1.

Shareholders’ meetings
2. The board of directors and
Topic 6 directors
3. External relationships
1. Shareholders’ meetings

INTRODUCTION

 Organs of a company Section 66-74

- Shareholders’ meeting
- Board of directors
- Managing director
- Committees of the board
 To determine each organ’s function, consider the Act, MOI and the common
law.

1. RELATIONSHIP BETWEEN BOARD AND SHAREHOLDERS’ MEETING

 Board of directors (sec 66(1)): The business and affairs of the company
must be managed by or under the direction of its board.
 Only board my exercise this management function. Relationship between
board and
 Shareholders may not usurp. shareholders:
Sec 66(1)
 Certain significant decisions regarding management Sec 66(4)(b)
Sec 71(1)
must be taken by shareholders’ meeting: Sec 16
- To appoint (sec 66(4)(b)) and, Sec 44
- Remove directors (sec 71(1))
- Amend MOI (sec 16) (when they don’t agree with the boards management)
- Shareholders’ approval needed for certain actions by board (sec 44)

2. SHAREHOLDERS’ MEETINGS (SEC 57 AND SEC 60)

 Act sets out formalities which must be complied with i.r.o. shareholders’
meetings.
 Non-compliance = means the resolution may not be valid.
 There are instances where formalities aren’t needed

A. CERTAIN INSTANCES WHERE FORMALITIES ARE NOT REQUIRED

i. Unanimous assent Assent = express approval or agreement

 Prescribed by the common law

 Shareholders can take decisions without formal meeting or without having to
observe all formalities.
 Unanimous assent is only possible if all shareholders are fully aware of what
is being done and all assent.
 It’s irrelevant whether all shareholders assent at same time and manner.
 If there is uncertainty must use a special resolution.
  Unanimous assent can occur very informally – you can send a WhatsApp to
the other 2 shareholders who both agree, one replying by email and the other
when you run into him in the shops, and he verbally agrees

ii. Company with only one shareholder (sec 57(2))

 Must be a profit company it can’t be state-owned companies (SOC).
 Shareholder may exercise voting right at any time i.r.o. any matter without
notice or compliance with any internal formalities.
- Unless the MOI provides otherwise.

iii. Company where every shareholder is also a director (sec 57(4))

 Not application to SOC.
 If a matter must be referred by the board to the shareholders, then
shareholders may decide on the matter at any time after referral, without
notice or compliance with internal formalities.
- Unless the MOI provides otherwise.

Requirements: sec 57(4)(a)(i)-(iii)

i. Every shareholder must be at the board meeting when the matter was deferred to them.
ii. Sufficient number of shareholders are present to meet the quorum requirements of sec64.
iii. A resolution adopted by the shareholders must have the support that would’ve been required
for it to be adopted as an ordinary or special resolution at a formal shareholders meeting.

iv. Written resolution (sec 60)

 Resolution that could be voted on by shareholders’ meeting may be
submitted for consideration to shareholders
 Shareholders may vote in writing
 Within 20 business days after resolution was submitted to them
 A Resolution is adopted if it’s supported by sufficient % voting rights
 If adopted: it has the same effect as if approved by voting at meeting
 Results of voting must be delivered to shareholders within 10 business days

3. PROXIES (SEC 58)

A. PROXY REQUIREMENTS
 Shareholders not obliged to attend shareholders’ meeting personally or even
to personally vote.
 May appoint individual as representative or proxy:
- To participate in, speak and vote at shareholders’ meeting on behalf of
shareholder.
- To give written consent to a section 60 decision.
 - “Proxy” could refer to both person and instrument (the instrument is an
agreement they have as to the manner in which the proxy should vote)
 The appointment of the proxy must be in writing, dated and signed by
shareholder.

 Proxy may vote as he or she thinks fit unless:

- MOI provides otherwise.
- Instrument indicates how proxy should vote (E.g. in favour of, against,
abstain).

B. SPECIAL RULES
 Sec 58(8):If company issues invitation to appoint person named by
company there are special rules that apply:
(a) An invitation must be sent to every shareholder that is entitled to notice of
the meeting at which the proxy will be exercised.

(b) The invitation or instrument supplied by the company for appointing the
proxy must:
i. Contain a reasonably prominent summary of the rights established by
the section.
ii. Contain adequate blank space immediately before the names of any
persons named in the proxy. This enables the shareholder to write in the
name or an alternative name of the proxy chosen by the shareholders.
iii. Provide adequate space for the shareholder to indicate whether the
proxy should vote in favour of, for or against or to abstain.

(c) The company may not require that the proxy appointment be made
irrevocable.
(d) The proxy appointment remains valid only until the end of the meeting at
which it was intended to be used (Subject to subsection (5)).

