Students Manuals Pdca LPM c06

Resolutions Made At General Meeting
CHAPTER SIX RESOLUTIONS MADE AT GENERAL MEETING
6.0
In this Chapter you will notice that the decisions of a general meeting is expressed and
recorded as the passing of resolutions. There are different types of resolutions being passed at a general meeting due to the nature and importance of the business being transacted in the meeting. The Companies Act 1965 provides for two types of resolutions; namely: ordinary and special resolutions. We should understand the mechanics involved in the passing of such resolutions and their effects including the principles that are applied in amending an ordinary resolutions, the rescission of resolutions, and expunging resolutions. So called Circular resolutions are passed without actually having a physical sit-down meeting as long as they follow the requirements of the bodys constitution of having all signatures of the governing members or signed by a majority of the governing body. This method of passing resolution is legally valid, and company law has been passed to legally accept a Members Circular Resolution provided all members sign on documents containing the resolution. The signing by the governing body or by members seems to be the important factor. We shall also examine how minutes are kept and its effects of giving confirmation of meetings being held as well as the validation of proceedings at meeting as to how members could ratify prior actions purportedly made on their behalf so as to give effect to the original action as from the date on which it was made.
MAICSA PDCA Law and Practice of Meetings Version 2 Updated June 2006
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LEARNING OBJECTIVES This chapter aims to help you to : Gain an understanding of the different types of resolutions; How these resolutions are passed and amended; What are the effects of ordinary and special resolutions; What are circular resolutions; How minutes of meetings are kept and its effects; How the proceedings of meetings could be validated.
6.1
MOTIONS, PROPOSED RESOLUTION & RESOLUTION
The term motion and resolution are frequently used indiscriminately as though they mean the same thing. Traditionally, each has a distinct meaning. A motion is a proposition submitted to a meeting with a view that it will be adopted by a majority vote. It is a proposal to do or accomplish or arrange for something to be done. Whereas, a resolution is a motion that has been carried by a requisite majority voting in its favour. It is possible for a meeting to decide to pass a resolution which by the use of suitable words has the effect of affirming that the motion was not carried, and thus recording this in a positive way in the minutes. A motion is usually described as carried at a meeting on a poll or by ballot, and thereby a resolution is passed by: and is recorded as such in the minutes. Thus it is usual to write in the minutes Resolved that.. . If a motion is not carried it does not become a resolution and therefore disappears into oblivion in a sense. In modern day recording, the word resolution is used interchangeably with the word proposal resolution that is to be considered. We will be using the modern approach in the latter paragraphs.
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Resolutions Made At General Meeting 6.2 CIRCULAR RESOLUTIONS
For companies incorporated under the Companies Act 1965, the articles of association usually regulate the manner in which business at the meetings is transacted. Both the directors and members have authority to pass resolutions. Resolutions passed and recorded in minutes book are legally accepted as evidence in the court of law, but the minutes must be signed by the Chairman of the meeting according to section 156 of the CA 1965. The directors collectively exercise their powers in management by passing board resolutions or circular resolutions as prescribed by the companys articles of association. (Article 90, Table A). In an actual meeting, the members as a whole will express their decision via voting on the motions and once a decision has been reached, a resolution will be passed at the meeting that is properly convened and held. However, section 152A of the CA 1965 also permits a members circular resolution to be made, if all members entitled to attend and vote at meetings, sign on documents containing the resolution. This legal provision insists that all members signatures must be signed on the circular, and further deemed that such members circular resolution has been held at the companys registered office address if so signed. This way of making a decision is most convenient for companies that have small numbers of members and therefore commonly used in small private companies, but not companies that have many members whose signatures may be difficult to obtain. The date of the resolution shall be the date on which it was signed by the last member.
6.3
BOARD OF DIRECTORS RESOLUTIONS
The articles of association or Table A will usually provide how board of directors could make decisions by passing resolutions. Table A, Article 80 provides that questions arising at any directors meeting shall be decided by a majority of votes and a determination by a majority of the directors, shall for all purposes be deemed to be the decision of the board. In this case, the majority is counted on the basis of the majority that forms the board who are present at the board meeting. And, in case of an equality of votes, the chairman of the meeting shall have a second or casting vote. Table A, Article 82 also provides that any director with the approval of the board may appoint an alternate director to represent him in his place at board meetings, during such period as the principal who appointed him, failed or is unable to attending board meetings. As
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Resolutions Made At General Meeting such the directors do not vote by proxy like the members do; they appoint alternates or substitute directors to attend and vote on their behalf at meetings. Apart from these physically sitting down meetings of the board, the above mentioned board circular resolution may be used in the event that the board does not meet physically and the type of resolution to be passed could be decided simply by signing on papers called directors circular resolution.
6.4
MEMBERS RESOLUTIONS
