Additional optional articles for public limited companies DELETE

Contents

This is dated [DATE]

1. ALLOTMENT OF SHARES AND PRE-EMPTION RIGHTS

1.1 Subject to the Companies Acts, these Articles and to any relevant authority of the Company in general meeting required by the Act, the Board may offer, allot (with or without conferring rights of renunciation), grant options over or otherwise deal with or dispose of shares or grant rights to subscribe for or convert any security into shares to such persons, at such times and upon such terms as the Board may decide. No share may be issued at a discount.

1.2 The Board may, at any time after the allotment of any share but before any person has been entered in the Register, recognise a renunciation by the allottee in favour of some other person and accord to the allottee of a share a right to effect such renunciation and/or allow the rights to be represented to be one or more participating securities, in each case upon the subject to such terms and conditions as the Board may think fit to impose.

1.3 Under and in accordance with section 551 of the Act, the Directors shall be generally and unconditionally authorised to exercise for each prescribed period all the powers of the Company to allot shares up to an aggregate nominal amount equal to the Section 551 Amount.

1.4 Under and within the terms of the said authority or otherwise in accordance with section 570 of the Act, the Directors shall be empowered during each prescribed period to allot equity securities (as defined by the Act) wholly for cash:

(a) in connection with a rights issue; and

(b) otherwise than in connection with a rights issue up to an aggregate nominal amount equal to the Section 561 Amount.

1.5 During each prescribed period the Company and its Directors by such authority and power may make offers or agreements which would or might require equity securities or other securities to be allotted after the expiry of such period.

1.6 For the purposes of this Article [4]

(a) rights issue means an offer of equity securities (as defined by the Act) open for acceptance for a period fixed by the Board to holders of equity securities on the Register on a fixed record date in proportion to their respective holdings of such securities or in accordance with the rights attached to them but subject to such exclusions or other arrangements as the Board may deem necessary or expedient with regard to treasury shares, fractional entitlements or legal or practical problems under the laws of any territory or under the requirements of any recognised regulatory body or stock exchange in any territory;

(b) prescribed period means any period (not exceeding five years on any occasion) for which the authority, in the case of Article [4.3], is conferred or renewed by ordinary or special resolution stating the Section 551 Amount and in the case of Article [4.4] is conferred or renewed by special resolution stating the Section 561 Amount;

(c) Section 551 Amount means for any prescribed period, the amount stated in the relevant ordinary or special resolution;

(d) Section 561 Amount means for any prescribed period, the amount stated in the relevant special resolution; and

(e) the nominal amount of any securities shall be taken to be, in the case of rights to subscribe for or to convert any securities into shares of the Company, the nominal amount of such shares which may be allotted pursuant to such rights.

Hide Note: Allotment of shares and pre-emption rightsNote: Allotment of shares and pre-emption rights
1. Allotment of shares and pre-emption rights
Allotment of shares and pre-emption rights

Articles 4.1 and 4.2 repeat verbatim articles 7.1 and 7.2 in Standard document, Articles of association for a public company limited by shares incorporated under the Companies Act 2006 ( www.practicallaw.com/8-503-9324) and should be deleted if superfluous.

The directors must not allot shares or grant rights to subscribe for or to convert any security into shares except in accordance with section 550 and 551 of the CA 2006 (section 549, CA 2006). A director who knowingly contravenes, or permits contravention of, this is liable to a fine. However, the allotment remains valid even if section 549 is breached.

As a section 551 authority can be quite lengthy, it is increasingly common for public companies (as is the case here) to use a mixture of authority in the articles and a short form enabling resolution in general meeting (usually the annual general meeting) to create and renew their authorities to allot (and to disapply pre-emption rights). Authorities given in this way are perfectly valid as a matter of law and have the benefit of reducing the length of standard resolutions included in the notice of meeting. The disadvantage is that the drafting in the wording of the resolution contained in the notice of annual general meeting may be less helpful to shareholders and it might be necessary to look at the company's articles to make sense of it.

The authority must state the maximum amount of shares that may be allotted under it (section 551(3)(a), CA 2006). It is usual to specify the total nominal amount rather than the total number of shares. This has the advantage that the resolution does not need to be amended if the company subsequently consolidates or subdivides its shares. If the authority relates to the grant of rights to subscribe for shares, it must state the maximum amount of shares which may be allotted under the rights (section 551(6), CA 2006). The authority must specify an expiry date of no more than 5 years from the date the resolution is passed (section 551(3)(b), CA 2006).