4. SHAREHOLDERS’ MEETINGS

 Purpose: To provide shareholders the opportunity to debate and vote on

matters affecting the company.
 Definition (sec 1): “With respect to any particular matter concerning a
company, means a meeting of those holders of that company’s issued
securities who are entitled to exercise voting rights in relation to that matter.”

A. ANNUAL GENERAL MEETING (AGM) (SEC 61(7) – (8))

7) A public company must hold an AGM:

(b) Initially no more than 18 months after the incorporation and,
 (c) After that every calendar year, but no more than 15 months
after the last AGM.

8) Business to be transacted at AGM

 Presentation of director’s report, audited financials for preceding financial
year and audit committee report
 Election of directors
 Appointment of auditor and audit committee
 Matters raised by shareholders (with or without advance notice)
 “Wording of section 61(8) highlights that business transacted at AGM may
go beyond matters listed in section 61(8) BUT the business must be
properly put before the shareholders”
o You must at least discuss what is set out in S61(8) but you can
expand on it

B. CONVENING A SHAREHOLDERS’ MEETING

ss(3)
- Written and signed demands for a meeting are delivered to the company and,
- Each demand describes a specific purpose and,
- Shareholders have at least 10% voting rights in aggregate for the same matter being
exercised.

 Who can call it?

- Board or any other person specified in MOI may call shareholders’ meeting
at any time.
 When must the company call it? Sec 61 (2) – (6)

2) Subject to section 60 a company must hold a shareholders meeting:

(a) When required by the Act or MOI to refer a matter to the shareholders to
decide.
(b) When required by s70 to fulfil a vacancy on the board and,
(c) When otherwise required:
(i) By ss(3) or ss(7) or,
(ii) By the MOI

 Consequences of failing to do so:

11) If a company is unable to convene a meeting as required because it has no
directors, or if all the directors are incapacitated:

Sec 61(11) – (14)

 (a) Any person authorised by the MOI may convene the meeting, or
(b) If no person has authorisation in par(a) then the Companies Tribunal may
issue an administrative order to convene a meeting on the date and terms
set by the tribunal.

12) If a company fails to contravene a meeting for a reason other than one
stated in ss11 then:
(a) At a time in accordance with the MOI
(b) When required by its shareholders in ss(3), or
(c) Within the stipulated time under ss(7)
a shareholder may apply to court for an order to contravene a meeting on a
date, time and terms decided by the court.

13) The company must compensate a shareholder for applying to the tribunal
(ss11) or to the court (ss12) for any costs incurred.

C. NOTICE OF MEETINGS (SEC 62)

 Company must give notice of meeting to all shareholders
(on record date) in prescribed manner and form.
 Notice must be delivered:
- Public company: 15 business days before meeting.
- All other cases: 10 business days before meeting.
 MOI may prescribe longer or shorter period by giving notice.
 Company may give shorter notice (than in Act or MOI), but only if every person
that may vote is present and agrees to waive minimum period of notice.
 Notice must be in writing and contain certain information (self study sec 62(3))
 Material defect in notice – meeting may only proceed if:
o Every person that may vote is present; AND
o Agrees to ratify defective notice [section 62(4)]
 Definition of “material” in section 1: when used as an adjective, means
significant in the circumstances of a particular matter, to a degree that is—
o (a) of consequence in determining the matter; or
o (b) might reasonably affect a person’s judgement or decision-making in
the matter;
o e.g. if a directors name is spelled incorrectly but its still obvious which
director it is -> it isn’t a material error

D. BUSINESS DAY CALCULATION (SEC 5(3))

  When, in this Act, a number of “business days” is provided for between the
happening of one event and another, the number of days must be calculated
by:
(a) Excluding the day on which the first such event occurs;
(b) Including the day on or by which the second event is to occur and,
(c) Excluding any public holiday, Saturday or Sunday that falls on or
between the days contemplated in par (a) and par (b) respectively.

E. NOTICE REQUIREMENTS(S62(3))
(3) Must be in writing and contain the following information:
(a) Date, time and place of the meeting.
(b) General purpose of the meeting
(c) Copy of proposed resolution for which the company received notice, and
percentage of voting rights required for the resolution to be adopted.

(d) In the case of an AGM:

(i) Financial statements = prenumbered or in a summarized form and,
(ii)Directions to obtain a copy of the complete set of annual financials for the
preceding year.
(e) A reasonably prominent statement that:
(i) Shareholder is entitled to attend and vote and to appoint a proxy.
(ii) The proxy doesn’t need to be a shareholder of the company and,
(iii) S63(1) requires that meeting participants provide identification.

