We often get queries relating to notices for board meetings, company meetings, quorums etc and our visits throw up examples of cases where incorrect notice has been given, or there has been no quorum at a meeting. Where it goes wrong, the result is that you may have invalid resolutions to wind up the company, appoint you as liquidator and approve your fees.
The problem lies in the fact that there have been 22 standard table/model Articles dating back to 1856! This includes the various separate model Articles for public and private companies effective from October 2007. Just to confuse the issue, some companies update their articles of association when new ones are issued, whilst others have their own or amended versions of the standard or model Articles.
While it should not be relied on as a get out of jail free card, the Duomatic principle, which is preserved by section 281(4) of the Companies Act 2006, may be able to help where incorrect notice of a general meeting has given. As a reminder, in the case of Re Duomatic Ltd [1969] 2 Ch 365, Buckley J upheld the common law principle of decision-making by shareholders by way of informal unanimous consent. He summarised the position as follows:-
“Where it can be shown that all shareholders who have a right to attend and vote at a general meeting of the company assent to some matter which a general meeting of the company could carry into effect, that assent is as binding as a resolution in general meeting would be.”
We would stress though that if you find yourself needing to rely on the Duomatic principle, the shareholders’ consent must be unanimous. In addition, subsequent case law has held that if a registered holder of voting shares is unable to vote for any reason (for example they are deceased, or the shareholder is a dissolved company) the company will be unable to apply the Duomatic principle.
Furthermore, whilst is currently the case that the Duomatic principle can be used to assist shareholders in placing a company into an insolvency process, there is another argument that a company’s financial position may preclude the application of the Duomatic principle. This says that any decision taken would not be simply for the benefit of and protection of the members (a pre-requisite of application) because where the company is insolvent there is a common law duty to consider the creditors’ interests.
We have set out in the tables below the headlines for the standard Table A Articles for companies incorporated between 1 October 1977 and 30 September 2009, and the standard Model Articles for companies incorporated after 1 October 2009, covering quorum, notice and the related CA requirement to consent to short notice:-
Standard Table A articles for companies incorporated between 1 October 1977 and 30 September 2009
Commencement Date
|
Quorum for Board Meetings
|
Notice for Meetings
|
Short Notice
|
Quorum
Required
|
Distribution in Specie
|
1 October 1977
|
As fixed by the
directors and unless fixed two
|
Annual general
meetings - 21 days’ notice in writing
Extraordinary
general meetings – 14 days’ notice in writing
|
Annual meeting –
all members
Extraordinary
general meetings – 95% of members
|
Public companies
- 2 persons holding or representing 1/3 of the issued shares or 3 members
Private companies
– 2 members
|
Paragraph 135
with the sanction of an extraordinary resolution
|
2 February 1979
|
As fixed by the
directors and unless fixed two
|
Annual general
meetings - 21 days’ notice in writing
Extraordinary
general meetings – 14 days’ notice in writing
|
Annual meeting –
all members
Extraordinary
general meetings – 95% of members
|
Public companies
- 2 persons holding or representing 1/3 of the issued shares or 3 members
Private companies
– 2 persons
|
Paragraph 135
with the sanction of an extraordinary resolution
|
22 December 1980
|
As fixed by the
directors and unless fixed two
|
Annual general
meetings - 21 days’ notice in writing
Extraordinary
general meetings – 14 days’ notice in writing
|
Annual meeting –
all members
Extraordinary
general meetings – 95% of members
|
2 members
|
Paragraph 135
with the sanction of an extraordinary resolution
|
3 December 1981
|
As fixed by the
directors and unless fixed two
|
Annual general
meetings - 21 days’ notice in writing
Extraordinary
general meetings – 14 days’ notice in writing
|
Annual meeting –
all members
Extraordinary
general meetings – 95% of members
|
2 members
|
Paragraph 135
with the sanction of an extraordinary resolution
|
1 July 1985
|
As fixed by the
directors and unless fixed two
|
Annual general
meetings - 21 days’ notice
Extraordinary
general meetings – 14 days’ notice
|
Annual meeting –
all members
Extraordinary
general meetings – 95% of members
|
2 members
|
Paragraph 117
with the sanction of an extraordinary resolution
|
1 August 1985
|
As fixed by the