For more information on allotment of shares, see Practice note, Allotment and issue of shares ( www.practicallaw.com/5-422-4150) .

Listing Rules

For public companies with a premium listing ( www.practicallaw.com/0-501-4233) , LR 13.8.1R of the Listing Rules ( www.practicallaw.com/7-107-6774) require that the circular issued in connection with a section 551 resolution must include:

  • A statement of the maximum amount of shares which the directors will have authority to allot and the percentage which that amount represents of the total ordinary share capital in issue (excluding treasury shares) as at the latest practicable date before publication of the circular.

  • A statement of the number of treasury shares held by the company at the date of the circular and the percentage which that amount represents to the total ordinary share capital in issue (excluding treasury shares) as at the latest practicable date before publication of the circular.

  • A statement by the directors as to whether they have any present intention of exercising the authority and, if so, for what purpose.

  • A statement as to when the authority will lapse.

All listed companies must forward to the Financial Conduct Authority (FCA ( www.practicallaw.com/5-107-5761) ) two copies of the circular at the same time as it is issued (LR 9.6.1R) and two copies of the resolution (assuming it is passed) as soon as possible after the relevant general meeting, unless the resolution is deemed to be "ordinary" business and is passed at an annual general meeting(LR 9.6.2R). The Listing Rules do not define "ordinary business" but it is likely that any resolution routinely proposed at an AGM will be ordinary business. If in doubt, consult the FCA.

These filing requirements are fulfilled by sending an electronic copy of the relevant documents via an upload facility or email to the National Storage Mechanism (NSM) ( www.practicallaw.com/9-503-1469) . No hard copy documents should be sent to the FCA. For further information, see Practice note, Regulatory Information Services: National Storage Mechanism ( www.practicallaw.com/3-203-3785) . The company must also make a RIS announcement in accordance with LR 9.6.3R notifying the market of the documents have been forwarded to the FCA/NSM and stating where copies can be obtained. For further information, see Practice note, Regulatory Information Services ( www.practicallaw.com/3-203-3785) .

Institutional investor guidelines

In respect of public listed companies, the investment committees impose a limit on the section 551 authority, in the form of the guidelines published by the Investment Association (previously the Association of British Insurers) (), the National Association of Pension Funds (NAPF ( www.practicallaw.com/9-107-6297) ) and the Pensions Investment Research Consultants (PIRC ( www.practicallaw.com/3-107-6988) ).

Investment Association

In July 2014, the IA published new share capital management guidelines which, among other things, set out the expectations of IA members where companies seek shareholder authorisation for the general allotment of new shares and any disapplication of pre-emption rights (see Legal update, Share capital: IMA share capital management guidelines ( www.practicallaw.com/1-576-1428) ). The guidelines revise previous ABI guidance for listed companies from 2009 on allotment of shares and own share purchases.

The guidelines state that the IA members will regard as routine an authority to allot up to two-thirds of the existing issued share capital, but any amount over one-third of the existing issued shares should be applied to fully pre-emptive rights issues only. The reason given for this recommendation is that shareholders have appropriate protections against dilution in pre-emption rights and the requirement for premium listed companies to obtain shareholder approval for Class 1 transactions. The guidelines also provide that the authority must be approved by ordinary resolution and last until the next AGM. When calculating the existing share capital, any shares held in treasury should be excluded. Under the previous version of the guidelines in certain circumstances all board members were expected to stand for re-election at the AGM after any share issue where the increased headroom had been used. This is not a requirement under the current guidelines, however.

The guidelines require any special resolution to disapply pre-emption rights to comply with the provisions of the Pre-Emption Group’s Guidelines ( www.practicallaw.com/3-107-7025) current Statement of Principles (for further details, see Pre-emption rights: allotment of shares: Pre-Emption Group statement of principles ( www.practicallaw.com/2-386-8902) ).

Expiry

On 8 December 2014, NAPF published its Corporate Governance Policy and Voting Guidelines 2014/2015  ( www.practicallaw.com/1-591-4172) (2014/15 guidelines). The 2014/15 guidelines are designed to assist investors in their interpretation of the provisions UK Corporate Governance Code when assessing a company's compliance with it. Appendix 1 sets out NAPF's detailed voting guidelines and these provide that an adverse vote would usually be appropriate if resolutions under section 551 (authority to allot) and 570 (disapplication of pre-emption rights:

  • Are bundled together, or with any other voting issue.

