Section 104 of the Companies Act 1997 is the answer when a company’s own meeting machinery has stopped working.
Section 104(1) — the grounds
(a) it is impracticable to call or conduct a meeting of shareholders in the manner specified in this Act or the constitution; or
(b) it is in the interests of a company that a meeting of shareholders be held,
the Court may order a meeting to be held or conducted in such manner as the Court directs.
Paragraph (a) is about mechanics: the ordinary process cannot be made to work. Paragraph (b) is far wider — it asks only whether a meeting is in the interests of the company, without requiring any impracticability at all.
Note the breadth of the remedy: the Court may direct how the meeting is to be held or conducted. That includes fixing the venue and date, appointing a chairman, setting the quorum, directing how notice is to be given, and directing how voting is to proceed.
When a meeting becomes impracticable
| Situation | The problem |
|---|---|
| Deadlock between two equal shareholders | Neither will attend the other’s meeting, so the quorum can never be met |
| A quorum requirement that cannot be satisfied | Schedule 2 clause 4, or a constitutional quorum, has become impossible — often after a death or a departure |
| Sole shareholder and sole director has died | Nobody can call or attend a meeting until the estate is administered |
| The board will not act | Directors ignore a section 102(1)(b) requisition — see section 102(2) |
| Shareholders cannot be located | Notice under Schedule 2 cannot practically be given |
| A minority is being frozen out | Meetings are called at times or places designed to exclude — also a section 152 matter |
| A creditor needs shareholder action | For example to appoint directors or approve a restructuring — hence the creditor’s standing |
Section 104(2) — standing
Application may be made by a director, or a shareholder, or a creditor of the company.
Most shareholder remedies in the Act are confined to shareholders and directors: section 143, section 152, section 35. Section 104 adds creditors, who have a legitimate interest in a company being able to function — to appoint directors, approve a restructuring, or resolve on a liquidation — when its internal machinery has seized up.
Section 104(3) — costs and security
The Court may make the order on such terms as to the costs of conducting the meeting and as to security for those costs as the Court thinks fit.
So the Court controls who pays. Where the application follows a board’s refusal to act on a valid requisition, section 102(3) is directly relevant: every director who fails to comply with the request is liable for all costs associated with making the application under section 104. Directors who ignore a 5 per cent requisition therefore face personal costs, quite apart from the offence under section 102(4).
The usual route: requisition first, Court second
- Requisition under section 102(1)(b). Shareholders holding not less than 5 per cent of the voting rights entitled to be exercised on the issue make a written request; the board shall call the meeting.
- Wait 21 days. Under section 102(2), if the board fails to convene within 21 days, the shareholders may request the Court to order a meeting under section 104.
- Apply under section 104, relying on paragraph (a), paragraph (b), or both — and on section 102(3) for costs against the defaulting directors.
Because the Court may direct how the meeting is conducted, an applicant should ask for the directions that will actually make it work: an independent chairman, a quorum of one where deadlock is the problem, a fixed agenda, a requirement that voting be by poll, and directions as to notice and the record date under section 106.
The Court’s related powers
| Power | Section |
|---|---|
| Appoint directors where there are none, or the number falls below the minimum | s 132 |
| Alter the constitution where the ordinary procedure is not practicable | s 35 |
| Rectify the share register, and award compensation | s 71 |
| Prejudiced shareholder orders — including regulating the conduct of the company’s affairs | s 152 |
| Injunction restraining conduct contravening the Act or constitution | s 142 |
| Order a meeting of creditors or shareholders in a liquidation | s 362 |
| Put the company into liquidation where it is just and equitable | Part XVIII |
An order under section 104 makes a meeting happen. It does not decide how the shareholders should vote, and it does not resolve a deadlock of substance — if the two 50 per cent holders still disagree, the meeting will simply record that. Where the underlying problem is that the company cannot function at all, the realistic applications are section 152, a buy-out, or a liquidation.
Sources
- Companies Act 1997 — ss 35, 71, 101–106, 132, 142, 143, 152, 362; Schedule 2; Part XVIII
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.