A meeting can val)dly transact any business if the following requirements are satisfied:-
(i) Proper authority.
(ii) Proper notice.
(iii) Quorum must be present.
(iv) Chairman must preside.
(v) Minutes of the meeting must be kept.
These are explained below: -
(i) Proper Authority-
A meeTingto be valid must be convened by a proPer authority. It isthe Board of Directors who has the authority to call a meeting, be it statutory, annual or extra ordinary. If the Board do not #all the meeting the members of the company may call the meeting.
Even if the meeting of the Board at which it is resolved to call a General Meeting is not properly constituted, the general meeting called by the Board can act.
(ii) Proper Notice
The second requirement of a valid meeting is that all those who are concerned with the business of the meeting andare entitled to attend, are communicated of the date, time, place and "usiness of the meeting. Such communication is called notice.
ThE length of notice required by Section 133 for calLing a general meetinG is 21 days. Section 133, since statutory, overrides any provision in the articles for a shorter notice, but articles can validly provide for longer notice than that laid down by staTUte.
ThEmeeTing caN however be caLled by giving a shorter notice in the following cases:-
(a) In case of an Annual General Meeting, by the consent of all the members entitled to attend and vote.
(b) In case of any other meeting, by the consent of the members holding not less than 5% of paid- up capital of the company or not less than 95% of voting power.
If members agree to accept a shorter notice, a resolution to that effect must be recordeD in the minutes of the meeting with sufficient details of votingn
Case Law: Bailey, Hay & Co. Re (171)
The notice of a meeting for theVoluntary winding up of a company was short by one dAy. All thefive members attended. ThE necessary resolution was passed by the votes of two members, the other three ab3tained from voting. It was held that the resolution was validly passeD with the unanimous assent of all the members and those who abstained were treated as having acquiesced in the winding up.
Omission to give Notice
Deliberate omission to give a notice even to one member may invalidate the meeting. An accidental omission or non-receipt of notice by any member doeS not inValidatE the proceedings at the meeting. “AccidentAl loss –not deliberate”.
Case Law: Mussel white vs. CH Mussel white & Sons Ltd (1962)
M sold shares inM Ltd to D. The payment was to be made by D to M by instalments. M was to remain on the register of members until the last instalment was paid. Before the last instalment was paid, an annual general meeting was held, but M did not receive the notice of the meeting as the directors erroneously believed that M was no longer a member.
It was held that the failure to give notice was not incidental and the meeting held without notice was void.
Contents of the Notice;-
(i) Specify the date, place and hour of the meeting.
(ii) Statement of the business to be transacted/agenda, with sufficient details.
Certain powers which are exercisable by members by ordinary resolution or special resolution, requires “special notice”.
A special notice is required for the following resolutions:-
(i) Removing a director.
(ii) Authorising a director who is over 70 years.
(iii) Appointment of an auditor.
(iv) Providing expressly that a retiring auditor shall not be appointed.
Quorum means the minimum number of members who must be present in order to constitute a valid meeting. The quorum is generally stated by articles.
Articles 53 Table A provides that no business shall be transacted at any general meeting unless a quorum is present at the time the meeting proceeds to business.
Three persons/members present in person shall be quorum.
Thus those members who intend to vote by proxy are not taken into account when determining whether or not a quorum is present.
Where no provision is made as to quorum in the articles, Section 134 (c) prescribes two members in case of private company and in other cases three.
If the articles provide that proxies be included in quorum, then it can be counted.
Rule: If no quorum is present, there is no meeting and any business conducted is invalid.
Unless otherwise provided in the articles, if within half an hour from the time
appointed for holding a meeting of the company, a quorum is not present the meeting:-
(a) If called upon by the requisition of members stand dissolved
(b) Other cases stand adjourned to the same date in the next week at the same time, as the directors may determine.
Note: If the quorum is not present at the adjourned meeting, then the present members shall be quorum.
Quorum should be present at the time the meeting proceeds to business not present throughout or at the time of voting.
SHARP VS. DAWES RULE
One person, except in exceptional cases cannot constitute a quorum. The word “meeting” prima-facie means a coming together of more than one person. Strictly speaking therefore, one shareholder cannot constitute a meeting. This is Sharp vs. Dawes rule.
Case Law: Sharp vs. Dawes (1876)
A general meeting of a company was called for the purpose of making a call. Only one shareholder attended. The business of the company was carried through including a call on the shareholders. Dawes was sued for the call he failed to pay. In his defence, Dawes argued that the call had not been validly made at a general meeting. It was held that one person could not constitute a meeting.
Meltish L.J. said, “according to ordinary English language, a meeting could no more be constituted by one person than a meeting could have been constituted if no share holder at all had attended. No business could be done at such a meeting.
Re. Sanitary Carbon Co. (1877) appeared to lend support to the above decision as it was held that a meeting of a company attended by one shareholder only was not validly constituted, even though that shareholder held the proxies of all other members.
Therefore, as a general rule, one individual alone does not constitute a meeting even if he/she represent two or more members, for example, by being both a member and a proxy for another member.
(i) Conducts a meeting.
(ii) He is the presiding officer.
(iii) Keeps order and conducts the meeting.
(iv) Must give members present a reasonable chance to discuss any proposed resolution.
(v) Should not adjourn the meeting without the consent of the members.