  • Are not consistent with Pre-emption Group’s Principles without a satisfactory explanation.

  • Grant authorities for more than one year.

For further details on the NAPF corporate governance policy and voting guidelines see Practice note, NAPF corporate governance policy and guidelines on voting ( www.practicallaw.com/0-379-7741) .

Pre-emption rights

Section 561 of CA 2006 preserves the existing shareholder's right of pre-emption where there is an allotment of equity securities. Equity securities means:

  • Ordinary shares.

  • Rights to subscribe for, or to convert securities into, ordinary shares.

(Section 560(1), CA 2006).

Ordinary shares are defined as shares other than shares that as respects dividends and capital carry a right to participate only up to a specified amount in a distribution.

A resolution disapplying pre-emption rights under section 570 ceases to have effect when the related authority to allot is revoked or expires (section 570(3), CA 2006). Therefore, it is good practice to specify an expiry date in a resolution passed under section 570 that is no later than the corresponding authority to allot (which must not be more than 5 years from the date the resolution is passed (section 551(3)(b), CA 2006)).

i The key features of the Pre-emption Group Guidelines are:

  • A routine section 570 disapplication should, generally, be limited to 5% of ordinary share capital in any one year with a cumulative limit of 7.5% in any three year rolling period with a maximum discount of no more than 5%.

  • The general parameters are not intended to be an absolute limit or to restrict issuers' ability to undertake rights issues or open offers. Issuers considering exceeding these parameters should, however, raise the issue of such a non-routine request with shareholders (likely to be through such bodies as the ABI and, perhaps, some key institutional investors) "at the earliest opportunity" and shareholders should consider each request on a case by case basis.

  • Examples of "critical considerations" and other considerations regarding the desirability of a non-routine requests are set out in the Pre-emption Group Guidelines. Institutional investors (and their advisers) are likely to consider these very carefully when deciding whether or not to vote in favour of such a request.

The Pre-emption group statement of principles

The Pre-emption group was formed in 2005 by members representing listed companies, investors and intermediaries, with a mandate to produce a statement of principles to be taken into account by companies when considering the case for disapplying pre-emption rights. The Group's statement of principles was first published in 2006 (with subsequent updates in 2008 and March 2015; see Legal update, Pre-emption rights: revised Pre-Emption Group statement of principles ( www.practicallaw.com/4-604-3925) and it is supported by the Investment Association and NAPF. The statement of principles is directed at all companies (wherever incorporated) with a premium listing on the Main Market of the LSE. However, companies admitted to the Standard Listing or High Growth segments of the Main Market, or to trading on AIM are also encouraged to comply.

The principles apply to all issues of equity securities that are undertaken to raise cash for the issuer or its subsidiaries, regardless of the legal form of the transaction. This means that cash box placings ( www.practicallaw.com/1-107-5857) will be subject to the principles, regardless of whether they are structured as an issuance of equity securities for non-cash consideration and therefore outside the scope of statutory pre-emption rights. The sale of treasury shares for cash by a company should also be regarded as equivalent to an issuance of new shares for the purposes of the principles.

The statement of principles provides that companies can expect to receive shareholder support for a special resolution effecting a general disapplication of pre-emption rights under section 570 of the CA 2006 provided that:

  • It relates to no more than 10% of the company's issued ordinary share capital in any one year.

  • To the extent that the disapplication exceeds 5% of the company's issued ordinary share capital, the circular for the AGM at which the disapplication is to be sought confirms that the excess will only be used in connection with an acquisition or specified capital investment which is either announced at the same time as the issue, or which has taken place in the preceding six-month period and is disclosed in the announcement of the issue.

  • It will last no longer than 15 months or, if sooner, until the next AGM.

While proposals exceeding the specified criteria as to size and duration are not ruled out, the statement of principles indicates that shareholders will generally not support such requests without a sufficiently strong business case.

The statement of principles also provides that companies should not utilise a general disapplication of pre-emption rights in respect of more than 7.5% of its issued ordinary share capital on a cumulative basis in any rolling three-year period. When applying this limit, companies should exclude any shares issued pursuant to:

  • A specific disapplication of the pre-emption rights granted under section 571 of the CA 2006.