directors and unless fixed two
|
Annual general
meetings - 21 days’ notice
Extraordinary
general meetings – 14 days’ notice
|
Annual meeting –
all members
Extraordinary
general meetings – 95% of members
|
2 members
|
Paragraph 117
with the sanction of an extraordinary resolution
|
22 December 2000
|
As fixed by the
directors and unless fixed two
|
Annual general
meetings - 21 days’ notice
Extraordinary
general meetings – 14 days’ notice
|
Annual meeting –
all members
Extraordinary
general meetings – 95% of members
|
2 members
|
Paragraph 117
with the sanction of an extraordinary resolution
|
1 October 2007
(Private Companies)
|
As fixed by the
directors and unless fixed two
|
14 days’ notice
|
90% of members
|
Save in the case
of a company with a single member, 2 members
|
Paragraph 117
with the sanction of an extraordinary resolution
|
1 October 2007
(Public Companies)
|
As fixed by the
directors and unless fixed two
|
Annual general
meetings - 21 days’ notice
Extraordinary
general meetings – 14 days’ notice
|
Annual meeting –
all members
Extraordinary
general meetings – 95% of members
|
2 members
|
Paragraph 117
with the sanction of an extraordinary resolution
|
Standard Model Articles for companies incorporated after 1 October 2009
Commencement Date
|
Quorum
for Board Meetings
|
Notice
for Meetings
|
Short
Notice
|
Quorum
Required
|
Distribution
in Specie
|
1 October 2009 – Private Ltd (by Shares)
|
As fixed by the directors and unless fixed
two
|
14 days’ notice
(28 days required for a written resolution
unless otherwise specified in the articles)
|
90% of members
|
Save in the case of a company with a
single member, 2 members
|
Paragraph 34 with the sanction of an
ordinary resolution
|
1 October 2009 – Private Ltd (by
Guarantee)
|
As fixed by the directors and unless fixed
two
|
14 days’ notice
(28 days required for a written resolution
unless otherwise specified in the articles)
|
90% of members
|
Save in the case of a company with a
single member, 2 members
|
N/A
|
As
fixed by the directors and unless fixed two
(note
that there can never be less than two directors)
|
Annual
general meetings - 21 days’ notice
Extraordinary
general meetings – 14 days’ notice
(28
days required for a written resolution unless otherwise specified in the
articles)
|
Annual
meeting – all members
Extraordinary
general meetings – 95% of members
|
2
members
|
Paragraph
76 with the sanction of an ordinary resolution
|
|
28 April 2013
-Private Ltd (by Shares)
|
As fixed by the directors and unless fixed
two
|
14 days’ notice
(28 days required for a written resolution
unless otherwise specified in the articles)
|
90% of members
|
Save in the case of a company with a
single member, 2 members
|
Paragraph 34 with the sanction of an
ordinary resolution
|
28 April 2013 – Private Ltd (by Guarantee)
|
As fixed by the directors and unless fixed
two
|
14 days’ notice
(28 days required for a written resolution
unless otherwise specified in the articles)
|
90% of members
|
Save in the case of a company with a
single member, 2 members
|
N/A
|
28 April 2013 – Public Ltd
|
As fixed by the directors and unless fixed
two (note that there can never be less than two directors)
|
Annual general meetings - 21 days’ notice
Extraordinary general meetings – 14 days’
notice
(28 days required for a written resolution
unless otherwise specified in the articles)
|
Annual meeting – all members
Extraordinary general meetings – 95% of
members
|
2 members
|
Paragraph 76 with the sanction of an
ordinary resolution
|
Remember though, as indicated above, the individual companies may have amended the Articles that they use. They may be using an earlier version or may have adopted a more recent version by resolution. You should therefore always check which version of the Articles are being used and whether they have been amended at any time.
By way of example, we saw one company where the quorum for the board meeting to pass a resolution to wind the company up or put it into administration was 3 directors. Unfortunately, the company had never had three directors, although the Articles said that it had to. New directors had to be appointed by the members. There also had to be a minimum of three members…and guess what? There had never been more than two members.
You may also get the situation where there is a deadlock caused by a minority shareholder and in a very recent example, the company had a 80% shareholder who wanted to pass a resolution to wind up the company but the other 20% shareholder refused to participate in a meeting. Without a quorum no resolution could be passed and so the majority shareholder could only seek to transfer some of his shares to a family member (which is possible provided that the directors agree to the transfer and the articles of association allow it), or alternatively petition for the winding up of the company.