By section 152A of the Companies Act 1965, all members of a company may sign members circular resolution in the manner authorised aforesaid by law. And because of this authority given by law, most companys articles do contain provisions that if a resolution is signed by all members entitled to attend at vote, the resolution is deemed passed at the registered office address of the company, regardless of where the resolution was signed. Under normal circumstances, in particular annual general meetings and extraordinary general meeting of large companies having numerous members are carried out by an actual physical sitting down meeting where proper notices have been issued to all members. The articles of association, the Companies Act 1965 and the Bursa Malaysia (formerly KLSE) Listing Requirements will state that for a particular resolution to be effective, and depending on the type of resolution proposed, it has to be voted upon by the members present at the meeting. The number of votes to be obtained will depend on whether the resolution proposed is an ordinary or special resolution.
6.5
SPECIAL RESOLUTIONS
Section 152 (1) CA 1965 defines a special resolution to be a resolution that has been passed by a majority or not less than three-fourths of all members entitled to vote in person or by proxy at a general meeting of which not less than twenty-one days notice has been given and wherein the notice has specify the intention to propose the resolution as a special resolution.
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Resolutions Made At General Meeting The notice of a special resolution must be given in accordance with section 144 (5) and section 152 CA 1965. circumstances:(a) (b) if it is so agreed by not less than 95% of the total voting rights for passing a special resolution in an EGM [section 145(3)(a) CA 1965]; if it is agreed by 100% of members entitled to attend and voting for an annual general meeting [section 145(3)(b) CA 1965]. However, a shorter notice is deemed duly called under the following
6.6
SPECIAL NOTICE
A special notice should not be confused with special resolution because they are entirely of different nature. A special notice is used for removing a director or an auditor, and is sent to the company by a proposing shareholder. The is defined by section 153 of the Companies Act 1965 as the intention to move a resolution given to the company not less than twenty-eight (28) days before the meeting at which the resolution is moved.
6.7
REGISTRATION OF SPECIAL RESOLUTIONS
As per section 154 (1) CA 1965, special resolutions resolved at meetings must be registered with the Companies Commission of Malaysia (CCM) by lodging Form 11. For wholly-owned subsidiary, Form 52 must be lodged with CCM if such resolution is required to be lodged for filing and passed by virtue of signing by the Corporate Representative under section 147 (6) CA 1965. These forms must be lodged with CCM within one month after the passing of the special resolutions except for the following matters (see table below) which the Companies Act 1965 stipulates a specific timeframe for the lodgment of forms.
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Resolutions Made At General Meeting 6.8 PASSING OF SPECIAL RESOLUTIONS TO GIVE EFFECT TO THE MATTERS LISTED BELOW:
The Companies Act 1965 requires the passing of special resolutions to give effect to the following matters: Sections in CA 1965 s. 15 (4) Passing of Special Resolution to give Timeframe for effect to the matters below: lodgment of Form Alteration of any restriction on the right to Within 1 month after the transfer the companys shares or any passing of the resolution limitation on the number of its members in Form 11 the memorandum or articles of a private company Alteration or deletion of provisions in the Within 14 days after the memorandum which could lawfully have passing of the resolution been contained in the articles of association. as per s.21 (2) Form 11
s.21 (1A)
s. 23 (1) & (3)
Change of name of the company
Within 14 days after the passing of the resolution as per s. 21 (2) & s. 23 (1) Form 11 Within 1 month of the passing of the resolution Form11 Within 14 days of the passing of the resolution s. 21 (2) & s. 25 Form 11
s. 24 (1)
s.25 (1)
On application and to the satisfaction of the Minister of Trade, a licence may be issued for the word Berhad to be omitted from the name of the public company limited by guarantee Re-registration (conversion) of an unlimited company as a limited company
s.26(1)
Re-registration (conversion) of a public Within 14 days of the company as a private company passing of the resolution s. 21 (2) & s. 26 (2) Form 11
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s.26(2)
Re-registration (conversion) of a private Within 14 day of the company as a public company passing of the resolution s. 21 (2) & s. 26 (1)Form 11 Change of objects of the company Within 14 days after allowing a lapse of 21 days of the passing of the resolution s. 28 (9) Form 11 Within 1 month of the passing of the resolution- Form 11 Within 1 month of the passing of the resolution- Form 11 Within 1 month of the passing of the resolution-Form 11
s. 28 (1)
s. 31 (1)
Alteration of the articles of association
s. 56 (2)
Creation of reserve liability
s. 64 (1)
Reduction of share capital
s. 69
Approval for payment of interest out of Within 1 month of the capital passing of the resolution- Form 11 Directors to cause a copy of statutory report Within 7 days before and auditors report to be lodged date of statutory meeting. Appointment of inspectors by resolution of Within 1 month of the the company passing of the resolution Form 11 Winding-up by the court company has so resolved Members voluntary winding-up where the Within 1 month of the passing of the resolution Form 11 Within 7 days of the passing of the resolution s. 254 (2)-Form 11
s. 142 (5)
s. 199 (1)
s. 218 (1) (a)
s. 254 (2)
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s. 258 (3) s. 269 (1) (a) s.270 (1) s. 273 (1)
Removal of liquidator under a members voluntary winding-up Exercise of certain powers by liquidator in a members voluntary winding-up
Within 1 month of the passing of the resolution Within 1 month of the passing of the resolution
Sanctioning liquidator to transfer property Within 1 month of the of company passing of the resolution Sanctioning arrangement entered into Within 1 month of the between a company and its creditors in the passing of the resolution course of being wound-up