F. MATERIAL DEFECT IN NOTICE “Material” in s1: Means significant

in the circumstances of a matter,
to a degree that is:
 The meeting may only proceed if: (a) Of consequence in
- Every person that may vote is present; and determining the matter; or
- Agrees to ratify defective notice (b) Reasonably affects a person’s
judgement or decision-
making.

5. CONDUCT OF A SHAREHOLDERS’ MEETING (s61 and s63)

 Place (sec 61(9)):

- Board may determine the location of the meeting (unless MOI requires
otherwise)
- Can be in RSA or abroad.

 Attending and participating – before a person can do so the following is

required:
- Present reasonable identification (identifies the person as a shareholder or
a proxy for a shareholder)
- The chairperson must be reasonably satisfied the right of that person to
participate and vote has been reasonably verified.
Notice to shareholders makes electronic
participation possible
  Electronic communication (sec 63(2))
- Company may make provision for shareholders’ meeting to be conducted by
electronic communication or that shareholders or proxies may participate by
electronic communication.
- However: MOI may provide otherwise and remove this provision,
o If it is done electronically all participants must be able to
communicate concurrently (at the same time with minimal delays)
and participate effectively.

 Electronic communication: Public companies (sec 61(10))

- Specifically for public companies, every shareholders’ meeting must be
reasonably accessible within SA for electronic participation by shareholders.
- Irrespective of whether meeting is held in SA or elsewhere

6. QUORUM (SEC 64)

 It’s the minimum number of persons who must be present before business
may be validly transacted.
 Categories to assess this:
- A certain percentage and number must be met for a meeting to
commence and for a matter to be considered.
Aggregate of 25% voting rights and these
A. PERCENTAGE REQUIREMENT requirements are at the start of the meeting.

 Shareholders’ meeting may not commence:

- Until sufficient persons who, in aggregate, may exercise 25% voting rights
that are entitled to vote i.r.o. at least one matter on agenda, are present.

 Matter may not be considered:

- Until persons who, in aggregate, may exercise 25% voting rights entitled to
be exercised on that matter, are present,
- At time the matter is called on agenda.
 MOI may set higher or lower percentage for quorum (as it is an alterable
provision)
Three shareholders must be present and,
B. NUMBER REQUIREMENT percentage requirement is met.

 Despite percentage requirement, if company has more than two shareholders,

the meeting may not begin or the matter debated, unless:
- At least three shareholders are present; and
- Percentage requirement is met.

C. POSTPONING OT ADJOURNING (sec 64(4) – (13))

  Within one hour of the appointed time the requirements of ss(1) and ss(3)
have not been met:
- Postponed without notice, motion or voting for one week.
- Consideration of a particular matter whether regarding another company or
not, is adjourned for one week without voting or notice.

7. VOTING AT MEETINGS

Definition of voting rights (sec 1): “Voting rights, with respect to any matter to be decided by a
company, means:
a) The rights of any holder of the company’s securities to vote in connection with that matter,
in the case of a profit company; or
b) The rights of a member to vote in connection with the matter, in the case of a non-profit
company.”

There are two methods available as to how voting at a meeting shall take
place:

A. SHOW OF HANDS (SEC 63(5))

 Every person present (as shareholder or proxy) and entitled to vote, has only
1 vote, irrespective of number of voting rights that person would otherwise be
entitled to exercise.

B. VOTING ON A POLL (SEC 63(6))

 Weighted voting rights can now be exercised
 Every person present (as shareholder or proxy) has the number of shares
associated with the securities held.
 Despite the MOI’s provisions, voting by way of a poll may be demanded by:
- Five persons acting together; or
- By a person (or persons) holding at least 10% of the voting rights.

8. SHAREHOLDERS RESOLUTIONS (SEC 65)

A. PROPOSAL FOR RESOLUTION

 By board or any 2 shareholders.
o Board should be able to propose resolutions as they have a better
understanding of the business

 Proposed resolution:
 - How it should be worded
o Expressed with sufficient clarity; and
o Accompanied with sufficient information or explanatory materials
o To enable shareholder to decide whether to take part in resolution
 If theres a unsatisfied shareholder, claiming the requirements haven’t been
met, he may approach the court

B. TWO TYPES
 Ordinary resolution = more than 50% of voting rights exercised must support
the resolution.
 Special resolution = at least 75% of voting rights exercised must support the
resolution (required for important decisions, see sec 65(11)).
 MOI may (except for an ordinary resolution for the removal of a director
under section 71)::
- Require a higher % for ordinary resolution (thus not lower); or
- Another % for special resolution (higher or lower).
- But: Special resolution must always be 10 percentage point more than
ordinary resolution (this is not the same as 10%).