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    Lecture 4.3

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    daniel 2future
    This document summarizes key aspects of member meetings and restrictions on decision making in corporate law. It discusses types of member meetings, who can call meetings, agenda requirements, notice procedures, voting rules, and restrictions on member decision making to prevent unfair exploitation of minority shareholders by the majority. It specifically examines the Gambotto case which established different tests for assessing the validity of constitutional amendments depending on whether they allow expropriation of minority shares or involve other conflicts of interest.

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    Lecture 4.3

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    daniel 2future
    22 views19 pages
    This document summarizes key aspects of member meetings and restrictions on decision making in corporate law. It discusses types of member meetings, who can call meetings, agenda requirements, notice procedures, voting rules, and restrictions on member decision making to prevent unfair exploitation of minority shareholders by the majority. It specifically examines the Gambotto case which established different tests for assessing the validity of constitutional amendments depending on whether they allow expropriation of minority shares or involve other conflicts of interest.

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    This document summarizes key aspects of member meetings and restrictions on decision making in corporate law. It discusses types of member meetings, who can call meetings, agenda requirements, notice procedures, voting rules, and restrictions on member decision making to prevent unfair exploitation of minority shareholders by the majority. It specifically examines the Gambotto case which established different tests for assessing the validity of constitutional amendments depending on whether they allow expropriation of minority shares or involve other conflicts of interest.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    22 views19 pages

    Lecture 4.3

    Uploaded by

    daniel 2future
    This document summarizes key aspects of member meetings and restrictions on decision making in corporate law. It discusses types of member meetings, who can call meetings, agenda requirements, notice procedures, voting rules, and restrictions on member decision making to prevent unfair exploitation of minority shareholders by the majority. It specifically examines the Gambotto case which established different tests for assessing the validity of constitutional amendments depending on whether they allow expropriation of minority shares or involve other conflicts of interest.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 19

    1

    CORPORATE LAW
    LECTURE 4
    Member meetings and restrictions on
    decision making
    2

    Types of members’ meetings


    • All public companies must hold an annual general
    meeting - AGM: s 250N
    • Other meetings are called extraordinary general meetings
    - EGMs
    • Rules governing meetings are set out in Corporations Act
    and the internal management rules – [RRs] or constitution
    • Usually, meetings are called by the board.
    • Can also be called:
    • s 249C [RR] by single director
    • Listed company by single director: s 249CA
    • Court, on application by a director or member if it is otherwise
    impracticable: s 249G
    3

    Can members call a meeting?


    • Requisition by 5%+ members: s 249D. Law has
    changed since 2015.
    • Directors need not convene if the purpose is
    improper: NRMA v Parker
    • s 249Q – meetings only for proper purposes:
    NRMA v Scandrett - motive irrelevant
    • S 249E – where directors don’t call meeting
    • Direct convening by 5%+ members: s 249F
    • Constitution can’t take away these statutory rights
    to call a shareholders meeting!
    4

    Members’ meeting agenda


    • Only matters that have been included in the notice of
    meeting can be considered at the meeting
    • Matters stated in s 250R in case of AGMs don’t need to
    be on the agenda
    • Financial reports; election of directors

    • The directors determine the agenda when calling a


    meeting
    • Members can request the inclusion of resolutions to be
    put to the members at next meeting: s 249N
    • 5% of vote or 100 members
    • Co must send out notice of member resolutions,
    statements – s 249O; 249P.
    5

    Giving notice of the meeting


    • General rule - 21 days.
    • Consent to short notice is possible: s 249H – AGM’s where all agree;
    EGMs where 95% agree
    • S 249H – no short notice where resolution to remove public company
    director.
    • Listed companies - 28 days: s 249HA
    • Notice must be given to members and directors – s 249J;
    and auditor – s 249K
    6

    Notice (cont)
    • What the notice of meeting must contain: s 249L
    • Special resolutions – s 249L(1)(c)

    • Must “fully and fairly inform and instruct the shareholder


    about the matter on which he or she will have to vote”:
    Devereaux Holdings
    • Need to balance the information presented, to make it
    accessible; must not be misleading or deceptive (even if
    this is unintentional)
    7

    Conduct of meetings
    • Quorum – s 249T [RR]
    • Use of technology – s 249S
    • Proxies and corporate representatives – s 249X – RR for
    pty ltds only
    • Directors elect the chair of the members’ meeting – s
    249U [RR]
    • Decision making without a meeting
    • In single member companies, resolution is passed by the member
    recording and signing it (‘minutes’): s 249B – notice still goes to
    ASIC
    • Proprietary companies may use “flying minutes”, in which all
    members entitled to vote must sign a document agreeing to the
    resolution: s 249A
    8