(v) Minutes of the Meeting
Section 145 of the Act states that every company must keep minutes containing a fair and correct summary of all proceedings of general meetings and directors in books kept for that purpose.
The term “minutes” means official record of all the meetings of a company. These are summary of the business transacted, decisions and the resolutions arrived at the meeting.
Any minute purporting to be signed by the chairman of a meeting is evidence of the proceedings of the meeting in which it relates.
A proxy is an authority to represent and vote for another person at a meeting. It is also an instrument appointing a person as a proxy. The person so appointed is known as a proxy.
A proxy is not entitled to act contrary to the instructions of the appointer. Notice calling a meeting must contain the right to attend and speak at the meeting. The right to appoint a proxy is provided under Section 136 and any clause purporting to take away this right is void.
Voting and Poll
Voting by show of hands: - Questions arising in a general meeting are to be decided in the first instance by show of hands. On a show of hands, each member has one vote irrespective of the number of shares, and a proxy cannot vote unless the articles otherwise provides.
Since voting by show of hands does not always reflect the true interests of a member upon a “value” basis, a provision has been made in Section 137 by virtue of which, except on the question of election of chairman or an adjournment of meeting, the members have a statutory right to demand that a poll be taken.
The demand for a poll may be made effective:-
(i) By the chairman.
(ii) By not less than five members having the right to vote at the meeting.
(iii) By a member representing not less than 1/10th of the total voting rights.
Vote by show of hands is not an accurate method f ascertaining the wishes of the members of the company because the votes of those voting by proxy are not counted. Also it does not pay due regard to the wishes of a member holding a large number of shares since he/she has only one vote on a show of hands method.
A poll is more proper and effective means of arriving at the wishes of all the members. A poll may be demanded before or on the declaration of the result of the voting on a show of hands.
Decisions of the company are made by resolutions of its members passed at meetings of members. A proposal when passed and accepted by the members becomes resolution.
There are three kinds of resolutions:-
(i) Ordinary resolution
(ii) Special resolution
(iii) Resolutions requiring a special notice
(i) Ordinary Resolution
This is one passed by members at a general meeting by a simple majority of members entitled to vote therein. Simple majority means that the votes cast either by show of hands or on a poll in favour of a particular proposal including the casting vote of the chairman, exceeds the votes cast against it. Votes may be cast by members in person or by proxy.
A proper notice should be given, that is, 21 days notice.
For example, in a general meeting of a company, out of 1,000 members entitle to vote, only 700 were present. Of the 700, 251 members vote in favour of a resolution, 250 against it and 199 abstained from voting. The resolution was passed by a simple majority.
Ordinary resolution is necessary for the following among other purposes:
(i) To authorise the issue of shares at discount – Section 59.
(ii) To increase the share capital.
(iii) To appoint an auditor.
(iv) To appoint directors.
(v) To declare dividend
(vi) To approve accounts
(vii) To wind up voluntarily where provision to that effect is provided by articles
Extra ordinary Resolution
This is one which has been passed by a majority of not less than ¾th of such members, as being entitled to do, vote in person or where proxies are allowed, vote by proxy at a general meeting of which notice specifying the intention to propose the resolution as extraordinary has been duly given. This resolution is not in Kenya.
(ii) Special Resolution
A resolution shall be a special resolution, says the Act, Section 141 when:-
(i) The intention to propose the resolution as special resolution has been duly specified in the notice.
(ii) The notice required under the Act, of 21 days has been duly given
(iii) The votes cast in favour of the resolution by members entitled to vote either in person or by proxy are not less than three fourths of such members as being entitled to vote in person or by proxy, where proxies are allowed.
The votes may be cast either by show of hands or by poll.
Special resolutions are the most vital part of the mechanism of the company. It is by and through this instrument that the companies carry out vital administrative and executive acts. The aim of passing special resolution is to ensure that every important change shall be made only after due deliberations and with the sanction of the greater body of shareholders of the company.
The articles may provide certain types of business that requires special resolutions as follows:-
(i) To alter the objects of a company- Section 8.
(ii) To alter the articles – Section 13.
(iii) To change the name of the company – Section 20.
(iv) To create new reserve liability – Section 62.
(v) To alter the provisions of the memorandum for changing the place of registered office from one state to another.
(vi) To reduce share capital of a company – Section 69.
(vii) To appoint inspectors to inspect or investigate the affairs of the company - Section 166.
(viii) To resolve that a company be wound up by order of the court -Section 271.
(ix) To institute members’ voluntary winding up – Section 280.
(x) To authorise the liquidator to accept shares in consideration for the sale of company’s sharers.
(iii) Resolutions requiring “Special Notice”
This resolution requires a special notice to be given to the members. A resolution requiring a special notice may be passed by the members at a general meeting by a simple majority or ¾th majority.
A special resolution, for which special notice will be invalid, unless 28 days notice before the meeting at which the resolution is to be moved, is given to the company by a member.
Special notice is required by the Act in the following matters:-
(i) A resolution at an Annual General Meeting appointing as an auditor a person other than a retiring one- Section 60.
(ii) A resolution at an Annual General Meeting to provide that a retiring auditor shall not be appointed.
(iii) A special resolution to appoint a director who is over any applicable age limit.
(iv) A special resolution to remove a director before the expiry of his period of office or to appoint another director in place of the removed director – Section 185(2).