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When can the Chairman of a Shareholders’ Meeting adjourn such a meeting?

Introduction

The appointment of a Chairman to preside over a Shareholders’ Meeting is usually a straight-forward affair. The Chairman’s role is, in general, to maintain peace and order during the meeting, ensure that the proper procedures are being followed and the matters discussed remain within the defined agenda for the meeting, and generally to resolve issues arising during such discussions, to the measure of his expertise and abilities.

One of the powers which typically vests with the Chairman, is the power to adjourn the meeting. Such a power, although on its face may be deemed to be ease to use, should only be used sparingly and under certain conditions; otherwise, a decision by the Chairman to adjourn the meeting may result in an invalid meeting to follow.

General Overview

The decision in the case of Byng vs London Life Association Ltd(1989) 2 WLR 738confirms that the Chairman has very limited inherent power to adjourn a meeting notwithstanding the provisions of the Articles of Association. The power to adjourn is exercisable only when the machinery provided by the Articles is no longer effective and the power must be used in order to facilitate the presence of those entitled to debate and vote at a meeting where such debate and voting is possible. As discussed in the said case, the underlying reason for requiring a company to hold meetings, is for the members to be able to attend in person so as to debate and vote on matters affecting the company.

In the absence of a contrary provision in the Articles of Association, the power of adjournment is vested in the meeting itself. However, careful examination of the wording contained in the Articles of Association is advised.  In Salisbury Gold Mining Co. Limited v Hathorn(1897) AC 268, the articles provided only that the Chairman could adjourn with the consent of the meeting and did not additionally require the Chairman to adjourn if so directed by the meeting; it was thus held that the Chairman was not bound to adjourn even if the majority of members present wanted him to do so.

 

The exercise of the inherent power may arise in such situations where the meeting has failed to be properly constituted. By way of example, this was the case in London Life discussed above, where the venue booked for the shareholders’ meeting could not properly fit all the shareholders of the company (thus, if the meeting was to proceed, it would have denied some of them of their right to attend, be heard and vote in the meeting). In such a case, a decision by the Chairman to adjourn the meeting was deemed to be a valid decision.

There have also been other cases in which it was deemed to be a valid decision of the Chairman to exercise his inherent power to adjourn the meeting, irrespective of whether the meeting requested and/or approved and/or authorized such an adjournment. These cases typically revolve around “emergency” circumstances, such as:

  1. If there is a threat of violence and/or actual violence in the meeting, and the purpose of the adjournment is to calm down the meeting and avoid or end the violence;
  2. Where a poll has been requested by the shareholders in accordance with the provisions of the Articles of Association, and the means of carrying out such a poll are not present during the meeting, and such adjournment shall facilitate the poll to take place;
  3. In cases where it becomes impracticable to continue the meeting without the rights of the shareholders being breached, for example, where the microphone/sound system fail in a big venue, preventing shareholders from effectively carrying out the debate of the resolutions;
  4. If someone falls ill and required urgent medical attention;
  5. In cases of natural disasters striking at the time of the meeting.

 

The Chairman, before deciding to exercise the power to adjourn, must carefully consider the reasons as to why an adjournment will be suitable for the case at hand. The purpose of an adjournment should be none other than to facilitate the presence of those shareholders who are entitled to debate and vote at a meeting where such debate and voting is possible.

Taking once again the example from the case of London Life, where the Chairman reached a decision to adjourn in good faith when it was clear that the meeting could not be conducted at all, as the venue was too small to contain all shareholders, and there were no adjacent or nearby rooms which were sufficiently connected with microphone or sound system which would have allowed all shareholders to be heard, and yet his decision was deemed by the Court to be unreasonable because he adjourned the meeting only to the afternoon of the same day.

The Court went on to indicate that those shareholders, whose private arrangements meant that they could not attend at the afternoon meeting, would not only be unable to speak but also unable to vote, even by proxy (as the Articles required for the proxy to be filed with the Company at least 24 hours prior to the meeting).

The Court also noted that the business to be discussed in the meeting was not of an urgent nature, and as such a longer period of adjournment would not prejudice the company and/or the business to be transacted.

In light of the above, it was decided by the Court that the business which was transacted in the adjourned meeting in the same afternoon was actually invalid.

As such, prior to deciding to adjourn a meeting, the Chairman needs to also consider the proper time-period for such an adjournment, which shall allow all shareholders sufficient time to be available in person or by proxy.

It has now become relatively standard practice that Articles of Association make express provision for the Chairman’s inherent powers, it being further provided on such adjournment that the time and place for the adjourned meeting shall be fixed by the Board. If the Chairman purports to adjourn without good reason the meeting can appoint another Chairman and proceed with the business (National Dwellings Society v Sykes [1894] 3 Ch 159).

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