The verbiage of ordinary resolutions is not found in the Companies Act 1965. However, it could be found in Table A, Article 36 and Article 40. All resolutions passed in a general meeting are ordinary resolutions unless the articles of association or the Companies Act 1965 requires a special resolution to be passed for that particular matter.
6.9
SIMPLE MAJORITY FOR PASSING ORDINARY RESOLUTION Ordinary resolutions require a simple majority of those who are present and voting by a show of hands or by a poll. It is the majority of those members who have voted and those who have abstained from voting are not taken into account. However, there are exceptions to this requirement. For example: section 129 (6) [appointment or re-election to office of a public company director attaining an age of or over 70, requires a majority of at least votes] section 172 (7) (a) CA 1965 [removal of the auditor from office requires a majority of votes] Both provisions above require a majority of not less than three-fourths of such members entitled to vote and voting in person or by proxy at a general meeting.
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6.10
REGISTRATION OF ORDINARY RESOLUTIONS Most ordinary resolutions do not require lodgment of Form 11 although there are some exceptions: section 132D which provides that in addition to obtaining an authority by members to allow directors to issue shares, the ordinary resolution must be lodged with the Registrar within 30 days of passing the resolution. section 62 (1) CA 1965 the power of the company to increase its authorised share capital, unless specified otherwise by the articles of the company.
6.11
EFFECTS OF RESOLUTIONS Once a motion has been considered by the members, a resolution will be passed to give effect to the matter. Resolutions are effective immediately upon being agreed up or approved by the members of the meeting and are therefore binding for all purpose and intent on the company and the third party. However, there are certain resolutions which although passed by the members of a company could not take effect because the provision of company law prohibits the passing of such a resolution. For example, section 132G(2) CA 1965 states that an arrangement or transaction to acquire shares or assets of another company in contravention of subsection (1) shall be void and any consideration given for the shares or assets shall be recoverable accordingly. Resolutions may be permanently effective and not rescindable. An example of such a resolution would be a special resolution passed by a limited company not to call up any uncalled share capital under section 56 (2) CA 1965, the special resolution is binding on the company and it cannot rescind its decision except in the event and for the purposes of the company being wound up.
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Resolutions Made At General Meeting However, some resolutions may be rescinded, for example, when a company passes a special resolution to alter its article of association at a members meeting and at a subsequent meeting, it passes another special resolution to rescind the first special resolution.
6.12
RESCINDING A RESOLUTION PASSED Once the motion has been passed it is minuted as having been resolved. But if the company had not carried out the activity and later decides to nullify the effect of that resolution, and depending on which level of authority, such resolution may be rescinded by passing another resolution to change the previous one or superceding it. For a resolution that was passed at a previous meeting to be rescinded at a subsequent meeting it will depend on some of the following factors: The purpose and nature of the original resolution passed previously and whether it is permitted by law to carry out a rescission. Which resolving body should the rescission be carried out i.e. board of directors or members at general meeting. The regulations governing the proceedings whether the company has adopted Table As provisions governing proceedings at meeting or it has implemented its own proceedings of meetings. Once the notice of motion to rescind a resolution is issued, any action giving effect to the previous resolution must be immediately suspended. To rescind the previous resolution, the subject matter or motion has to be moved, seconded, debated and voted according to the rules and procedure of meetings. If there is a prescribed procedure in the articles of association it has to be followed strictly, otherwise, the rescission would be made ineffective. If there is no prescribed
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Resolutions Made At General Meeting procedure for rescission, the company would still be able to rescind its previous resolution based on the principles that if a body has been given the power to decide on a matter then it would have the power to rescind its decision. However, the subsequent resolution passed would only take effect provided that the substance of the previous resolution has been wholly revoked.
6.13
AMENDMENTS TO WORDINGS OF RESOLUTION TABLED If a motion or proposed resolution had been issued and circulated to members and the meeting had proceeded to deliberate on the motion, an amendment that is proposed to change the wordings of the motion or substituting words or deleting phrases or any of these combinations, that would materially affect the original wordings, can be moved and seconded after the original motion has been proposed but before voting has taken place. It is usual for Articles that when the text of an ordinary resolution is set out in full in the notice of meeting, the articles of association may provide that no amendment shall be considered unless forty eight hours notice in writing of the proposed amendment has been given to the company. Amendments to a motion or proposed resolution are possible provided that: It is within the scope of the notice of the meeting; It should not be onerous or : - redundant (re-open business already settled); - inconsistent (incompatible with a previous decision of the meeting); - obstructive, vexatious, dilatory or irrelevant; It must not negate the substantive resolution; It is a minor one.
A vote should be taken to ascertain whether or not the meeting would accept the amendment. If accepted, it would have to be voted on separately.