  • A general disapplication of pre-emption rights that has been granted in connection with an acquisition or specified capital investment.

Instruments convertible into shares count towards the 7.5% limit and should be included when the instruments are issued (rather than the point at which ordinary shares are subsequently issued pursuant to the relevant instruments).

When making a non-pre-emptive issue, the statement of principles provides that:

  • Companies should ensure that they are raising capital on the best possible terms.

  • Any discount to the market price should be limited to a maximum of 5%. When calculating the amount of the discount, any expenses borne by the company which are directly attributable to the issue (including commissions and fees) should be included.

  • Any discount should be disclosed in the announcement of the pricing of the relevant issue.

Companies should also disclose in their next annual report following a non-pre-emptive issue made under a general disapplication of pre-emption rights:

  • The actual level of discount achieved.

  • The net proceeds raised.

  • How those net proceeds were used.

  • The percentage increase in issued share capital arising from non-pre-emptive issues over the preceding three year period.

In relation to specific disapplications of pre-emption rights under section 571 of the CA 2006, the statement of principles does not attempt to prescribe all the circumstances in which shareholders might be willing to approve such a disapplication. However, Part 3 of principles identifies a number of general considerations that are likely to be critical to shareholders' voting decisions in most cases. This includes:

  • The strength of the business case.

  • The size and stage of the company's development within its sector.

  • The stewardship and governance of the company.

  • The level of dilution of value and control for existing shareholders.

Companies are encouraged to signal the possibility of their intention to seek a specific disapplication of pre-emption rights at the earliest opportunity and, where appropriate, to consult a small number of major shareholders before making any announcement.

Listing Rules

Public companies with a premium listing ( www.practicallaw.com/0-501-4233) must also comply with the pre-emption rules under LR 9.3.11R and LR 9.3.12R of the Listing Rules. These provide that unless shareholders permit otherwise, a listed company proposing to issue equity securities for cash, or sell for cash treasury shares that are equity shares, must first offer those shares to existing equity shareholders (other than the company itself by virtue of holding treasury shares) and to holders of other equity shares who are entitled to be offered them (for example, under the terms of those securities) in proportion to their existing holdings.

The Listing Rules are more flexible than and sometimes conflict with the statutory pre-emption right set out in the CA 2006. Notably, the Listing Rules:

  • Expressly provide that fractional entitlements can be ignored on a rights issue or open offer (LR 9.3.12R(2)(a)).

  • Provide that overseas shareholders need not be offered equity securities on a rights issue or open offer if the company considers it necessary or expedient to exclude them from the offer on account of the laws or regulatory requirements of another territory (LR 9.3.12R(2)(b)).

For further information on the practical implications of these differences, see Practice note, Rights issues: overview ( www.practicallaw.com/2-107-4999) .

Most listed companies propose resolutions at each annual general meeting to disapply the statutory pre-emption right. The Listing Rules pre-emption provisions also do not apply where the statutory pre-emption right has been disapplied in accordance with section 570 or section 571 of the CA 2006 (or equivalent for overseas companies) and the issue is within the terms of that authority (LR 9.3.11R(1) and (4)). However, because of the preferences of institutional shareholders, it is market practice for listed companies to continue to comply with the Listing Rules pre-emption provisions even where they are not technically required to do so because statutory pre-emption rights have been disapplied.

The circular issued in connection with a proposed disapplication of the statutory pre-emption right by a listed company must include:

  • A statement of the maximum amount of equity securities that the disapplication will cover.

  • The percentage that the amount generally disapplied represents of the total ordinary share capital in issue at the latest practicable date before publication of the circular.

    (LR 13.8.2R.)

For more information on pre-emption rights see Practice note, Pre-emption rights ( www.practicallaw.com/2-386-8902) .

Investment Association share capital guidelines

Following the merger of the investment affairs division of the ABI ( www.practicallaw.com/4-107-6445) with the Investment Management Association in June 2014, the enlarged organisation, now known as the Investment Association, is responsible for guidance previously issued by the ABI.

In July 2014, the Investment Association published new share capital management guidelines which, among other things, set out the expectations of its members where companies seek shareholder authorisation for the general allotment of new shares and any disapplication of pre-emption rights (see Legal update, Share capital: IMA share capital management guidelines ( www.practicallaw.com/1-576-1428) ). The guidelines revise the 2009 ABI guidance for listed companies on allotment of shares and own share purchases.

