What happens if a chairman storms out of a shareholders meeting?

17th October 2019 Corporate

Occasionally shareholders meetings can become fraught, and when faced with hostile shareholders it is not unknown for chairmen to declare a meeting over and just leave – particularly where resolutions they don’t want passing are to be considered. The recent case of Kaye and another v. Oxford House (Wimbledon) Management Company Limited considered what the effect of this would be.

Oxford House was a flat management company, owned by the owners of the flats in the block – a very common arrangement. An argument arose between certain of the flat owners as to whether or not some patio furniture had been place by one tenant in the shared garden of the block, and not on his property. This argument escalated into litigation. After much back and forth, some of the shareholders requisitioned a shareholders meeting at which a large number of resolutions, including resolutions to remove the current board and appoint new directors, were to be considered. After calling the meeting one of the current directors took advice from counsel as to whether the resolutions to be put to the meeting were ineffective or vexatious, and therefore could not properly be moved at the meeting pursuant to s.303(5) of the Companies Act 2006. At the meeting, the chairman declared that the resolutions would not be put to the meeting as those relating to the board changes would result in there being fewer directors than the company’s articles of association required – in part because counsel had opined that the re-appointment to the board of certain former directors who had been removed by a previous vote would be vexatious. The chairman then declared the meeting closed and left with one other shareholder. Notwithstanding this, the rest of the shareholders at the meeting unanimously agreed it should continue, and that they should vote on the resolutions. They did so, and all the resolutions passed. The Court was then asked to, amongst other things, make a declaration as to whether the resolutions changing the board were validly passed.

Ultimately the Court determined that the resolutions were validly passed and the change of directors was effective. There were a number of reasons for this, including:

  • there being no power for the directors of a company to consider whether a proposed resolution could be properly moved after the notice of general meeting was sent. If they changed their mind about a resolution being moved they should attend the meeting and attempt to persuade the shareholders that it was not proper;
  • a chairman has no power to stop a general meeting at his own will and pleasure, nor does he have discretion to decide that resolutions on the agenda should not be put to the meeting; and
  • if a chairman does leave a meeting, it is open to those shareholders present to appoint a new chairman and continue the meeting (as long as they constitute a quorum, of course).

Especially in relatively small companies passions can run high as to how the business should be managed and who should be in charge. This cause should serve as a reminder to both directors and shareholders that attempts to frustrate the proper exercise of shareholders’ powers will be frowned on by the Courts, and that abuses of process to achieve the results desired by the directors are unlikely to succeed.

We regularly advise on shareholders disputes and procedural matters relating to shareholders meetings, and advise on how best to ensure that meetings are properly conducted. ​​​​​

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John Young is a Partner located in Londonin our Corporate and Commercial department

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