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Week 3

The document outlines the definitions and regulations surrounding shareholders and company meetings as per the Companies Act, 2008. It details the requirements for convening meetings, including notice, quorum, and voting procedures, as well as the types of resolutions that can be passed. Additionally, it provides examples illustrating the application of these rules in specific scenarios involving shareholder decisions.

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2 views

Week 3

The document outlines the definitions and regulations surrounding shareholders and company meetings as per the Companies Act, 2008. It details the requirements for convening meetings, including notice, quorum, and voting procedures, as well as the types of resolutions that can be passed. Additionally, it provides examples illustrating the application of these rules in specific scenarios involving shareholder decisions.

Uploaded by

Malikmasonto6
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Week 3: Shareholders and Company Meetings

Chapter 5

Contents
Introduction and Shareholders’ Meetings .................................................... 2
Introduction and Shareholders’ Meetings example ....................................... 4
Introduction and Shareholders’ Meetings

Section 1 defines a shareholder as the holder of a share issued by a


company and who is entered as such in the certificated or uncertificated
securities register of the company.

And Part F of Chapter 2 provides that a ‘shareholder’ is a person who is


entitled to exercise any voting rights in relation to a company, irrespective of
the form, title or nature of the securities to which those voting rights are
attached. You will recall from the previous unit that voting rights are usually
attached to ordinary shares, but other types of shares and debentures can
provide for voting rights as well. Thus a holder of a debenture would fall
under this definition as well.

The Companies Act, 2008 defines securities as any shares, debentures or


other instruments, irrespective of their form or title, issued or authorised to
be issued by a profit company. When the Companies Act, 2008 refers to
securities, it refers to both shares and debt instruments such as
debentures.

A shareholder can include the holder of a debt instrument who has been
granted voting rights.

Share: One of the units into which the proprietary interest in a profit
company is divided

Shareholders' Meeting: A meeting of the holders of a company’s issued


securities who are entitled to exercise voting rights in relation to that matter.

Before a meeting of shareholders can be held, it has to be properly called


and convened.

A meeting is properly convened if the prescribed notice for convening the


meeting was given by persons who have the relevant authority to convene
the meeting. Notice to a meeting must be given to all persons who are
entitled to receive notice of the meeting. A meeting must be convened for a
time, date and place that is accessible to the shareholders of the company. A
meeting may commence only if a quorum is present.

The record date is important because it is the date that determines


shareholders rights, which is the right to receive notice of a meeting and
vote at a meeting.

In terms of Section 1 of the Companies Act, 2008, the record date is the
date on which a company determines the identity of its shareholders and
their shareholdings for the purposes of the Act.

The Board of Directors (BOD) may set a record date, which must not be
earlier than the date on which the record date is determined or more than
10 business days before the date on which the event or action is scheduled
to occur and must be published to the shareholders in the prescribed
manner. Where BOD does not give the record date, it is the latest date by
which the company is required to give shareholders notice of that meeting or
the date of the action or event.

BOD or any other person specified in MOI or rules may call a shareholders’
meeting at any time. There are instances when a shareholders’ meeting
must be called: when the MOI or Companies Act, 2008 states that the BOD
is required to convene a meeting and refer a matter to a decision by
shareholders; and when a meeting is demanded by shareholders that have
at least 10% of voting rights on the matter to be decided.

Notice of Meetings: Proper notice must be given of the meeting. It must be


in writing and must include the date, time and place for the meeting. If there
is a record date, the notice must include the record date and the notice
should explain general purpose of meeting or specific purpose. For a public
company or non-profit company, the notice must be given 15 days before
date of meeting, for other companies 10 days before the date of meeting. A
proposed resolution must accompany the notice convening the meeting
indicating the percentage of voting rights required for resolution to be
adopted. The notice must also contain a statement that the shareholder can
appoint a proxy in place of shareholder participants required to provide
proof of identity at the meeting. For an AGM the notice must also contain a
summary of the Annual Financial Statements that will be tabled at the
meeting and the procedure to obtain a complete copy.

Proxy: A person who is appointed to represent a shareholder at a meeting.


The Companies Act, 2008 allows a shareholder to appoint any individual in
writing as his or her proxy.

Quorum: Minimum number of members who have to be present at the


meeting before the meeting can commence. Shareholders’ meeting may not
begin until sufficient persons are present at the meeting to exercise 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. The MOI may specify higher
or lower percentage in place of the Companies Act’s default quorum of 25%.
If company has more than 2 shareholders, at least 3 must be present.

Conduct of Meetings: Voting can be done by a show of hands, poll or


through electronic communication.
In terms of section 60 of the Companies Act, 2008, it is possible to take
decisions without convening a meeting, the company must submit a
proposed resolution to every person who is entitled to vote on the resolution.
Shareholders are then entitled to exercise their vote in writing within 20
days from receiving the proposed resolution and must return the written
vote to the company. AGMs however can only be convened by having a
meeting.

Annual General Meeting: The first AGM must be held not more than 18
months after the company’s date of incorporation. Subsequent meetings
must be held not more than 15 months after the date of the previous annual
general meeting. The matters that must be discussed at the AGM include:
the presentation of the director’s report; the audited financial statements for
the immediately preceding financial year and the audit committee report;
election of directors; appointment of an auditor for the ensuing financial
year and appointment of the audit committee; and any matters raised by
shareholders.

There are two types of resolutions that can be passed at a meeting: ordinary
and special resolutions.

Ordinary Resolutions: A resolution adopted with the support of more than


50% of the voting rights exercised on the resolution.

Special Resolution: A resolution adopted with the support of at least 75%


of the voting rights exercised on the resolution or a ‘different’ percentage
specified in the MOI.

The MOI can change the percentage required for the ordinary resolution
(make it higher) and the special resolution, as long as there is a 10%
difference between ordinary and special at all times.

Have a look at Table 5.1 in your textbook to see the types of matters that
require that a special resolution has to be passed.

Introduction and Shareholders’ Meetings


Examples

The shareholders of Frangipani Fragrances (Pty) Limited wish to elect Mr


Kersch as a director to replace a director who has died. Do they have to call
a general meeting for this purpose? Advise the shareholders of the
procedure they should follow.

Feedback:
The shareholders of Frangipani Fragrances (Pty) Limited may elect a director
without having a formal meeting, by written polling of all shareholders
entitled to vote on their election. As such, they do not have to hold a general
meeting for this purpose. The company must deliver a statement within 10
business days after adopting the resolution, describing the results of the
vote, consent process or election to every shareholder entitled to vote on the
resolution.

The Memorandum of Incorporation of Zunex (Pty) Limited provides that


should shareholders wish to exercise the right to appoint a proxy, they may
only appoint one from the list provided by the company. Sindile is a
shareholder of the company and wants to appoint a proxy who is not a
shareholder. Discuss whether or not she may do so?

Feedback:
Shareholders could be invited by the company on the proxy appointment
form to appoint a proxy from a list provided by the company. However, a
shareholder is not obliged to choose one or more persons from the list.
Sindile may accordingly appoint the proxy of her choice.

Andile (Pty) Limited has taken a decision to amend the Companies


Memorandum of Incorporation. What type of resolution is required and what
are the requirements for such a resolution?

A special resolution taken at a shareholder’s meeting is required. This is


normally at least 75% of the voting rights exercised on the resolution but
can be lower, as long as it is still 10% more than an ordinary resolution.

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