The Investment Association guidelines state that:

  • Its members will regard as routine an authority to allot up to two-thirds of the company's existing issued share capital, but any amount over one-third of the existing issued shares should be applied to fully pre-emptive rights issues only.

  • A disapplication of pre-emption rights should be obtained annually by a special resolution in accordance with the Pre-Emption Group’s statement of principles.

 

2. VARIATION OF RIGHTS

2.1 Subject to the Companies Acts, the rights attached to any class of shares can be varied or abrogated either with the consent in writing of the holders of not less than three-quarters in nominal value of the issued share of that class (excluding any shares of that class held as treasury shares) or with the authority of a special resolution passed at a separate meeting of the holders of the relevant class of shares known as a class meeting.

2.2 The provisions of this Article will apply to any variation or abrogation of rights of shares forming part of a class. Each part of the class which is being treated differently is treated as a separate class in applying this Article.

2.3 All the provisions in these Articles as to general meetings shall apply, with any necessary modifications, to every class meeting except that:

(a) the quorum at every such meeting shall not be less than [two] persons holding or representing by proxy at least one-third of the nominal amount paid up on the issued shared of the class ) (excluding any shares of that class held as treasury shares); and

(b) if at any adjourned meeting of such holders such quorum as set out above is not present, at least one person holding shares of the class who is present in person or by proxy shall be a quorum.

2.4 The Board may convene a class meeting whenever it thinks fit and whether or not the business to be transacted involves a variation or abrogation of class rights.

Hide Note: Variation of rightsNote: Variation of rights
2. Variation of rights
Variation of rights

This article is optional as the Act sets out the proceedings for a meeting convened to vary class rights. Section 630 of the CA 2006 provides that any rights attaching to any class of shares may be varied or abrogated by consent in writing from the holders of at least three-quarters in nominal value of the issued shares of that class (excluding any shares held as treasury shares), or by sanction of a special resolution. Any amendment to, or insertion of, a variation of class rights provision in the articles is to be treated as a variation of those rights (sections 630(5) and 631(5)).

Section 22 of the CA 2006 provides that a company's articles may provide that specified provisions of the articles may only be amended (or repealed) if conditions are met, or procedures complied with, that are more restrictive than those required for a special resolution. The effect of section 22 is that, a variation of class rights provision in the articles which sets out a procedure that is more restrictive than the passing of a special resolution, would appear to be an entrenched provision. As an entrenched provision, under section 22(2) such an article could only be included in the articles either on formation of the company or by an amendment to the articles agreed to by all of the members of the company. However, because of the concerns that section 22 will catch variation of class rights provisions, the implementation of section 22(2) has been delayed in order for BIS to consider the issue further.

For more information on entrenchment and the implications of including an entrenched provision in the articles see Articles of association: content ( www.practicallaw.com/6-386-8924) .

 

3. INCREASE OF SHARE CAPITAL

The Company may increase its share capital in accordance with section 617 of the Act.

4. REDUCTION OF SHARE CAPITAL

The Company may reduce its share capital by special resolution confirmed by the court in accordance with Chapter 10 of Part 17 of the Act.

5. VOTES OF MEMBERS

5.1 Subject to Article 8.2, the Companies Acts, to any special terms as to voting on which any shares may have been issued or may for the time being be held and to any suspension or abrogation of voting rights under these Articles, at any general meeting every member who is present in person (or by proxy) shall on a show of hands have one vote and every member present in person (or by proxy) shall on a poll have one vote for each share of which he is the holder.

5.2 On a show of hands, a duly appointed proxy has one vote for and one vote against a resolution if the proxy has been appointed by more than one member entitled to vote on the resolution and the proxy has been instructed:

(a) by one or more of those members to vote for the resolution and by one or more other of those members to vote against it; or

(b) by one or more of those members to vote either for or against the resolution and by one or more other of those members to use his/her discretion as to how to vote.

Hide Note: Votes of membersNote: Votes of members
5. Votes of members
Votes of members

This article repeats sections 284 and 285 of the CA 2006.

