Company Law Club Newsletter 2007-06
STOP PRESS - CHAIR'S CASTING VOTE OUTLAWED BY ACCIDENT
In the afternoon on Friday 28th. September, the government announced some further
changes to Table A to take effect on Monday 1st. October. These are in addition
to those announced just over a month earlier and, like the earlier ones, are
amendments needed to take into account the effects of those sections of the
Companies Act 2006 that become effective on 1st. October 2007.
The notice given of these changes was, of course, ridiculously short, having
the effect that the solicitors and company registration agents who keep abreast
of changes in the law have had a mad scramble to devise amended documentation
in time. Many others will not have been up to date, with the result that companies
registered by those not completely on the ball will have documentation that
is inaccurate. At Incorporation Services we have kept abreast of these developments,
though it did mean that all our standard documentation had to be changed again
in a great rush to enable companies to be registered on Monday 1st. October
All that was bad enough, but the changes include a significant amendment to
the operating rules for general meetings of the vast majority of companies.
One of the changes to Table A turns on the interpretation of sec281 and sec282
of the Companies Act 2006, which defines 'ordinary resolution'. The email from
Companies House says that these sections preclude the passing of an ordinary
resolution by use of the chair's casting vote. As a result they have taken out
of Table A article 50, which gives the chair a casting vote in the event of
a tied vote in general meetings.
It is unlikely that this was what Parliament intended when the Act was passed.
If these sections really have that implication, and if the law is not amended,
it means that the vast majority of existing companies, whose articles give the
chair a casting vote, cannot now operate as they have in the past, and as intended
under their current articles. This is a significant effect, probably achieved
by accident. Many companies will have the casting vote rule from Table A by
default and may rarely use it. Some, however, will have had their articles specially
drafted with the provision in mind. Note, too, that, as this change in the law
results from the wording of the Act itself, and not just the amendment to Table
A, so that the rule that the chair cannot have a casting vote will apply to
all companies, and not just those incorporated from 1st. October 2007.
The sections causing the problem are:
Sec281. Resolutions
(1) A resolution of the members (or of a class of members) of a private company
must be passed-
(a) as a written resolution in accordance with Chapter 2, or
(b) at a meeting of the members (to which the provisions of Chapter 3
apply).
(2) A resolution of the members (or of a class of members) of a public company
must be passed at a meeting of the members (to which the provisions of
Chapter 3 and, where relevant, Chapter 4 apply).
(3) Where a provision of the Companies Acts-
(a) requires a resolution of a company, or of the members (or a class of
members) of a company, and
(b) does not specify what kind of resolution is required,
what is required is an ordinary resolution unless the company's articles require
a higher majority (or unanimity).
(4) Nothing in this Part affects any enactment or rule of law as to-
(a) things done otherwise than by passing a resolution,
(b) circumstances in which a resolution is or is not treated as having been
passed, or
(c) cases in which a person is precluded from alleging that a resolution has
not been duly passed.
Sec282. Ordinary resolutions
(1) An ordinary resolution of the members (or of a class of members) of a company
means a resolution that is passed by a simple majority.
(2) A written resolution is passed by a simple majority if it is passed by
members
representing a simple majority of the total voting rights of eligible members
(see Chapter 2).
(3) A resolution passed at a meeting on a show of hands is passed by a simple
majority if it is passed by a simple majority of-
(a) the members who, being entitled to do so, vote in person on the
resolution, and
(b) the persons who vote on the resolution as duly appointed proxies of
members entitled to vote on it.
(4) A resolution passed on a poll taken at a meeting is passed by a simple
majority
if it is passed by members representing a simple majority of the total voting
rights of members who (being entitled to do so) vote in person or by proxy on
the resolution.
(5) Anything that may be done by ordinary resolution may also be done by special
resolution.
No detailed explanation has been given by the government as to why they conclude
that these provisions exclude the chair's casting vote. It is, of course, possible
for a company to have a chair who is not a member of the company. If this is
the basis of the interpretation, there is an argument that the articles could
allow a chair who is a member of the company to have a casting vote, adopting
a Bushell v. Faith line of reasoning.
At this stage it is too early to tell. It is clearly, however, a bit of a mess.
We will keep you updated on further developments
For details of provisions of the Companies Act 2006 coming into effect on
1st. October 2007 go to Provisions implemented in
October 2007
For other information on the Companies Act 2006 go to
First Company Law Club Article (the first 7 parts
of the Companies Act 2006)
Second Company Law Club Article (Parts 8,9 &
10 of the Companies Act 2006)
Text of the Act
on IPSO website
Provisions already implemented at April 2007
Proposed timetable for implementation
A list of all parts and chapters
Company Law Club new legislation section (for
commencement orders, etc)
DTI
website
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