BPP University College Of Professional Studies Limited (BPP)
Legal Practice Course
Business Law and Practice
Summary
Summary Internal disputes
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Business Law and Practice
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BPP University College Of Professional Studies Limited (BPP)
Legal Practice Course
Business Law and Practice
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Internal disputes-
Directors have control of company day to day management
But there are statutory controls to stop any abuse of power
o Directors must disclose info about themselves & their dealings w/ the company
o Shareholder approval is required for certain transactions
o Shareholder have some decisions reserved to them
Removal of directors by shareholders-
S168(1) - a company (the shareholders), may by ordinary res, remove a director before the expiration of
his period of office - notwithstanding anything in any agreement between the company and that
director.
S168(2) - special notice is required
-
Special notice-
Will refer to it as a ‘removal resolution’
Notice of the proposed resolution must be given to the company (the board)
At least 28 clear days before the GM
Shareholders that proposed the removal, will call = ‘unhappy shareholders’
Once the board receives the notice, they can:
Place it on the agenda
Not place it on the agenda
Place the removal resolution on the agenda of the GM
S312(1) - Where ... special notice is required of a resolution, the resolution is not effective unless notice
of the intention to move it has been given to the company at least 28 days before the meeting at which
it is moved.
Shareholders should be given notice at the same time & in the same manner of a GM – s312(2)
14 days clear notice – s307(1), s360(1)-(2)
(Fenning v Fenning Environmental Products Ltd)
s312(3) - Where this is not practical – notice of the removal res can be given:
(a) - by ad in a newspaper
(b) - any other mode allowed by articles
Again, must be 14 clear days notice before GM
Board do not place removal resolution on the GM agenda-
, Directors are not bound to place the removal resolution on the agenda for consideration at a
forthcoming general meeting
(Pedley v Inland Waterways Association Ltd)
In this case, the shareholders may need to force the directors to call a general meeting in accordance
with s.303
-
Shareholders’ power to require a GM to be called-
Where the removal res was not placed on the agenda, the unhappy shareholders have the ability to
require the directors to call a GM
If directors refuse, the unhappy shareholders may be able to call a GM themselves
‘a s303 request’ -
S303 (2) (a)- shareholders holding no less than 5% of the paid up voting share capital can serve a
request on the company – to require them to call a GM
The request must state the general nature of the business to be dealt with at the GM & may have the
text of the res they wish to propose at the GM
S303-
(4)A request—
o (a)must state the general nature of the business to be dealt with at the meeting, and
o (b)may include the text of a resolution that may properly be moved and is intended to
be moved at the meeting.
(5)A resolution may properly be moved at a meeting unless—
o (a)it would, if passed, be ineffective (whether by reason of inconsistency with any
enactment or the company's constitution or otherwise),
o (b)it is defamatory of any person, or
o (c)it is frivolous or vexatious.
Directors obligations under a s303 request-
S304(1) - when directors receive a s303 request, they must call a GM:
(a) Within 21 days from the date of the s303 request, and
To be held no more than 28 days after the date of the notice for calling a GM
Failure to call the GM-
If the directors fail to call a GM under s.304(1) - all of the shareholders who submitted the s.303 request
/any of them representing more than one half of the voting rights of those who submitted that s.303
request, can call a GM themselves - s.305(1)
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