Under CA 2006, on a vote on a resolution on a show of hands, each member present has one vote (section 284(2), CA 2006) and on a poll, each member has a vote per share (section 284(3)(a), CA 2006). If proxies are appointed, the proxy has one vote on a show of hands unless the proxy has been appointed by more than one member and has been instructed by one or more of those members to vote for the resolution and by one or more members to vote against the resolution. In such a case, the proxy will have one vote for and one vote against (section 285(2), CA 2006).

 

6. Members' resolutions

6.1 Members of the Company shall have the rights provided by the Companies Acts to have the Company circulate and give notice of a resolution which may be properly moved, and is intended to be moved, at the Company's nest annual general meeting.

6.2 Expenses of complying with these rights shall be borned in accordance with the Companies Acts.

Hide Note: Circulation of Members' resolutions and other matters on requisition of membersNote: Circulation of Members' resolutions and other matters on requisition of members
6. Circulation of Members' resolutions and other matters on requisition of members
Circulation of Members' resolutions and other matters on requisition of members

In addition to the right to require resolutions to be put before a general meeting they have convened under section 303 (4) and (5) and the right to require circulation of statements under section 314 members of public limited companies can require resolutions to be put before the annual general meeting (sections 338-340, CA 2006). For the requisition to be effective the procedure for requisitioning a resolution at an annual general meeting must be followed carefully.

Under section 338 and 338A of the CA 2006, the members of a public company may require the company to give to those members entitled to receive notice of the next AGM, notice of any resolution which may properly be moved and is intended to be moved at that meeting and of any matter which may properly be included in the business of that meeting

Members of a public company holding at least 5% of the voting rights or at least 100 members of a public company holding on average at least £100 of paid-up capital, have the right to propose a resolution for the annual general meeting agenda and to require the company to circulate details of the resolution to all members (section 338(3)).

Section 338(2) provides that members cannot move a resolution at an annual general meeting that would be ineffective, defamatory, frivolous or vexatious. The members' request must:

  • Identify the resolution.

  • Be received by the Company at least six weeks before the annual general meeting, or if later, the time that the annual general meeting notice is given.

  • Be made in hard or soft copy.

  • Be authenticated by the person or persons making it.

Where a public company is required to circulate a members' resolution under section 338, CA 2006, notice of the resolution must be given in the same manner as the notice of annual general meeting and at the same time as, or as soon as reasonably practical after, it gives the notice of annual general meeting. Officers in default are liable to be fined (section 339, CA 2006).

The company must bear the cost of circulating the resolution where the request is received before the end of the financial year preceding the annual general meeting (section 340(1), CA 2006). In any other case, the expenses incurred by the company in complying with section 339, CA 2006 should be paid by the members who requested the circulation of the resolution, unless the company resolves otherwise (section 340(2), CA 2006). In addition, except where the company has previously resolved to the contrary, it is not bound to comply with section 339 unless there is deposited with or tendered to it a sum reasonably sufficient to meet its expenses, no later than:

  • Six weeks before the AGM to which the request relates.

  • If later than the above, the time at which notice is given of that meeting.

For more information, see Practice note, General meetings: Members' rights, members' resolutions ( www.practicallaw.com/1-523-5936) .

 

7. ANNUAL GENERAL MEETINGS

An annual general meeting shall be held once a year, at such time (consistent with the terms of the Companies Acts) and place as may be determined by the Board.

Hide Note: Annual general meetingsNote: Annual general meetings
7. Annual general meetings
Annual general meetings

All public companies must hold AGMs. Under section 336(1) public companies are obliged to hold an AGM within the period of six months beginning with the day following its accounting reference date. For more information on AGMs see A toolkit for annual general meetings ( www.practicallaw.com/6-501-6168) .

 

8. CONVENING OF GENERAL MEETINGS

All meetings other than annual general meetings shall be called general meetings. The Board may, whenever it thinks fit, and shall on requisition in accordance with the Companies Acts, proceed to convene a general meeting. If there are not sufficient Directors to call a general meeting, any Director may call a general meeting and Article [] shall apply.

Hide Note: Calling meetingsNote: Calling meetings
8. Calling meetings
Calling meetings

The board of directors has the power to call general meetings (section 302, CA 2006) and the vast majority of general meetings are called by the board. The articles may contain provisions relating to directors' ability to call general meetings though they cannot override the Act and prevent the board from calling general meetings. It is prudent to have board minutes documenting the board meeting at which the directors resolve to call a general meeting. It is likely that the directors would also approve the notice of meeting at the same board meeting.