    Voting
    • Members’ entitlement to vote: s 250E [RR] – one vote per
    share
    • preference shareholders right to vote depends on their defined
    class rights
    • Voting by proxies – s 249Y
    • Voting (show of hands and poll) – s250J [RR]; s250K
    • Note some limits on member’s right to vote in their own interests –
    later lectures eg related party transactions; capital reductions
    • Casting vote of chair –s 250E(3) [RR]
    9

    Irregularities
    • Section 1322 – outcome of meeting may be valid despite
    some irregularity (ie failure to follow required procedure)
    • Applies to “proceeding under the Act” – includes directors’
    and members’ meetings
    • Two different mechanisms
    • Automatic validation (valid unless a court says no) or
    • Curing declaration (invalid until a court says yes)
    • Section 1322(2) - includes absence of quorum, defect of
    notice or time
    • Not invalid unless court is of the opinion that a substantial
    injustice has resulted or may result, and declares it invalid
    10

    Automatic validation
    • 1322(2) is the section where complainers on the receiving
    end of a procedural irregularity can apply to the court to
    have the proceeding invalidated.
    • eg they didn't get a notice of meeting and if they had, they
    would have attended, voted against it etc and THINGS
    WOULD HAVE BEEN DIFFERENT! ie they have suffered
    a substantial injustice.
    • and the court can't fix the problem by any other means, so
    the court orders the proceeding to be invalid and the
    company has to do whatever it is again.
    • Onus on the person arguing invalidity
    11

    Court’s power to validate irregularities


    • ‘Curing’ declaration
    • Section 1322 (4) - (6) – court can declare that an act,
    matter, or thing, or a proceeding, is not invalid so long as:
    • it is procedural in nature
    • the person acted honestly
    • it is just and equitable to make the order
    • no substantial injustice
    • Onus on the person asserting validity
    • Substantial injustice:
    • Poliwka v Heven Holdings
    • MTQ Holdings
    • Outcome OF PROCEDURE would have been different …
    12

    How does s 1322(4) work?


    • Something is already broken (eg the failure in Weinstock v
    Beck of the pty co director to be re-appointed 30 years
    ago in accordance with the constitutional requirement),
    and
    • THAT PERSON applies to the court to have it declared
    not invalid.
    • It is likely to be part of some other dispute and this section
    allows the court to tidy up the failure to do some
    procedure properly and then the court can get to the
    substance of the dispute. In other words, the main dispute
    before the court won't turn on 'a technicality'.
    13

    Restrictions on member decision making


    • Members may exercise voting rights in their own self-
    interest (even if they are also directors). But there are
    limits – called ‘the equitable limitation’:
    • to stop unfair exploitation of minority shareholders by majority
    • Because it is not always possible for minority shareholders to sell

    • Not a positive duty to be ‘good’ or unselfish.


    • ASK: do the facts involve a decision by the majority of
    members that harms the minority?
    • The rule applies slightly differently for:
    • cases involving constitutional amendment
    • cases not involving constitutional amendment
    14

    What votes does it apply to?


    • Majority unwilling to sue where they are the alleged
    wrongdoers: Biala v Mallina Holdings
    • Taking the company’s property where the members vote
    not to sue outsider.
    • Menier v Hooper’s Telegraph Works

    • Changing the constitution


    • Even where s 136 is complied with, amendment may be invalid due
    to equitable limitation
    • Gambotto v WCP deals with:
    • amendments that expropriate shares
    • other constitutional amendments that give rise to conflict
    15

    Gambotto

    • Majority passed a IEL


    resolution for 99.7%

    compulsory
    acquisition by IEL of
    WCP
    other shares
    Mr G Others
    • IEL did not vote
    0.09% 0.21%
    • Mr Gambotto did not
    attend or vote
    16

    Gambotto establishes different tests for


    different amendments
    • Category 1 amendments: Amendments to allow
    expropriation of
    • minority’s shares; or
    • valuable proprietary rights attached to their shares (eg voting or
    dividend rights)
    • Are only valid if:
    • proper purpose, and
    • no oppression of minority shareholders
    • Proper purpose test is very restrictive – advancing
    company’s commercial interests is not enough
    17

    Category 1 (cont)
    • The only “proper purpose” recognised by the court is to
    prevent harm to company, eg:
    • minority s/h is competing with company
    • removal of member is necessary to allow company to continue in
    present business
    • Also must show that there was no oppression. This
    requires:
    • procedural fairness – full disclosure and independent
    valuation
    • substantive fairness – price is fair (may not always be
    market value)
    18

    Gambotto and other areas of law


    • Gambotto equitable limitation on shareholder voting
    doesn’t apply where votes taken under statutory reduction
    of capital
    • Winpar Holdings v Goldfields Kalgoorlie
    • Overlaps with oppression remedy, considered in Lecture
    11
    19

    Category 2 amendments
    • Other amendments involving a conflict of interest
    • Are only valid if :
    • done for a company purpose, and
    • no oppression of minority shareholders

    • More “purposes” are valid here compared with Category 1

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