appoint more than one proxy.
Failure to comply with this requirement does not affect the validity of the meeting or of anything done at the meeting.
A provision of the company’s articles is void to the extent that it would have the effect of requiring the appointment of a proxy or document necessary to show the validity of, or otherwise relating to, the appointment of a proxy to be received by the company or another person earlier than whichever of the following periods is applicable:
a) in the case of a meeting or adjourned meeting, 48 hours before the time for holding the meeting or adjourned meeting;
b) in the case of a poll taken more than 48 hours after it was demanded, 24 hours before the time appointed for the taking of the poll;
c) in the case of a poll taken not more than 48 hours after it was demanded, the time at which it was demanded.
Section 302 provides that a proxy may be elected to preside at a general meeting by a resolution of the company passed at the meeting. The appointment of a proxy to vote on a matter at a meeting of a company authorizes the proxy to demand, or join in demanding, a poll on that matter.
Section 304 provides that a member of a company who has appointed a person to act as a proxy of the member may terminate the appointment by notice. The termination of the authority of a person to act as proxy does not affect the validity of a vote given by that person unless the company receives notice of the termination:
a) before the start of the meeting or adjourned meeting at which the vote is cast; or
b) in the case of a poll taken more than forty-eight hours after it is demanded, before the time fixed for taking the poll.
• The Chairman
Section 293 provides the members present at a general meeting may by ordinary resolution, elect one of the members to preside at the meeting. Subsection (1) is subject to any provision of the company’s articles that states who may or may not be chairperson or preside at a general meeting of the company.
In the case of National Dwelling Society v. Sykes Chitty J stated,
“It is the duty of the chairman, and his function, to preserve order and to take care that the proceedings are conducted in a proper manner and that the sense of the meeting is properly ascertained with regard to any question which is properly before the meeting.”
The powers and duties of the chairman which can be deduced from this statement include:
a) Determining that the meeting is properly constituted and that a quorum is present.
b) Informing himself as to the business and objects of the meeting
c) Preserving order in the conduct of those present
d) Confining discussion within the scope of the meeting and reasonable limits of time
e) Deciding whether proposed motions and amendments are in order
f) Formulating for discussion and decision questions which have been moved for the consideration of the meeting
g) Deciding points of order and other incidental matters which require decision at the time
h) Ascertaining the sense of the meeting by:
• Putting relevant questions to the meeting and taking a vote on them
• Declaring the result
• Causing a poll to be taken if duly demanded
i) Declaring the meeting closed when business has been completed. Note that the chairman has no power to adjourn a meeting merely because the proceedings have taken a turn which he himself does not like as was the case in National Dwelling Society v. Sykes. However, he may adjourn the meeting if it becomes disorderly or if the members agree.
• Conduct of business
The conduct of business at meetings is not governed by the act. However, each item of business contained in the notice of meetings should be taken separately, discussed and put to the vote.
Members may propose amendments to the resolutions. The chairman should reject any amendment, which is outside the limits set by the notice convening the meeting. With ordinary business, this rule may present no difficulty but with special business, which has necessarily been described in details in the notice; there are only limited possibilities of amendment. If the special business is an ordinary resolution it may be possible to amend it so as to reduce its effect to something less (provided that the change does not entirely alter its character) e.g. an ordinary resolution authorizing the directors to borrow 100,000 pounds might be amended to substitute a limit of 50,000 pounds (but not to increase it to 150,000 pounds as 100,000 pounds would have been stated in the notice). It is not possible to pass a special resolution, which differs in substance from the text set out in the notice. In Re Moorgate Mercantile Holdings (1980) A special resolution set out in the notice provided for the total cancellation of a share premium account balance of 1,356,900.48 pounds since the assets which it represented had been lost (form of reduction of share capital). At the meeting, the resolution was amended, for technical reasons, to reduce the balance to 321.17 pounds and it was passed in that form. It was held that the resolution as passed was invalid since it was not the special resolution of which notice had been given.