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Resolutions Made At General Meeting It is of the better view that the chairman should accept an amendment proposed by the meeting and not to reject it. In the event that the chairman has improperly rejected an amendment, the resolution carried could be challenged and made invalid, if brought to the court. To prevent this from happening it would be prudent that the articles of association should contain a provision of validating the resolution even though there is an error or misjudgment on the part of the chairman. Voting on an amendment should be in the order in which they affect the original motion and they should be disposed off one by one. If there is an equality of votes then the amendment should be rejected unless the chairman has a casting vote and he exercises that vote. The chairman may rely on Table A, Articles 51 and 52 or the articles of association as the case may be, to defer the poll until the end of the meeting so as not to disrupt the meeting. At the end of the meeting, three polls would have to be taken: A poll whether or not to accept the amendment A poll on the resolution as proposed to be amended A poll on the original resolution
If the amendment is accepted via the first poll then the second poll will determine the results of the resolution, while the third poll becomes irrelevant. If the amendment is rejected by the first poll, then the second and third poll becomes redundant.
6.14
DEMANDING FOR A POLL A resolution lost on a show of hands may be reconsidered at that meeting or at the next meeting by putting a request to the chairman for a vote by show of hands. This will again depend on the companys articles, because Table A, Article 51 states that a demand for a poll can be carried if the result of the show of hand has not been declared, the chairman or at least three members present in person or by proxy, or any member or members representing not less that 10% of total voting rights.
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Resolutions Made At General Meeting 6.15 PASSING A RESOLUTION IN WRITING For expediency and business efficacy purposes, the articles of association and the law has devised provisions like Table A, Article 90 and Section 152A of the Companies Act 1965 where the holding of a physical meeting in order to manage the affairs of the company and determining the wishes of the members may not be necessary. A circular resolution or paper resolution may be circulated amongst directors or members as the case may be so as to obtain the determination of the matter concerned. For the purpose of the directors circular resolution, Table A, Article 90 requires all signatures of the directors to validate the resolution and in some other articles, a majority of directors signature may validated the resolution. However, for a members circular resolution to be valid all signatures of the members must be obtained to validate the resolution passed.
6.16 CASE LAW ON DIRECTORS CIRCULAR RESOLUTION These paper meetings are common and these informal decision making may be justified on the principle of unanimous consent. However, informal decisions of the board of directors must be unanimous: Runciman v Walter Runciman plc [1992] BCLC 1084, 1092 High Court England. If there are dissenting views from the directors, it will be necessary to call for a meeting unless the articles of association allow for informal decisions to be taken on a majority basis. Therefore, if a circular resolution is not signed by all the directors, or as required by the articles, it will be invalid. A board of directors meeting will then have to be called to consider the proposed resolution where the directors who are present could discuss the matter face-to-face. Table A, Article 90 provides that a resolution in writing, signed by all the directors for the time being entitled to receive notice of a meeting of the directors, shall be as valid and
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Resolutions Made At General Meeting effectual as if it had been passed at a meeting of the directors duly convened and held.Such a board circular resolution must be signed by all directors in order for the resolution to be valid, unless the articles of association provide otherwise (Kelapa Sawit (Teluk Anson) Sdn Bhd v Yeoh Kim Leng [1991] 1 MLJ 301. For example, the articles of association may provide that only a majority is required to pass the resolution, hence, the resolution would become effective and valid upon getting a majority of the directors signatures on the circular resolution. However, it is important that the circular resolution be circulated to all directors and not to certain majority directors in order that it can be signed accordingly. (Chan Choon Ming v Low Poh Choon [1995] 1 CLJ 812). It is usual to assume that the date when the circular resolution becomes effective would be the date stated on the circular resolution that is returned and kept in the minute book.
6.17
WHERE DIRECTORS AND SHAREHOLDERS ARE SIMILAR In companies where the directors and shareholders are identical, decisions are taken without calling for a formal meeting and there is no distinction made between a decision of the board and that of the shareholders. However, Mohd Ghazali JC in Tan Tien Kok v Medical Specialist Centre (JB) Sdn Bhd [1994] 3 MLJ 469 High Court Malaysia held that a resolution passed by the board of directors could not be considered to be a shareholders resolution, even if the directors and shareholders were the same persons. In Jimat bin Awang v Lai Wee Ngen [1995] 3 SLR 769, 779 Court of Appeal Singapore, Lai J doubted the correctness of the decision of Mohd Ghazali JC on the basis that the judge had not considered the unanimous consent principle.
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Resolutions Made At General Meeting 6.18 CIRCUMSTANCES WHERE WOULD NOT SUFFICE DIRECTORS CIRCULAR RESOLUTION
It must be noted that directors circular resolution may be used for matters pertaining to management of the company. However, where the Companies Act specifically requires a meeting to be held as in Section 257 (1) CA 1965, and that at a meeting of directors have formed the opinion that the company will be able to pay its debts in full . the directors must adhere to the requirement of the Act of holding the said meeting to make the declaration of solvency. This equally applies to directors determining the solvency of a public company that intends to buy back its own hares [Section 67A(2) and Companies Regulations 1966, Reg. 18A & 18B]
