How to call and run a shareholders’ meeting

An excerpt from Lawpack's Limited Company Formation Kit.

When you’re managing a limited company, most of the day-to-day running of a limited company is carried out by you and the other company directors. So you won’t really need to worry about holding shareholders’ meetings, unless a very important issue arises.

Occasions when you may need to hold a shareholders’ meeting are if issues arise concerning capital or changing the limited company’s constitution, which are issues decided by the shareholders.

In some cases directors and shareholders of a limited company will be the same people.

Limited company shareholders act officially as a group. This means that you can either call or arrange for the shareholders to sign a written company resolution or respond to an email.

Certain rules and procedures have to be followed in order to call and conduct a shareholders’ meeting:

Notice given for a shareholders’ meeting

Shareholders must receive advance warning of shareholders’ meetings:

Each shareholder entitled to attend the shareholders’ meeting must receive notice of all shareholders’ meetings. Each shareholder should be notified of the date, time and place and full details of the proposed company resolution to be considered at the shareholders’ meeting. The notice may be sent by post or electronically. If the details are shown on the limited company’s website, the shareholder must be sent a letter or email drawing his/her attention to it.
Each shareholder must receive his/her own notice of the shareholders’ meeting. The length of notice is now 14 days.
It’s possible for shareholders’ meetings to be held at short notice, provided the requisite majority of shareholders have consented to short notice. This consent must be recorded and signed in writing.
In most cases you will be able to hold the shareholders meeting immediately if you obtain the shareholders’ consent to short notice. (An example template of the Consent to Short Notice Form is included in Lawpack’s Limited Company Formation Kit.)
Consent to short notice may be given:
- in the case of an annual general meeting (AGM), by all the limited company members entitled to attend and vote at the shareholders’ meeting; and
- in the case of general meetings, by a majority in number of the limited company members holding not less than 90 per cent in nominal value of the shares and having the right to attend and vote at the shareholders’ meeting.

Shareholders’ meeting proxy

Each limited company shareholder may appoint someone to attend the shareholders’ meeting on their behalf (a proxy), if they’re unable to attend. The proxy may attend and speak at the shareholders’ meeting and vote on a poll on the shareholder’s behalf. The proxy may now vote on a show of hands.

The notice calling the shareholders’ meeting should inform shareholders that they are entitled to appoint a proxy to attend, speak and vote in their place and that the proxy need not be a shareholder.

The proxy form must be lodged with the limited company within a specified period before the shareholders’ meeting is held (this period cannot be longer than 48 hours).

Shareholders’ meeting quorum

Shareholders act collectively, and not individually, so a certain number of shareholders must be present before a shareholders’ meeting can be held. This is known as a ‘quorum’.

Normally, a minimum of two shareholders present either in person or by proxy constitutes a quorum. But in the event of the limited company only having one shareholder, s/he will not unnaturally form a quorum.

Company resolutions are passed by a majority of the shareholders at shareholders’ meetings.

Voting at a shareholders’ meeting

Shareholders vote to make their collective decisions. The vote which takes place at the shareholders’ meeting can be made in one of two ways:

On a show of hands — every shareholder present at the shareholders’ meeting in person is entitled to cast one vote. Proxies are now entitled to vote on a show of hands.
On a poll — every shareholder present at the shareholders’ meeting shall be entitled to cast one vote for every share held. Proxies can vote on a poll.

The number of votes required to pass a particular item depends on whether the company resolution is an ordinary resolution or special resolution.

Ordinary company resolutions

Ordinary company resolutions proposed at a general meeting must be approved by a simple majority (i.e. more than 50 per cent) of the votes cast at the shareholders’ meeting, whether by a show of hands or on a poll.

Two examples of many types of limited company business which must be approved by ordinary company resolution include:

Declaring a bonus issue.
Removal of a limited company director.

Special company resolutions

Special company resolutions must be passed by a three-quarters majority of the votes cast at the shareholders’ meeting, whether by a show of hands or on a poll.

Examples of limited company business which must be approved by special company resolution are:

Alteration to the Memorandum of Association.
Alteration to the Articles of Association.
Reduction of capital.
A change of name. You also must send the appropriate fee to Companies House.

Some ordinary company resolutions and all special company resolutions must be filed at Companies House within 15 days of being passed. Sometimes forms and fees must also accompany the company resolutions.

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Published on: October 11, 2010