Under section 109 of the Companies Act 1997, the board manages the company. Section 90 gives shareholders the right to hold it to account without taking the wheel.
Section 90(1) — the chairman must allow it
Notwithstanding anything in this Act or the constitution, the Chairman of a meeting of shareholders shall allow a reasonable opportunity for shareholders at the meeting to question, discuss, or comment on the management of the company.
The obligation is expressed as “shall allow” and applies notwithstanding the constitution. A chair who shuts down questions, or confines the meeting strictly to the formal resolutions on the notice, is not complying.
Note that the right arises at a meeting of shareholders — any meeting, whether the annual meeting under section 101 or a special meeting under section 102. It is one of the practical reasons a written resolution under section 103 is not a complete substitute for a meeting.
What counts as “reasonable” depends on the size of the company, the number of shareholders and the matters at hand. A chair may fairly limit repetition, irrelevance and abuse; a chair may not fairly limit legitimate scrutiny of the company’s performance, its accounts, its transactions or its officers.
Sections 90(2) and (2A) — resolutions about management
Notwithstanding anything in this Act or the constitution, but subject to subsections (2A) and (3), a meeting of shareholders may pass a resolution under this section relating to the management of a company.
The provisions of Schedule 2 govern proceedings at a meeting at which such a resolution is passed, except to the extent that the constitution provides for matters expressed in that Schedule to be subject to the constitution.
So shareholders may put a management resolution to a meeting even though the constitution does not provide for it, and even though management is the board’s function. The ordinary meeting rules in Schedule 2 — chairman, notice, quorum, voting, proxies, minutes, shareholder proposals — apply.
Section 90(3) — and it does not bind the board
Unless the constitution provides that the resolution is binding, a resolution passed under subsection (2) is not binding on the board.
If shareholder resolutions bound the board, directors would owe duties they could not discharge: section 112 requires a director to act in good faith and in what the director believes to be the best interests of the company, and section 115 requires the care and diligence of a reasonable director. A director cannot be obliged to follow an instruction they believe is against the company’s interests.
The Act therefore separates voice from control. Shareholders may say what they think, and record it in a resolution. If they want a different result, the constitutional route is to remove the directors by ordinary resolution under section 134 — the sanction that makes the voice effective.
A constitution may make such resolutions binding, and some joint venture constitutions do so for defined reserved matters. That is a deliberate transfer of authority from the board to the shareholders, and it should be drafted precisely.
The rest of the accountability toolkit
| Tool | Section |
|---|---|
| Call a special meeting on the written request of shareholders holding 5% of the votes | s 102 |
| Put a shareholder proposal to a meeting | Schedule 2, cl 8 |
| Receive the annual report and financial statements | ss 209–212 |
| Question the auditor, who is entitled to attend and be heard at a shareholders’ meeting | s 203 |
| Inspect company records and require information from the company | ss 216, 219 |
| Apply for an investigation of the company’s records | s 220 |
| Injunction restraining conduct contravening the Act or constitution | s 142 |
| Derivative action in the company’s name, with leave | s 143 |
| Order requiring a director or the company to act | ss 148, 150 |
| Relief as a prejudiced shareholder | s 152 |
| Remove a director by ordinary resolution | s 134 |
Section 90A — the statement of rights
(a) the class of shares held, the total number of shares of that class issued by the company, and the number held by the shareholder; and
(b) the rights, privileges, conditions, and limitations, including restrictions on transfer, attaching to those shares; and
(c) the relationship of those shares to other classes of shares.
(a) such a statement was provided within the previous 6 months; and (b) the shareholder has not acquired or disposed of shares since; and (c) the rights attached to shares have not been altered since.
The statement is not evidence of title to the shares or of any of the matters set out in it, and it must state in a prominent place that it is not.
Evidence of title comes from the share register under section 69(1). The section 90A statement is an information document — valuable because paragraph (a) tells a shareholder the total number of shares of the class issued, which is how a minority discovers it has been diluted.
Compare section 75(1)(b), which requires a similar statement to accompany a share certificate on an issue or transfer. Section 90A gives the shareholder a right to ask for one at any time thereafter.
Sources
- Companies Act 1997 — ss 69, 75, 90, 90A, 101–103, 109, 112, 115, 134, 142, 143, 148, 150, 152, 203, 209–212, 216, 219, 220; Schedule 2
Before relying on anything here, read the current text of the Companies Act 1997 and check for later amendments. If a decision matters to you, get advice — start with the Office of the Public Solicitor, or find a firm in the law firms directory.