6.19
MEMBERS CIRCULAR RESOLUTION It is a common law ruling that there is no need to hold an actual physical general meeting to determine the wishes of the members, provided that all the members, who are entitled to attend and vote on the matters which a general meeting should carry into effect, assent unanimously to such a course of action. This principle was held in the case of Re Express Engineering Works Ltd [1920] 1 Ch 466 where the five directors who were also the sole members of the company were attending a board of directors meeting to vote in respect of a contract in which they were interested in, but was prohibited by the articles of association. The court held that since all the five directors were present at the meeting which they treated as a shareholders meeting instead of a directors meeting, the resolution passed could not be set aside because the transaction was within the powers of the company. The assent of the members need not be given at the same time (Parker & Cooper v Reading [1926] Ch 975). The members may agree to a course of action at different times and not simultaneously. Thus, it would be possible for decisions to be taken by circulating a paper resolution to the members; if they all agree, their unanimous decision would be as good as a resolution being passed at a meeting.
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However, there are circumstances whereby the law specifies that an actual meeting has to be called to resolve certain matters. These are meetings that are preferably not advisable to be carried out by way of mere signing on documents : where a public company wishes to buy back its shares (Section 67A CA 1965). The board of directors must hold a meeting as required by Regulation 18B of the Companies Regulations 1966 as well as related provisions of the Bursa Malaysia Securities Berhad Listing Requirements. Where a general meeting of every company to be called the annual general meeting shall in addition to any other meeting be held once in every calendar year and not more than fifteen months after the holding of the last preceding annual general meeting. (Section 143 (1) CA 1965) In practice, small private companies still pass resolutions in writing by all members to satisfy this requirement. Where the directors of every company shall at some date not later than eighteen months after the incorporation of the company and subsequently once at least in every calendar year at intervals of not more than fifteen months lay before the company at its annual general meeting, a profit and loss account for the period since the preceding account made up to a date not more than six months before the date of the meeting (Section 169 (1) CA 1965) In practice, newly incorporated small private companies still pass resolutions in writing by all members to satisfy this requirement. Where a director of a public listed company may be removed by ordinary resolution. [Section 128 (2) and (3)] There must be opportunity for the affected director the right to be heard and his written representation to be read out at the meeting where the proposed resolution to remove him is to be tabled for consideration.
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Resolutions Made At General Meeting Where the auditors are removed before their term of appointment. Section 172 (4) provides that an auditor may be removed from office by a resolution of the company at a general meeting of which special notice has been given. Section 172 (5) entitles the auditor concerned to make a written representation to be read to the members prior to the meeting. Where the board of directors must inquire into the solvency of a companys financial position so that they can sign the declaration of solvency, before an extraordinary general meeting can be called to table the motion to wind-up the company by members voluntary winding-up.
6.20
LEGALISING PAPER MEETING Section 152A (1) CA 1965 provides that notwithstanding anything to the contrary in this Act or the articles of the company, a resolution in writing signed by or on behalf of all persons for the time being entitled to receive notice of, and to attend to vote at general meetings shall, be treated as a resolution duly passed at a general meeting and, where relevant, as a special resolution so passed. This section also allows a special resolution to be passed without the necessity of holding a meeting if a written resolution is signed by all persons having the right to vote. Section 152A (2) CA 1965 provides that any such resolution shall be deemed to have been passed at a meeting held at the registered office on the date of which it was signed by the last member. This section determines the venue of the meeting to be at the registered office in spite of the fact that no meeting has been called except that the paper resolution is being circularized to members. Section 152A (3) CA 1965 provides that this section shall not be construed as requiring that the persons signing a resolution shall sign the same document containing the resolution; but where two or more documents are used for the purpose of obtaining signatures in respect of any resolution, each of such document shall be certified in advance by the secretary of the company as containing the true and correct version of the proposed resolution.
