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  Corporate Governance Rules Affecting Validity of Proceedings at Company Meetings

Corporate Governance Rules Affecting Validity of Proceedings at Company Meetings

Issues Affecting Validity of Proceedings at Meetings

A.      Quorum

Quorum refers to the total number of members present in person or by proxy, whose presence satisfies the required minimum number of members that would be present for the meeting to start and progressively proceed to the expected end.

How is Quorum Determined? (section 232(1) of the CAMA)

Unless otherwise provided in the articles; no business shall be transacted at any general meetings unless a quorum of members is present at the time when the meeting proceeds to business and throughout the meeting. For the purpose of determining a quorum, all members or their proxies shall be counted: section 232(3) of the CAMA.

Unless otherwise provided in the articles, the quorum for a meeting shall be:

a.        1/3 of the total number of members of the company or 25 members (whichever is less) present in person or by proxy.

b.       where the number of members is not a multiple of 3, then the number nearest to 1/3.

c.        where the number of members is 6 or less, the quorum shall be 2 members: section 232(2) of the CAMA.

Quorum During the Progress of the Meeting

Unless the Articles otherwise provides, quorum is to be maintained from the starting of the business of the meeting and throughout the meeting: section 232(1) of the CAMA. Please note that proxy is counted for the purpose of calculating quorum. Where quorum was formed at the commencement of a meeting but the quorum was lost as the meeting progressed, then the Chairman ought to direct on the fate of the meeting. The Chairman’s direction depends on whether the reason for the withdrawal from the meeting was a “sufficient” or “insufficient reason”.

If it is for insufficient reason or for the purpose of reducing the quorum, the meeting can continue with the number present, and their decision shall bind all the shareholders and where it remains only one member, he may seek direction of the court to take a decision: section 232(4) of the CAMA. However, if it is for sufficient reasons, the meeting shall be adjourned to the same place and time, in a week’s time.  If there is no quorum still at the adjourned meeting, the members present shall be the quorum and their decision shall bind all shareholders.  If only one member is present at the adjourned meeting, he may seek direction of the Federal High Court to take a decision: section 232(5) of the CAMA.

B.   Voting

Voting is done to ascertain the support of a particular Resolution by members. There are basically two types of voting at any General meeting: section 224(1) of the CAMA. These are:

a.          Show of hand            
b.          By demanding a poll

Voting by Show of Hand

This is voting according to the number of persons present and entitled to vote even by proxy.  It is determined by counting the number of members supporting or opposing a Resolution.

Voting by Demand of Poll

Voting on a poll entails the shareholders voting according to the number of shares they each own individually. Although one share attracts one vote, certain classes of shares are permitted to have weighted vote; that is to say, attracts more than one vote. An example is preferential shares: section 143 of the CAMA. Proxies also vote according to the number of shares which the member they are representing hold.

Procedure Upon Demand of Poll

If a poll is duly demanded, the result of the previous show of hands is then disregarded. The poll shall be taken in such manner as the Chairman directs, and the result of the poll shall be deemed to be the Resolution of the meeting at which the poll was demanded: section 226(2) of the CAMA.

However, a poll demanded on the election of a Chairman or on a question of adjournment shall be taken forthwith, and on any other question shall be taken at such time as the Chairman of the meeting directs, and any business other than that upon which a poll has been demanded may be proceeded with pending the taking of the poll: section 226(4) of the CAMA.

Restrictions On Demand Of Poll

The right to demand poll shall not be limited by Articles except on the election of Chairman and adjournment of meeting. Where the Articles limits the right, the Articles shall be void: section 225(1) of the CAMA. Thus a Company’s Articles can validly restrict the use of poll voting in respect of election of the Chairman or adjournment of meeting. Also, there shall be no right to demand on poll on the election of members of the Audit Committee under section 359 of the CAMA. This is an absolute bar: section 225(3) of the CAMA.

Who can Demand a Poll?

The following persons can demand a poll.

a)       The Chairman, where he is a shareholder or a proxy
b)       At least three members present in person or by proxy.
c)       Any member or members present in person or by proxy and who represent not less than 1/10 of the total voting rights.
d)       Any member or members holding shares not less than 1/10 of the total fully paid up shares in the capital of the company: section 224(1)(a)–(d) of the CAMA.

Chairman’s Casting Vote

In the case of an equality of votes, whether on a show of hands or on a poll, the Chairman is entitled to a second or casting vote: section 226(3) of the CAMA.

Result of Vote

For show of hands, the Chairman’s declaration of the result is conclusive. Thus, no one can re-count hands after such declaration unless a poll is demanded. An entry to that effect in the Minutes Book shall be conclusive evidence of the result, without proof of the number or proportion of the votes recorded in favour of, or against the resolution: section 224(2) of the CAMA. On the other hand, for Poll, in computing the majority, the number of votes cast for and against the resolution should be counted.

Adjournment of Meetings-(section 239 of the CAMA)

A meeting may be adjourned either because:

i.           No Quorum is formed at the original meeting, or
ii.          The business was unfinished at the original meeting.

The Chairman, may with the consent or directive from the members at the meeting, adjourn the meeting from time to time and from place to place. No new business is allowed at the adjourned meeting only the unfinished business from the original meeting shall be transacted: section 239(1) of the CAMA. It is not necessary to give notice of adjourned meeting unless it is adjourned for 30 days or more, in which case, then notice must be given: section 239(2) of the CAMA.

Quorum at Adjourned Meeting

If within one hour from the time an adjourned meeting is due to start, a quorum is not present;

v   If the meeting is convened upon the requisition of members, the meeting shall be dissolved.

v   If not a requisitioned meeting, it shall stand adjourned to the same day in the next week, at the same time and place or to such other day, time and place as directed by chairman and in his absence, the directors: section 239(3) of  the CAMA.

Please note that at the second adjourned meeting, any two or more members present shall form a quorum and their decision shall bind all shareholders; and if only one member is present, he may seek the direction of the Federal High Court to take a decision: section 239(4) of the CAMA.

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12:10:00  Company Law, Company Meetings, corporate, Corporate Governance, Corporate Law Practice

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