In the lifetime of any private limited company, you will need to make important decisions. Shall we appoint a new director? Do the articles of association need to be updated? Is it time to close the company down? These decisions need to be made the right way. And this is where the general meeting comes in.
In this post, we’ll answer your questions about the role general meetings play in the running of a limited company. Let’s get started.
What is the general meeting?
The general meeting (also known as an extraordinary general meeting) is a coming together of the company’s shareholders – these being the owners of the business – to discuss company matters and make decisions through resolutions. Resolutions are voted on by the shareholders via a show of hands or poll, in accordance with their voting rights.
It is an official meeting that needs to adhere to the rules set out in the Companies Act 2006. It requires a chairperson (normally a director or shareholder) and meeting minutes should be kept. If a chairperson has not been elected prior to the meeting, the first piece of business at the meeting should be to appoint one.
The general meeting should not be confused with the annual general meeting (AGM). Whilst a private limited company can hold an AGM if its shareholders wish, they’re only compulsory for public limited companies (in which case they should be held once a calendar year).
Any shareholder meeting that is not an AGM is considered a general meeting.
As we’ll cover in more detail shortly, the general meeting is not compulsory. So if you run a limited company by yourself (you are the sole director and sole shareholder), whilst you could theoretically still hold a general meeting, this isn’t required.
It is important to stress that a one-person company still needs to keep a record of any decisions that are made, and these should be kept with the company records.
Who can attend a general meeting?
The general meeting is normally considered a shareholders’ meeting. However, directors, proxies (a person acting on behalf of a shareholder in their absence), auditors, and corporate representatives can also attend.
Whilst directors often attend and chair general meetings, the general meeting should not be confused with board meetings.
Board meetings are very much associated with directors and are used to discuss performance and make decisions within the directors’ powers. Board meetings are unregulated by the Companies Act 2006 and instead framed by a company’s articles of association.
To put it simply, shareholders’ decisions are made at general meetings and directors’ decisions are made at board meetings.
What decisions can be made at a general meeting?
The general meeting is the domain of the shareholders. So, as you would expect from a meeting between the business owners/stakeholders – it is used to make significant decisions that will impact the company.
Decisions that can be made at a general meeting include (but are not limited to) the following:
- Allotting, transferring, and removing shares
- Appointing and removing directors
- Appointing and removing secretaries
- Approving large loans and contracts
- Changing the company name
- Creating or amending a shareholders’ agreement
- Updating a director’s duties
- Updating the articles of association
- Winding up the company
Who has the power to call a general meeting and how should it be organised?
Directors typically call general meetings, but any shareholder who holds at least 5% of the company shares can request that a general meeting be called if they believe that one is necessary.
Once a general meeting has been called, a director should send notice to the shareholders. This notice can be delivered via post or email and needs to include the date, time, and location of the meeting, as well as the details of any proposed resolutions that are going to be dealt with at the meeting.
In instances where a special resolution is being proposed, the full text of the special resolution needs to be included.
There are criteria in place regarding when the general meeting needs to be organised by. It’s essential that the director:
- Gives shareholders at least 14 days’ notice
- Ensures the general meeting is called within 21 days of it being requested
- Ensures the general meeting is scheduled no later than 28 days after it is requested
If a meeting has been organised with a ‘short notice period’ (less than 14 days) any shareholder with more than 10% of the company shares has the power to stop the meeting from going ahead.
How does voting work?
Decisions at a general meeting are made when votes are cast on ordinary and special resolutions.
These votes are normally conducted via a show of hands, but a poll can be requested instead. This can be requested by any shareholder with at least 10% of the company shares, any two shareholders, a director or the chairperson.
It is common for a poll to be used after a show of hands, if the show of hands was unsuccessful in obtaining a clear result for the resolution in question.
With a show of hands, the number of shares held by the shareholder is redundant (one shareholder equals one vote). Whereas, with a poll, each shareholder has one vote for each share that they hold.
An ordinary resolution requires a 50% majority to be passed. A special resolution requires a 75% majority to be passed.
Only shareholders who hold shares with voting rights get to vote on resolutions (regardless of the voting method being used). If any proxies are present, they should get the exact same voting rights as the shareholder that they are representing has.
What should be included in the meeting minutes?
Even if you’re the only person in your company, you will need to keep minutes for all of your general meetings. Not only is this a statutory requirement, but it may also come in useful if there are any disputes – internal or external – in the future.
Your general meeting minutes need to include the following information:
- Company name, number, and registered office address
- Date, time, and location of the meeting
- List of attendees
- List of proxies and who they are representing
- Proposed ordinary resolution(s), the result, and who voted for/against it
- Proposed special resolution(s), the result, and who voted for/against it
- Queries raised
- Any other business that was discussed
- Closing remarks
If your company has a secretary in place, they will normally take care of keeping the minutes. If there is not a secretary appointment in place, anyone else in the company – such as a director or shareholder – who is deemed suitable can take on the job.
How many people must attend a general meeting for it to be valid?
The quorum for a general meeting, this being the minimum number of people who must be present for the meeting to be valid and for any resolutions to be passed, is two shareholders. This is unless this has been changed in the articles of association or if a company only has one shareholder.
This shouldn’t be confused with the minimum number of people required to get a resolution passed (this can be one).
- A company has two shareholders, both of whom are present at the general meeting. The general meeting is therefore valid.
- Shareholder A holds 51% of the company shares and Shareholder B holds 49% of the shares.
- Through a poll, Shareholder A votes in favour of the ordinary resolution, and Shareholder B opposes this.
- Because two shareholders are present, the resolution is passed. This is valid because two shareholders were present even though only one of them voted in favour of the resolution.
Do all shareholders need to be in the same room for a general meeting to go ahead?
No, the model articles for private limited companies (used by the majority of companies) imply that a general meeting can be held remotely: ‘In determining attendance at a general meeting, it is immaterial whether any two or more members attending it are in the same place as each other.’
So, unless the articles have been amended (this can be done before or after a company has been formed), you are free to conduct a general meeting with some or all of the attendees based in different locations.
Are they compulsory?
Yes and no. In most cases, they are not, unless the company’s articles of association state that they are (the model articles do not state this).
However, a general meeting is compulsory if the removal of a company director or an auditor is being discussed. This would then need a special resolution to be voted on at a general meeting.
Other than this, the majority of decisions that can be made at a general meeting can also be taken care of with a written resolution. As the name would suggest, a written resolution enables shareholders (with voting rights) to vote and resolutions to be passed, in writing.
Both ordinary and special resolutions can be taken care of with a written resolution.
So there you have it…
Communication is fundamental to the successful running of a limited company. Whilst a general meeting may be considered ‘a bit of a nuisance’, it does provide a useful platform for shareholders to come together and discuss the business in a proactive environment.
We hope you have found this post helpful.
Please leave a comment if you still have any questions regarding the general meeting, or anything else associated with starting and running a limited company.