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Resolutions Made At General Meeting 6.21 MIUNTES OF MEETING The minutes of a meeting are written records of the proceedings of business transacted at a particular meeting and recorded as the minutes by the company secretary. It is a summary of the proceedings of a meeting and each item or heading is preferably serially numbered with a column for action to be taken. The minutes will usually include the following information: The name of the entity holding the meeting ABC Sdn Bhd/XYZ Bhd. etc. The type of meeting directors meeting or general meetings or class meetings; The place, day, date and time of holding the meeting; The names of the persons present, those attending as ex-officio or by invitation or in attendance and those names of persons absent with apologies; The identity or name of the chairman; The reading of the notice of meeting or waiver as the case may be; The quorum as confirmed by the company secretary; A record of decisions that have been taken and resolutions passed; The records of items of business not requiring formal resolution (minutes of narration); Closure of meeting by indicating the time; Names of proposers and seconders where necessary; Signature of the chairman at the end of the minutes, usually written as Confirming or signed as Correct Record. There is no legal requirement for such wordings, but it is a mere practice. Minutes should be concise and clear and are not verbatim transcripts of what was said at the meeting. Therefore, only the conclusion and the exact wordings of each resolution passed are to be recorded in the minutes. The reasons for the decision should not be recorded unless directed to do so by the meeting. Where issues that have been discussed and there are dissentions by certain members it is best practice to record such dissentious statement made so as to reflect the way the 97
Resolutions Made At General Meeting decision came about. This is particularly important as evidence of the person making the dissenting statement. As per section 156(1) CA 1965, every company shall cause: (a) minutes of all proceedings of general meetings and of meetings of its directors to be entered in books kept for that purpose within fourteen days of the date upon which the relevant meeting was held; and (b) those minutes to maybe signed by the chairman of the meeting at which the proceedings were held or by the chairman of the next succeeding meeting.
6.22
ATTENDANCE RECORD It is also a practice that the attendees of each meeting must sign an attendance list which would assist in ascertaining whether the required quorum was present and the identity of those present for future evidence and kept in the minutes book as part of the proceedings of the meeting.
6.23
MINUTE BOOK & ITS STATUTORY REQUIREMENT Two-minute books are to be kept, namely one to record the minutes of the board of directors and the other to record the minutes of the members. It should be noted that the minute book must be used specifically for recording minutes and no other purposes. It was held in North SydneyApollo Printing Pty Ltd [1976] 1 ACLR 392, 399 Supreme Court of New South Wales that the minute books are prima facie evidence of the proceedings of the meeting.
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Resolutions Made At General Meeting Generally minutes are kept in a bounded book. If loose-leaf book is used they should be numbered and securely filed to prevent any tampering or removal of the pages. The minutes have to be legible and it is usually in a typewritten form. Section 358 (1) CA 1965 provides that any register, index, minute book or book of account may be kept either by making entries in a bound book or by recording the matters in question in any other permanent form. Section 358 (2) CA 1965 provides that where any register, index, minute book or book of account are to be kept and is not kept by making entries in a bound book, there must be :(a) reasonable precautions to be taken for guarding against falsification and for facilitating the discovery of any falsification; and (b) proper facilities to be provided to enable the register, index, minute book or book of account to be inspected, and where default is made in complying with this, the company and every officer of the company who is in default shall be guilty of an offence and have to pay a penalty of two thousand ringgit and default penalty. Pursuant to section 156 (2) CA 1965 any minute so entered that purports to be signed as provided in section 156 (1) (b) CA 1965, shall be evidence of the proceedings to which it relates. Section 156 (3) CA 1965 provides that where minutes have been so entered and signed, then, until the contrary is proved:(a) the meeting shall be deemed to have been duly held and convened, (b) all proceedings relating to that meeting shall be deemed to have been complied with; and
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Resolutions Made At General Meeting (c) all appointments of officers or liquidators made during the meeting shall be deemed to be valid.
6.24
DEFAULT & INACCURACY OF MINUTES Should there be a default of not recording the minutes within 14 days of the date upon which the relevant meeting was held, the company and every officer of the company who is in default shall be guilty of an offence and have to pay a penalty of two thousand ringgit and default penalty (section 156 (3) CA 1965) Minutes of general meeting sometimes do not record everything that occurred and evidence may be led to show that certain matters were not recorded in the minutes. In Re Indian Zoedone Co [1884] 26 Ch 170 Court of Appeal England, Lord Selborne LC held that the onus of proving that minutes were inaccurate lay on the person who challenged the minutes. A member who had attended a meeting may give evidence that the minutes did not adequately record what had occurred at the meeting. He may refer to his written notes which he had taken down during the meeting, so as to justify his allegations. However, if the minutes which have been adopted, are found to be inaccurate in its meanings and recording of the proceedings, a motion is put to amend the minutes. If the amendment is carried, the alteration could be made. The amending resolution has to be minuted. As per the case of Re Cawley & Co [1889] 42 Ch D 209 it was held that minutes should not be altered unless an amending resolution had been passed and minuted.
6.25
CONFIRMING MINUTES In practice, with the consent of the meeting, the minutes are taken as read at the succeeding meeting. A motion is put to recommend their confirmation as a true record of
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Resolutions Made At General Meeting the previous meeting. This board procedure is to ensure that the other directors have no objections or wish to raise any issue on the accuracy of the minutes. Once the chairman has signed the minutes as a true and accurate record of the meeting, no alteration can be made, unless another resolution to alter the minutes is made at a later date.
6.26
MEMBER MAKING NOTES OF MEETING Unless there is a law prohibiting it, a member may make notes of the proceedings by mechanical or electronic means like tape recording. In the case of PP v Gurbachan Singh [1964] MLJ 141 High Court Malaysia held that a tape recording was admissible as corroborative evidence in criminal proceedings. Likewise, the same would hold true in civil proceedings.