There are two types of votes:
i. By show of hands
ii. By poll
The common law rule is that a member is entitled to one vote only irrespective of the number of shares he holds as was held in Re Horbury Bridge Coal Co. (1879). The vote is to be cast by a show of hands. However, as soon as the result of voting has been declared by the chairman, any member can demand a poll. The demand cancels the result of the previous voting.
The rights of members to vote and the number of votes to which they are entitled to in respect of their sharesare fixed by the articles. One vote per share is normal but some shares, e.g. preference shares, may carry no voting rights in normal circumstances.
Section 258 provides when a vote on a written resolution put to the members of a company is taken, then
a) if the company has a share capital each member has one vote for each share, or each one hundred shillings of stock, held by the member; and
b) if the company does not have a share capital each member has one vote.
When a vote on a resolution is to be taken by the members of a company at a meeting on a show of hands each member present in person has one vote; and each proxy present who has been duly appointed by a member entitled to vote on the resolution has one vote.
When a vote on a resolution is to be taken by the members of a company by a poll:
a) if the company has a share capital each member present in person, or each proxy present who has been duly appointed by a member, has one vote for each share, or each one hundred shillings of stock, held by the member; and
b) if the company does not have a share capital each member present in person, or each proxy present who has been duly appointed by a member, has one vote.
Section 294 provides that on a vote on a resolution at a meeting with a show of hands, the person presiding at the meeting may declare the result of voting on a show hands:
i. has or has not been passed; or
ii. has passed with a particular majority.
Such a declaration is conclusive evidence of the result of the voting without proof of the number or proportion of the votes recorded in favor of or against the resolution. An entry in respect of such a declaration in the minutes of the meeting recorded in accordance with section 292 is also conclusive evidence of that fact without further proof.
This section does not have effect if a poll is demanded for passing the resolution and the demand is not subsequently withdrawn.
Section 295 provides that a provision of a company’s articles is void to the extent that it would have the effect of excluding right to demand a poll at a general meeting on a resolution other than one for:
i. electing the member who is to preside at the meeting; or
ii. adjourning the meeting.
A provision of a company’s articles is void to the extent that it would have the effect of making ineffective a demand for a poll on a resolution made-
a) by no fewer than five members having the right to vote on the resolution;
b) by a member or members representing no less than ten percent of the total voting rights of all the members having the right to vote on the resolution; or
c) by a member or members holding shares in the company conferring a right to vote on the resolution, being shares on which an aggregate amount has been paid up equal to not less than ten percent of the total amount paid up on all the shares conferring that right.
Section 296 provides that a member who is entitled to cast two or more votes at a poll taken at a general meeting of a company is not obliged to use all of those votes or to cast them all in the same way.
Section 297 provides that if a body corporate is a member of a company, it may, by resolution of its directors or other governing body, authorize a person or persons to act as its representative or representatives at a meeting of the company.
To shorten the proceedings at meetings the procedure is:
i. On putting a resolution to the vote the chairman calls for a show of hands, i.e. one vote may be given by each member present in person: proxies do not vote. The chairman declares the result. Unless a poll is then demanded, the chairman’s declaration (duly recorded in the minutes) is conclusive. No one can re-count hands after the meeting.
ii. If a real test of voting strength is required, a poll may be demanded. The result of the previous show of hands is then disregarded. On a poll, every member and also proxies representing absent members may cast the full number of votes to which they are entitled. A poll need not be held forthwith but may be postponed so that arrangements to hold it can be made. When a poll is held, it is usual to appoint “scrutinisers” and to ask members and proxies to sign voting cards or lists. The votes cast are checked against the register of members and the chairman declares the result.
In voting, either by show of hands or on a poll, it is the number of votes cast which determines the result. Votes which are not cast, whether the member who does not use them is present or absent are simply disregarded. Hence the majority vote may be much less than half or three quarters) of the total votes which could be cast.