General meetings can also be called by members, see Practice note, General meetings: Members' rights ( www.practicallaw.com/1-523-5936) .

 

9. NOTICE OF GENERAL MEETINGS

A general meeting shall be called by at least such minimum notice as is required or permitted by the Companies Acts. The period of notice shall in either case be exclusive of the day on which it is served or deemed to be served and of the day on which the meeting is to be held and shall be given to all members other than those who are not entitled to receive such notices from the Company. The Company may give such notice by any means or combination of means permitted by the Companies Acts.

Hide Note: Notice of general meetingsNote: Notice of general meetings
9. Notice of general meetings
Notice of general meetings

Under the CA 2006, an AGM of a public company must be called by notice of at least 21 clear days and all other meetings by notice of at least 14 clear days (section 307(2)).

For a public traded company to be able to call a meeting on less than 21 days' notice, it must have passed a special resolution reducing the period of notice to not less than 14 days either at the immediately preceding AGM or a general meeting held since that AGM and it must allow members to vote by electronic means accessible to all members who hold shares that carry voting rights at general meetings (section 307A, ).

For more information on the notice to be given for general meetings, see Practice note General meetings: notice ( www.practicallaw.com/1-523-5842)

Provision E.2.4 of the UK Corporate Governance Code suggests that notice of at least 20 working days is given for AGMs and for companies with financial years starting on or after 1 October 2014, E.2.4 of the Code requires at least 14 working days' notice for other general meetings.

In its UKI Proxy Voting Guidelines, published in January 2015, ISS requested that companies:

  • Give as much notice as is practicable when calling a general meeting, with the additional flexibility afforded by this authority only being used in limited and time-sensitive circumstances where it would clearly be to the advantage of shareholders as a whole.

  • Provide assurance that the shorter notice period would only be used when merited.

See Legal update, Corporate governance: ISS UKI Proxy Voting Guidelines 2015 ( www.practicallaw.com/4-595-0187) .

In order to provide this assurance and to help ensure that ISS recommends its members to vote in favour of a 14 days' notice resolution, companies may want to include wording in the explanatory notes to the resolution confirming that the company will only call a meeting on less than 21 days' notice where the proposals are time-sensitive and the short notice would clearly be to the advantage of shareholders as a whole. ISS states in its guidelines that companies which have used this authority inappropriately can expect future requests to be viewed sceptically when they attempt to renew the authority in future years.

For a form of 14 days' notice resolution, see Standard document, Resolution (member): general meetings, other than AGMs, to be held on not less than 14 clear days' notice ( www.practicallaw.com/0-502-3727) .

 

10. CONTENTS OF NOTICE OF MEETINGS

10.1 Every notice calling a meeting shall specify the place, date and time of the meeting, and there shall appear with reasonable prominence in every such notice a statement that a member entitled to attend and vote is entitled to a proxy or (if he has more than one share) proxies to exercise all or any of his rights to attend, speak and vote and that a proxy need not be a member of the Company. Such notice shall also include the address of the website on which the information required by the Act is published, state the procedures with which members must comply in order to be able to attend and vote at the meeting (including the date by which they must comply), provide details of any forms to be used for the appointment of a proxy and state that a member has the right to ask questions at the meeting in accordance with the Act.

10.2 The notice shall specify the general nature of the business to be transacted at the meeting and shall set out the text of all resolutions to be considered by the meeting and shall state in each case whether it is proposed as an ordinary resolution or as a special resolution.

10.3 In the case of an annual general meeting, the notice shall also specify the meeting as such

10.4 For the purposes of determining which persons are entitled to attend or vote at a meeting and how many votes a person may case, the Company may specify in the notice of meeting a time, not more than 48 hours before the time fixed for the meeting (not taking into account non-working days) by which a person must be entered in the Register in order to have the right to attend or vote at the meeting or appoint a proxy to do so.

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10. Contents of notices of meetings
Contents of notices of meetings

The content requirements for notices of meetings are set out in sections 311, 337(1) and 325 of the CA 2006, see Practice note, General meetings: Notice ( www.practicallaw.com/1-523-5842) and Standard document, Notice of general meeting: listed company ( www.practicallaw.com/1-375-8999) .

 

11. OMISSION TO give notice nad non-receipt of NOTICE

The accidental omission to give notice of any meeting or to send an instrument of proxy (where this is intended to be sent out with the notice) to, or the non-receipt of either by, any person entitled to receive the same shall not invalidate the proceedings of that meeting.