6.27
INSPECTION OF MINUTE BOOKS The books containing the minutes of proceedings of any general meeting shall be kept by the company at the registered address of the office of the company, and shall be open to the inspection of any member without charge as per section 157 (1) CA 1965. It must be noted that only the minute book of proceedings of any general meeting shall be open to inspection by members. However, members could not inspect the minute book containing the minutes of proceedings of board of directors meeting. Pursuant to section 157 (2) CA 1965 any member shall be entitled to be furnished within fourteen days after he has made a request in writing to the company for a copy of any minutes specified in section 157 (1) CA 1965, at a charge not exceeding one ringgit for every hundred words.
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Resolutions Made At General Meeting If any copy required by the member is not furnished, the company and every officer of the company who is in default shall be guilty of an offence and have to pay a penalty of five hundred ringgit and default penalty (Section 358 (1) CA 1965).
6.28
CONDITIONS FOR INSPECTION Section 359 (1) CA 1965 provides that any register, minute book or document of a corporation which is by this Act required to be available for inspection shall subject to be available for inspection at the place it is kept during the hours in which the registered office of the corporation is accessible to the public. This would mean that the minute book could be inspected during officer hours at the registered office of the company. Section 359 (2) CA 1956 provides that any person permitted by this Act to inspect any register, minute book or document of a corporation may make copies of or take extracts from it and any officer of the corporation who fails to allow any person so permitted shall be guilty of an offence against this Act.
6.29
COURT MAY COMPEL COMPLIANCE & INVESTIGATION Section 362 (1) CA 1965 provides that if any person in contravention of this Act, refuses or fails to permit the inspection of any register, minute book or document or to supply a copy of any register, minute book or document, the Court may by order compel an immediate inspection of the register, minute book or document or order the copy to be supplied. Section 200(4) gives power to an inspector appointed by section 197 (At direction by Minister) of section 199 (By special resolution of a general meeting) to require any officer or agent of any corporation whose affairs is under investigation to surrender and produce all books and documents for the inspectors retention and have access at all reasonable times to all books and documents.
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6.30
RATIFICATION BY GENERAL MEETING Ratification is validation by the company of a prior action or decision which had been purportedly made on its behalf by the board of directors without their authority, so as to render the action or decision valid as from the date the original action or decision was made. The effect of ratification is retrospective but the procedure to ratify a past action must be by members at a general meeting that is held within a reasonable time and within the permit of law. If the directors purport to exercise a power that should properly have been exercised by the general meeting, their action can be ratified by an ordinary resolution of the general meeting. The shareholder-directors may use their votes as shareholders to effect the ratification and the action becomes valid. The minority shareholders may argue on the validity of the ratification, applying the exceptions in Foss v Harbottle [1843] 2 Hare 461. For listed companies, para 17.10 of the Listing Requirements has added a new provision that does not allow ratification of any transaction which requires shareholders approval and the approval has to be obtained prior to the completion of the transaction. This would apply to non-related party transactions which are open market transactions. In law, ratification is rather complex, but it is clear that an act cannot be ratified if: it is beyond the powers of the company to carry out the act; it is illegal; it amounts to fraud on the minority; or it involves a breach of directors duty to the companys creditors
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6.31
COURT MAY ORDER A DEFECT UNDER SUBSTANTIAL INJUSTICE The company or the board of directors may fail to observe the necessary procedural requirements as required by the Companies Act 1965. Section 355 (1) CA 1965 provides that no proceedings shall be invalidated by any defect, irregularity or deficiency of notice or time unless the Court is of the opinion that substantial injustice has been or may be caused thereby which cannot be remedied by any order of the Court. This provision has the effect of allowing the decisions of the board or the general meeting to stand notwithstanding the procedural irregularities, deficiency of notice or time unless the Court thinks that these irregularities have caused or may cause substantial injustice that cannot be remedied. As per section 355 (2) CA 1965 which provides that the Court may, if it thinks fit, make an order declaring that the proceeding is valid notwithstanding any such defect, irregularity or deficiency. This provision can be applied where the defect or irregularity is not a deliberate act. The word proceeding has been defined in the case of Lim Hean Pin v Thean Seng Co Sdn Bhd & Ors [1992] 2 MLJ 10. The Court held that a general meeting is included under the word proceeding and it should also be extended to the proceedings of company meetings provided that they are required to be held under the Companies Act 1965. As per section 355 (3) CA 1965 procedural irregularities would include absence of quorum, defects in notice, non-receipt of notice, short notice of general and creditors meetings and accidental failure to give notice to a member. These irregularities would not invalidate the meeting unless the member applies to the Court to have the meeting declared null and void. Section 355 (3) CA 1965 empowers the Court to validate procedural irregularity where there has been a default in the observance of the memorandum and articles of association. However, if it is within the powers of the Company to rectify the irregularity by holding a meeting of the members, then the court would refuse to validate the irregularity.
