What should Bud do to convene an extraordinary general meeting? Board Meeting of December 31, 2013 At the outset, it must be emphasized that the validity of a meeting hinges on a number of factors: 1. Whether sufficient notice was given; 2. Whether the relevant notice was properly served; 3. Whether the contents of the notice satisfied the requirements of Cap. 22 and the articles of the company. Subject to the exceptions provided in Cap. 622, non- compliance with the above rules may render the meeting, if held, invalid. Length of Notice On the facts given, the notice of this meeting was purportedly served by Clarence on Bud on December 26, 2013 by cell phone text message. Two questions arose from this purported service. First, there are strict rules in Cap. 22 governing the convening of board meetings and the requisite notice thereof. S. 571(2) stipulates that the requisite length of a meeting other than GM is 14 days. Seen in this eight, the notice of the Board meeting of December 31, 2013 prima facie failed to comply with the statutory requirement and was therefore invalid. Having said that, two points need to be raised. S. 579(1) of Cap. 622 does provide that accidental omission of service of notice shall not render a meeting invalid. That issue does not arise here because Clarence did serve a notice on Bud.
Secondly, it must be emphasized that at common law it is well established that short notice does not itself necessarily render the relevant meeting invalid. It was held in Browne v. La Trinidad that a notice served just 4 minutes before a eating was not invalid. The court explained that if the person aggrieved by the short notice neither complained nor took steps to adjourn it, he would be bound by his own default. If he should not be allowed later to overturn any resolutions passed at that meeting, the course of business of the company would be paralyses.
The irregularity could have been cured at any moment without the court’s intervention but no steps were taken to that end. In these circumstances, the court would decline to interfere. On the facts given, Bud took no steps to adjourn the meeting or protest against the short notice. Having said that, it is doubtful whether the principle of Browne v. La Trinidad can be applied to a 2- member company. In conclusion, the short notice per SE did render the Board meeting of December 31 invalid. Service of Notice Next, the validity of the notice of the Board meeting also turned on the mode of service of such notice.
S. 572 allows 3 different methods of service, namely by hard copy, in electronic form as well as at the company’s own website. In the instant case the mode of service chosen by Clarence was cell phone text message. For the sake of argument, assuming for the moment that this as a lawful electronic mode of service, the service still had to comply with requirements under s. 831. It is to be noted that under s. 831(3)(a) for a company to communicate with another person in electronic form, that person must have agreed to receive the information or notice in that form.
Accordingly, the crucial issue is whether Bud had agreed to receive the notice of board meetings and general meetings in the form of cell phone text message. If he had not, then the electronic notice served by Clarence must be invalid. Quorum Further or alternatively, for the Board meeting to be validly held on December 31, 013, it must satisfy the statutory quorum requirement. S. 585(3) provides that subject to the company’s articles, where the company has more than 1 member, the requisite quorum of meetings other than general meetings is 2. Article 11(2) of Cap. EH also provides the same. In the light of these provisions, for the Board meeting of December 31, 2013 to be quartet, both Clarence and Bud must be present. By reason of Bud’s absence, the Board meeting must be insinuate and any resolution purportedly passed thereat must be invalid and of no legal effect. Bud’s Requisition for GEM Upon discovery of the invalid resolution of setting up the Japanese restaurant purportedly passed on December 31, 2013, Bud immediately requisitioned the convening of an GEM. Again the Companies Ordinance provides strict rules for such requisition.
S. 566(2) stipulates that holders of 5% of the paid-up capital may requisition the convening of an GEM. In addition, there are formality requirements under s. 566(3) and (5). First, the requisition must state the general nature of business to be dealt with at the proposed GEM the proposed resolution must be set out in the requisition (s. 566(3)(b)). Last UT not least, the requisition must be sent to the company either in hard copy or in electronic form (s. 566(5)(a)) and authenticated by the person making the requisition (s. 566(5)(b))..
Service of ARQ question On the facts given, Bud sent requisition by e-mail to the company. Whether that was a valid service under s. 566(5)(a) depends on whether it complied with the requirement under s. 828 which deals with communication to companies. Under s. 828(2) provides that if the mode of service is one to which the company has agreed (as. (a)(i)) to an electronic address specified by the company (as. (a) ii)) then the service must be valid. Since s. 828 is silent on service by e-mail, was Bud’s e-mail a valid service? The answer is in the affirmative because under s. F the service is in a form which in the opinion of the sender will enable the recipient to see and understand the contents thereof and to keep a copy, then the service is also valid. Commonsense dictates that an e-email can no doubt satisfy both requirements of s. 828(2)(c). In conclusion, Bud’s e-mail was indeed valid service under Cap. 622. Contents of Requisition Next, the facts provided also showed that in the e-mail Bud did specify the tauter of the business to be dealt with and the resolution to be passed thereat, i. E. To cancel the investment in the Japanese restaurant.
This means that his notice complied with the statutory requirement. Duty to Convene Meeting Turning to the last issue, Clarence had been avoiding Bud and offering excuses for not holding the GEM. In this regard, attention must be drawn to s. 567(1) which requires the board to convene a general meeting within 21 days and the GEM must be convened within 28 days of that notice (s. 567(2)). Meeting Ordered by the Court Clearance’s failure to discharge these statutory duties may compel Bud to apply to court for an order to convene an GEM at a date, time and venue to be specified in that order (s. 70(1)). That is so because the alternative of member’s requisitioning under 5. 568 is not available to him. S. 568 only allows a member holding half of the voting rights to requisition a general meeting (as. (l)) and here Bud only holds 49%. Bud, however, must be advised that the court will only exercise its discretionary power to order a meeting upon being satisfied that it was impracticable to convene a meeting having regard to the circumstances of the case (Re El Sombrero Ltd). The court is slow to order a meeting to break he deadlock between equal shareholders (Ross v.
Deleted). In the instant case, although Clarence and Bud are not equal shareholders, Clarence holds the majority shares of 51%. The court may refuse to order a meeting if it would allow the minority shareholder to override the wishes of the majority shareholder (Vector Entertainment Holding Ltd v. South Entertainment Ltd). Conclusion In conclusion, being the minority shareholder under oppression, Bud should be advised to seek redress under the doctrine of minority protection or shareholders’ remedies (a different topic to be cover in due course).