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11.1 Omission to send notice
Omission to send notice

Section 313(1) provides that accidental failure to give notice of either a general meeting or a resolution to be moved at a general meeting to one or more persons does not render the meeting or resolution invalid. Section 313(1) may be overridden by a company's articles except in relation to the situations set out in subsections 313(2)(a)-(c).

 

12. OVERFLOW MEETING ROOMS

12.1 The Board may, in accordance with this Article, make arrangements for members and proxies who are entitled to attend and participate in a general meeting, but who cannot be seated in the main meeting room where the Chairman will be, to attend and take part in a general meeting in an overflow room or rooms. Any overflow room will have appropriate links to the main room and will enable audio-visual communication between the meeting rooms throughout the meeting. The Board will decide how to divide members and proxies between the main room and the overflow room. If an overflow room is used, the meeting will be treated as being held and taking place in the main meeting room and the meeting will consist of all the members and proxies who are attending both in the main meeting room and the overflow room.

12.2 Details of any arrangements for overflow rooms will be set out in the notice of the meeting but failure to do so will not invalidate the meeting.

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12. Overflow meeting rooms
Overflow meeting rooms

This provision is based on a ruling (Byng v London Life [1989] 2 WLR 738) where it was held that it was acceptable to use an overflow room where too many attended to be accommodated in the main meeting room, if:

  • All due steps were taken to direct to the overflow room those unable to get into the main meeting.

  • There were adequate audio-visual links between the two rooms for people in each room to see and to be seen, and to hear and to be heard by people in the other room. In fact, in Byng the audio-visual links were deficient and the use of the overflow room was not valid.

In the absence of an express provision, a company can simply rely on the decision in Byng and use overflow rooms provided the audio-visual links are correctly set up. The advantage of an express provision is that it provides clarity on the face of the articles and avoids the possibility of dispute.

Model Article 29 provides for two or more persons who are not in the same place as each other to attend a general meeting.

For more information, see Practice note, General meetings: Running an effective meeting (including an adjourned meeting): Venue and overflow rooms ( www.practicallaw.com/8-523-8583) .

 

13. SATELLITE MEETING PLACES

13.1 To facilitate the organisation and administration of any general meeting, the Board may decide that the meeting shall be held at two or more locations.

13.2 For the purposes of these Articles, any general meeting of the Company taking place at two or more locations shall be treated as taking place where the Chairman of the meeting presides ( the principal meeting place) and any other location where that meeting takes place is referred in these Articles as a satellite meeting.

13.3 A member present in person or by proxy at a satellite meeting may be counted in the quorum and may exercise all rights that they would have been able to exercise if they were present at the principal meeting place.

13.4 The Board may make and change from time to time such arrangements as they shall in their absolute discretion consider appropriate to:

(a) ensure that all members and proxies for members wishing to attend the meeting can do so;

(b) ensure that all persons attending the meeting are able to participate in the business of the meeting and to see and hear anyone else addressing the meeting;

(c) ensure the safety of persons attending the meeting and the orderly conduct of the meeting; and

(d) restrict the numbers of members and proxies at any one location to such number as can safely and conveniently be accommodated there.

13.5 The entitlement of any member or proxy to attend a satellite meeting shall be subject to any such arrangements then in force and stated by the notice of the meeting or adjourned meeting to apply to the meeting.

13.6 If there is a failure of communication equipment or any other failure in the arrangements for participation in the meeting at more than one place, the chairman may adjourn the meeting in accordance with [INSERT NUMBER OF ARTICLE FOR ADJOURNING MEETINGS]. Such adjournment will not affect the validity of such meeting, or any business conducted at such meeting up to the point of adjournment, or any action taken pursuant to such meeting.

13.7 A person (satellite chairman) appointed by the Board shall preside at each satellite meeting. Every satellite chairman shall carry out all requests made of him by the Chairman of the meeting, may take such action as he thinks necessary to maintain the proper and orderly conduct of the satellite meeting and shall have all powers necessary or desirable for such purposes.

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13. Satellite meetings
Satellite meetings

Insert such a provision for satellite meetings where it is likely to be occasions where two or more locations will be necessary for general meetings. Such provisions are very useful for companies that have overseas offices and shareholders.

 
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