Monday, January 19, 2015

Always check a Company’s Articles

Whilst not as common now as it used to be, we are still encountering the occasional problem with invalid initial company meetings in MVLs and CVLs. We thought that the time was right for a reminder given that an invalid general meeting of the members of the company (“general meeting”) means an invalid winding up resolution, an invalid appointment as liquidator and a problem that needs sorting out.

We first Blogged about this back in 2005 looking at what constitutes a quorum at a general meeting, and you can read that article by clicking here. Then in 2013 we Blogged about the last date for submission of proxies by members given the wording used by some strange Articles we had seen, and you can read that article by clicking here.

The notice, quorum and proxy requirements relating to general meetings are covered in the company’s Articles, and it is those that govern the conduct of the general meeting. As a result, we recommend that you should always get hold of a copy of a company’s Articles and review them when you are first consulted by the directors about a liquidation. We comment on some provisions of the standard Table A Articles for the each of the Companies Acts in 1985 and 2006, but you should note that the standard Table A is often adapted or amended and you will need to check the specific set of Articles filed for the company that you are dealing with. The review should be of:

• the quorum requirements for the general meeting where there is more than one member – standard Table A Articles provide that it is two, if there are two or more members, but you still need to check as some older Articles in particular may provide for a larger number;

• the notice requirements – the Companies Act 2006 requires 14 days’ notice for general meetings unless otherwise stated in the company’s Articles. The standard Companies Act 2006 Table A Articles are silent on the subject, so unless you have specific amendments you should normally use 14 days, but it has to be 21 days’ notice where the company uses standard Companies Act 1985 Table A Articles;

• the proxy requirements – Article 62 of the standard Companies Act 1985 Table A Articles states that proxies are “to be deposited at the office or at such other place within the United Kingdom as is specified in the notice convening the meeting or in any instrument of proxy sent out by the company in relation to the meeting not less than 48 hours before the time for holding the meeting, and an instrument of proxy which is not deposited or delivered in a manner so permitted shall be invalid.” You need to be aware of this when setting the last date for submission of proxies as it is at odds with the wording of standard notices of general meetings that we see, which either require the proxy to be lodged by 12 noon on the business day prior to the meeting or do not set a last date and time for a proxy to be lodged. One approach to avoid problems in such cases would be to pass a resolution replacing Article 62 of the standard Table A Articles with wording similar to that as set out below in Article 45(d) of the standard Companies Act 2006 Table A Articles.

Article 45(d) of the standard Companies Act 2006 Table A Articles says that a proxy is valid if it “is delivered to the company in accordance with the Articles and any instructions contained in the notice of the general meeting to which they relate.” The standard Companies Act 2006 Table A Articles do not contain any provisions relating to the delivery of a proxy, so the time by which a proxy must be delivered is set out entirely in the notice of the meeting in such cases, albeit subject to the provisions of section 327(2) of the Act which makes any requirement to submit a proxy more than 48 hours before the meeting void. As a result, the standard notices of general meetings work nicely with those Articles and do not create a problem.

• written resolutions – standard Table A Articles permit these, but you still need to check to see if there are any peculiarities as regards formalities should you intend to take written resolutions rather than just have a meeting of members.