In the case of joint holders the vote of the senior joint holder who tenders a vote whether in person or by proxy shall be accepted to the exclusion of the votes of the other joint holders, the seniority being determined by the order in which the names stand in the register of members. However in Burns v. Siemens Bros Dynamo Works Ltd it was held that joint holders are entitled to require that their holding be split with a different holder being registered as the senior in respect of the various split holdings. Section 260 provides that if two or more persons hold a share jointly, only the vote of the senior holder who votes and any proxies duly authorized by that holder are eligible for counting by the company. For the purposes of the section, the senior holder of a share is determined by the order in which the names of the joint holders appear in the register of members.
Note that it is common for members in arrears with calls or other sums not to be allowed to vote.
Company meetings make decisions by passing resolutions. A resolution is proposed, deliberated upon and voted on.A proposed resolution may be amended as long as the amendments do not negate its main purpose.
The following types of resolutions provided for under the Companies Act:
i. Written resolutions
ii. Ordinary resolutions
iii. Special resolutions
iv. Resolution requiring special notice under section 287 of the Act
Section 255 provides that a resolution of the members, or of a class of members of a private company may be passed either as a written resolution; or at a meeting of the members.
Section 262 provides that the following may not be passed as a written resolution:
a) a resolution under section 139 removing a director from office before the end of the director’s period of office; or
b) a resolution under section 739 removing an auditor before the end of the auditor’s term of office.
Either the directors or members of the private company may propose a resolution as a written resolution.
A written resolution has effect as if passed by the company in a general meeting; or by a meeting of a class of members of the company.
A resolution of the members or of a class of members of a public company may be passed only at a meeting of the members.
Section 256 provides that a resolution is an ordinary resolution of the members (or of a class of members) of a company if it is passed by a simple majority.
Section 257 provides that a resolution is a special resolution of the members (or of a class of members) of a company if it is passed by a majority of not less than seventy-five percent.
Note that a written resolution may be passed with a simple majority (ordinary resolution) or a majority of not less than seventy-five percent (special resolution). However, note that if a resolution of a private company is passed as a written resolution the resolution is not a special resolution unless it stated that it was proposed as a special resolution; and if the resolution so stated it may only be passed as a special resolution.
If a resolution is passed at a meeting, the resolution is a special resolution only if the notice of the meeting:
a) included the text of the resolution; and
b) specified an intention to propose the resolution as a special resolution, but if the notice of the meeting specified such an intention, the resolution may be passed only as a special resolution.
Section 275 provides that a resolution of the members of a company is validly passed at a general meeting if:
a) notice of the meeting and of the resolution is given; and
b) the meeting is held and conducted, in accordance with the Act and the company’s articles.
Separate minutes or proceedings of directors and general meetings must be kept; the latter are open to inspection by members. The minutes when signed by the chairman of the meeting or next succeeding meeting, are prima facie evidence of the proceedings.
Section 317 of the Act provides that every company shall keep comprising:
a) copies of all resolutions of members passed otherwise than at general meetings;
b) minutes of all proceedings of general meetings; and
c) details provided to the company in accordance with section 319 where decisions are taken in a company that has a sole member.
The company shall keep the records for at least ten years from the date of the relevant resolution, meeting or decision. If a company fails to comply with this requirement the company, and each officer of the company who is in default, commit an offence and on conviction are each liable to a fine not exceeding KES 500,000.
Section 318 provides that the minutes of proceedings of a general meeting, if purporting to be signed by the person presiding at that meeting or by the person presiding at the next general meeting, are evidence of the proceedings at the meeting.
If a record of proceedings of a general meeting of a company exists, then, until the contrary is proved:
a) the meeting is presumed to have been duly held and convened;
b) all proceedings at the meeting are presumed to have duly taken place; and
c) all appointments at the meeting are presumed to be valid.
Section 320 requires companies to keep its records available for inspection at its registered office. The company shall, on being requested to do so by a member of the company, make the records available for inspection by the member without charge. If a member of the company requests the company to provide the member with a specified record, the company shall comply with the request within seven days after receiving the request, subject to payment of the prescribed fee (if any).