Topic 5

• Company


  Has no physical existence, can only perform actions through human beings - shareholders, directors, managers, and employees
• Group of persons who has the right (or duty) to perform various actions on behalf of the company is usually determined by the MOI or the Companies Act
• Section 71(1) of the Act gives the power to shareholders to remove a director at any time by ordinary resolution
• Shareholder


  Holder of a share issued by a company and entered in the securities register
• Shareholders meeting


  Meeting of holders of a company's issued securities entitled to exercise voting rights
• Types of meetings


  • General meetings
  • Class meetings
• Calling a shareholders meeting

  1. Properly convened if prescribed notice was given by the board of directors, any other person specified in the Memorandum of Incorporation or rules, or shareholders by written demand (10 percent voting rights attaching to share)

  2. Failure to comply with prescribed formalities could result in an invalid decision

  3. Exceptions are made to the rules and formalities for shareholders meetings
• If the required percentage of shareholders have demanded a meeting


  The board of directors is obliged to hold the meeting and cannot over-rule the shareholders on that point
• Notice of meetings


  1. Must be in writing

  2. Public company/NPC: 15 business days before, Other companies: 10 business days before

  3. Meeting may proceed if all persons are present, waive notice, or ratify the defective notice
• Annual General Meetings (AGM)


  1. Public company must hold its first AGM no more than 18 months after incorporation, and thereafter no more than 15 months after the previous AGM

  2. Prescribed matters to be discussed at the AGM include directors' report, audited financial statements, election of directors, appointment of auditor and audit committee, matters raised by shareholders, chairman's report
• Record date


  1. Set by the board of directors for determining which shareholders are entitled to receive notice of a shareholders meeting, participate in the vote, decide any matter by written consent or electronic communication

  2. Company must deliver a notice to all shareholders as per Section 62(1) of the Act
• Proxies


  1. Agent appointed by a shareholder to attend, participate, speak, and vote on their behalf at a shareholder's meeting

  2. Proxy may be any individual or two or more persons concurrently appointed to exercise voting rights

  3. Proxy form must be in writing, signed by the shareholder, and delivered to the company prior to exercising any rights

  4. Appointment of a proxy is valid for one year after signing and remains valid until the end of the meeting

  5. Shareholder can revoke the appointment by cancelling in writing or making a later inconsistent appointment, and delivering a copy of the revocation instrument to the proxy and the company

  6. Proxy may vote as they think fit unless the shareholder has indicated on the form
• Appointment of a proxy

  Inconsistent appointment of a proxy, and delivering a copy of the revocation instrument to the proxy and to the company
• The proxy may vote as he or she thinks fit unless the shareholder has indicated on the proxy form whether the proxy must vote in favour of or against a particular resolution
• Quorum and Conduct at Meetings

  At least 25% of all the voting rights that are entitled to be exercised in respect of at least one matter to be decided at the meeting
• Quorum for a meeting to commence

  If a company has more than 2 shareholders, at least 3 shareholders must be present at the meeting in order for the meeting to commence or for a matter to be considered, provided that the members present can exercise at least 25% of all the voting rights that are entitled to be exercised
• Show of hands


  Any person present (including proxy) and entitled to exercise voting rights has only one vote, irrespective of the number of shares held by that person
• Meetings can be electronic
• Postponement and adjournment of meetings


  A meeting may be postponed or adjourned for one week (MOI may alter) if, within one hour (MOI may alter) after the appointed time for a meeting to begin, a quorum is not present. Where a quorum is not present at the postponed or adjourned meeting, those present in person or by proxy will be deemed to constitute a quorum. A meeting may be adjourned from time to time without further notice on a motion supported by a majority of the voting rights held by all those present at the meeting
• Decisions taken at a general meeting

  Ordinary resolutions require the support of more than 50% of the voting rights exercised on the resolution. Special resolutions require at least 75% of the voting rights exercised on the resolution. The Memorandum of Incorporation may specify a higher percentage of voting rights to approve the resolution. The Memorandum of Incorporation may permit a lower percentage of voting rights to approve the resolution. There must be a margin of at least 10 percentage points between the requirements for the adoption of an ordinary and a special resolution. Required for specific decisions such as amendment of the Memorandum of Incorporation, approving the voluntary winding-up of the company, approval of a sale of assets, a merger, an amalgamation or a scheme of arrangement, approval of directors’ remuneration, and any other matter required by the Memorandum of Incorporation
• Proposing shareholder resolutions


  A shareholder resolution may be proposed by the board of directors or any two shareholders. A proposed resolution must be expressed with sufficient clarity and specificity, and be accompanied by sufficient information or explanatory material to enable shareholders to decide whether to participate in the meeting and to cast their votes
• Decisions taken without convening a meeting


  Written resolutions are permissible without the need for a formal meeting. The resolution must be supported by the same threshold majority generally required for an ordinary or special resolution. Business required to be conducted at the annual general meeting of the company may not be conducted in this way. All shareholders must vote in writing within 20 business days after the resolution is submitted to them. If adopted, the resolution has the same effect as if approved by voting at a meeting. Within 10 business days after adopting the resolution, the company must deliver a statement describing the results
• Who is a director?
• Definition of “Director” – sec 1 of the Companies Act, 2008 “means a member of the board of a company, as contemplated in section 66, or an alternate director of a company and includes any person occupying the position of a director or alternate
• Resolution adoption


  Resolution adoption has the same effect as if approved by voting at a meeting. Within 10 business days after adopting the resolution, the company must deliver a statement describing the results
• Director


  Member of the board of a company, as contemplated in section 66, or an alternate director of a company and includes any person occupying the position of a director or alternate director, by whatever name designated
• Role of a Director

  • Leadership
  • Decision Making
  • Fiduciary duties
  • Manage relationship with shareholders
  • Determine the ethics and values of the company
  • Company Administration
• Types of Directors


  • Ex officio director
  • MOI-appointed director
  • Alternate Director
  • Elected director
  • Temporary director
• Ex officio director


  Holds office as a director solely as a result of holding another office, title, or status, e.g., CEO. Has all powers, functions, duties, and liabilities as any other director, but subject to the MOI
• MOI-appointed director


  Not appointed by shareholders unless MOI states so. MOI specifies how and/or by whom such a director is appointed
• Alternate Director


  Appointed or elected subject to the contents of the MOI. A person elected or appointed to serve, as the occasion requires, as a member of the board of a company in substitution for a particular elected or appointed director of that company
• Temporary director


  MOI can provide for the appointment of a temporary director. Unless the MOI provides otherwise, directors may appoint a temporary director
• Executive Directors


  • Involvement in the day-to-day management of the company or being in full-time salaried employment of the company (or its subsidiary) or both
• Non-executive Directors


  • Not being involved in the management of the company
• Independent Directors


  • King Code IV has enhanced the provisions regarding the classification of non-executive members as ‘independent’
• First directors
• First directors appointment


  Each incorporator of a company will also be a first director of that company. This directorship will be temporary and will continue until a sufficient number of directors have been first appointed or first elected in terms of the requirements of the Act. If incorporators plus ex officio directors together do not meet the required minimum number of directors, a shareholders’ meeting must be called within 40 business days. Each director, excluding first directors and ex officio directors, must be elected by the persons entitled to exercise voting rights in such an election, to serve for an indefinite term, or for a term as set out in the Memorandum of Incorporation. Election constituted by a series of votes. Each voting right only to be exercised once. The majority of voting rights must support the candidate. The Board may appoint a temporary director until the vacancy can be filled
• Ineligibility and disqualification (s 69)
• Directors’ duties
• Common Law Duty to avoid conflict of interest