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Resolutions Made At General Meeting As per section 355 (4) CA 1965, the Court (whether the company is in process of being wound up or not) may enlarge or abridge time for doing an act, upon such terms as justice of the case may require it. Pursuant to section 355 (2) CA 1965, the Court could make an order declaring that the proceeding of a company to be valid not withstanding any such defect, irregularity or deficiency. Pursuant to section 355 (3) (a) CA 1965, the Court could make an order as it thinks fit to rectify; or to negative; or to modify the consequences of any such omission, defect, error or irregularity; or validate any act which has been rendered invalid through omission, defect, error or irregularity. Prior to making this validation order, the Court has to consider whether such an order would do injustice to the company or to any member or creditor. Blackburn J in the case of Re Australia Continental Resources Ltd [1975] 1 ACLR 405, stated that the word injustice would involve the consideration of the relative gains or losses of the parties concerned. It was insufficient to show that there was prejudice to the company, its members or creditors. The Court would have to balance the prejudices in relation to the parties concerned before making such an order.
6.32
ELECTRONIC MEETINGS Due to the advancement in technology, it is possible to hold meetings in more than one place and to hold a meeting by way of telephone conferencing or by using video conferencing facilities. Although there is no statutory provision in the Companies Act 1965 to provide for this at the moment, it may be possible for the members to include this method of convening meeting in the articles of association. What is required is that members are in communication simultaneously at the time of the meeting. The physical presence of the members in the same venue is not a strict requirement for holding the meeting.
105
As per the case of Re Farnell Electronic Components Pty Ltd [1997] 25 ACSR 345 (NSW SC) held that what was required was a meeting of the minds; not a physical meeting. It is worthwhile noting that the Australian Corporations Act 2001 (Cth) section 249S provides that a company may hold a meeting of its members at two or more venues using any technology that gives the members as a whole a reasonable opportunity to participate. This means the use of video conferencing and electronic communication and requires that all those present be able to hear and be heard. If a member does not have a reasonable opportunity to participate in a meeting of members held in two or more venues, the meeting will only be invalid on that ground if the court declares the meeting or part of it invalid. Such a declaration will only be made if a substantial injustice has been caused and it cannot be otherwise remedied: s. 1322(3A). According to the Explanatory Memorandum, the company does not have to permit each member the opportunity but must provide a means for the members to communicate with the person chairing the meeting and be heard by those participating at other venues. The Explanatory Memorandum lists a number of factors that should be taken into account such as: The ability of the chair to conduct and control proceedings; The number of persons attending; The nature of the business of the meetings; The voting processes available; and Whether persons at the meeting can communicate with the chair and follow proceedings In view of the above, if all the members agree to the use of technology to hold meetings without the physical presence at one venue, it may be possible to conduct meetings in this
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Resolutions Made At General Meeting manner. What happens if the technology fails during the meeting? Perhaps, we could resort to section 355 Companies Act 1965 to validate the proceedings. However, it would be prudent to note section 145A of the Companies Act 1965 which provides that where any meeting (including an adjourned meeting) is required to be held, it shall be held in the State where its registered office is situated. The better view is to seek law reform of the Companies Act 1965 as it has not been reviewed in tandem with modern information communication technology.
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Practice Questions
1. 2. 3. 4. What is a resolution? Explain the differences between a minutes and resolution passed? Briefly differentiate between a motion and a resolution. Describe the ways for resolutions to be passed by the board of directors. 5. 6. How may electronic meetings be made valid for company meetings? A private company has 5 shareholder; namely:(i) (ii) (iii) (iv) (v) Mr. Chong (Holding 20,000 shares); Ms. Jeniffer Liew (Holding 10,000 shares); Mr. Michael Jackson (Honding 30,000 shares); Encik Hassan bin Ali (Holding 20,000 shares); and Encik Mahmud bin CheMat (Holding 20,000 shares)
Explain (a) How is the majority votes counted at an EGM held? (b) If Ms Jeniffer and Mr. Michael Jackson were not present at the EGM, can they object to a resolution that was passed with sufficient majority? (c) How could the shareholders requisite for an EGM, if the board of directors persistently refuse to call for the meeting?
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Resolutions Made At General Meeting

CHAPTER SIX RESOLUTIONS MADE AT GENERAL MEETING

Resolutions Made At General Meeting

MOTIONS, PROPOSED RESOLUTION & RESOLUTION

Resolutions Made At General Meeting 6.2 CIRCULAR RESOLUTIONS

BOARD OF DIRECTORS RESOLUTIONS

REGISTRATION OF SPECIAL RESOLUTIONS

s. 23 (1) & (3)

Change of name of the company

Resolutions Made At General Meeting

Alteration of the articles of association

Creation of reserve liability

Reduction of share capital

s. 218 (1) (a)

Resolutions Made At General Meeting

s. 258 (3) s. 269 (1) (a) s.270 (1) s. 273 (1)

Resolutions Made At General Meeting

Resolutions Made At General Meeting

Resolutions Made At General Meeting

Resolutions Made At General Meeting

Resolutions Made At General Meeting

Resolutions Made At General Meeting

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