Table of Contents
Shareholders exercise their decision-making power in a company when matters are put to a shareholder vote. The most significant decisions related to the company’s management are reserved for shareholders alone. Therefore, shareholder voting is one of the most important aspects of company law. There are three ways shareholders can vote:
- a show of hands;
- a poll vote; and
- a written resolution.
Each is limited for certain situations, and in some cases, the company’s constitution may forbid certain kinds of voting. This article will provide further information on how shareholders can exercise their right to vote.
Annual General Meetings
While there is no legal obligation to do so, many private companies elect to have an annual general meeting (AGM). As the name suggests, this is a meeting held once a year and all shareholders are invited to attend. The company’s articles of association usually prescribe the date and time your company must hold an AGM.
The AGM is where important company matters are put to the shareholders by the directors (or, in some cases, other shareholders) in the form of resolutions. Shareholders with voting rights either vote to support or reject the resolutions.
General Meetings
All shareholder meetings that are not an AGM are general meetings. Some companies refer to these as extraordinary general meetings. In addition, directors or shareholders can call a general meeting, depending on the circumstances.
Directors
Directors run the company on a daily basis and have the power to convene a general meeting. To do so, directors must convene a board meeting and vote to pass a resolution calling for a meeting. Alternatively, directors may sign a written resolution, which does not require them to physically convene.
Shareholders
If one or more shareholder owns at least 5% of the voting shares in a company, they can also convene a shareholder meeting. They do this by petitioning the directors to pass a board resolution calling for the general meeting, which the directors are obligated to do within 21 days upon request.
In all cases, the directors must give the shareholders at least 14 days from the date the directors pass the board resolution authorising the convention and the date the meeting is held. In some cases, shareholders can waive the notice period.
Continue reading this article below the formCall 0808 196 8584 for urgent assistance.
Otherwise, complete this form and we will contact you within one business day.
Voting Procedures
Before the meeting can proceed, your company must meet its quorum. A quorum is the minimum number of shareholders necessary for an AGM or general meeting to have legal effect.
In a meeting, shareholders can vote on any scheduled matters. The law gives shareholders two ways of voting at a meeting:
- by a show of hands; or
- through a poll vote.
Show of Hands
A show of hands gives each shareholder in attendance one vote. For example, if there are ten shareholders in your company and seven present at the meeting, there are seven available votes. If the matter is an ordinary resolution, then at least four shareholders must vote in favour. However, if the matter requires a special resolution, at least six must vote in favour.
Poll Vote
Most companies choose to vote via a show of hands in the first instance because it is the easiest way to carry on business. However, shareholders with larger shares in the company are disadvantaged by show of hands. In such cases, the shareholders may vote on the matter through a poll vote, where each shareholder’s vote is determined by their share of voting rights in the company.
For a company using the model articles of association, under certain circumstances, a poll vote can be demanded by:
- the chairperson;
- the directors;
- any two shareholders; or
- any single shareholder holding at least 10% of the shares.
Voting in Advance
The company’s articles may permit shareholders to cast their vote in advance of the AGM or general meeting.
Voting by Proxy
In some cases, a shareholder may appoint another person to vote on their behalf.
Written Resolutions
Written resolutions offer an alternative way for shareholders to vote on company matters. With two exceptions, you can pass any matter via written resolution rather than convening a general meeting or waiting for the AGM (where an AGM is prescribed). The exceptions are:
- removing a director; or
- removing the company’s auditors.
Key Takeaways
Shareholders vote on the most important decisions facing a company. These decisions are put to the shareholders in the form of a resolution. In most cases, directors decide to put the matter to a shareholders’ vote by calling a general meeting (or waiting for the annual general meeting). In some cases, shareholders can propose resolutions.
Depending on the matter at hand, shareholders may need to pass it by a simple majority (for ordinary resolutions) or by 75% or more (for special resolutions). Shareholders can vote by a show of hands, where each shareholder gets one vote. Alternatively, shareholders can vote via a poll, which gives each shareholder as many votes as they have voting shares. Finally, as an alternative to calling a meeting, directors or shareholders can circulate written resolutions.
If you need help with your business, our experienced corporate lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Visit our membership page or call us today on 0808 196 8584.
Frequently Asked Questions
Shareholders can vote either at the general meeting, annual general meeting, or via written resolution.
If a company prescribes an annual general meeting, then if any matters require shareholder approval, shareholders may vote on it at the AGM. Alternatively, directors or shareholders may call a general meeting at any point, given sufficient notice. Finally, your company might circulate a written resolution in lieu of a meeting.
We appreciate your feedback – your submission has been successfully received.