Is it legal?

For an appointed executive(PR) to deny the owners of the club(the shareholders) information on the company's financial position? Does this contravene company law? Perhaps someone with greater knowledge could comment.

the shareholders appoint the directors and all the directors have to do is fulfil their legal obligations to those shareholders. Disclosure of manangement information is not a requirement at law, only statutory information. This stops competititors buying say 1 share and requesting copies of the management accounts.

The directors only obligations is to prepare statutory accounts and maintain the statutory records.

Board meetings
The articles of a company will delegate the management of the company to its board of directors (for more information on the articles see the OUT-LAW guide to The company constitution). The board will act collectively, meeting regularly to consider and decide issues affecting the company. How those board meetings are run is a matter largely for the articles and for the board itself to decide. Unlike shareholders’ meetings, which are more tightly regulated, board meetings are generally free of legislative interference.

So there is nothing in statute about the notice to be given for board meetings. Any director or the secretary can call a board meeting and, unless the articles or a previous board meeting have stipulated the length of notice to be given, the only requirement is that it be reasonable.

What is reasonable will depend on the type of company and its past practice. For a private company where all directors are already on site, reasonable notice may be a few hours or even minutes; for a large international company with directors scattered over the globe and non-executives with other responsibilities, board meetings will be fixed a year or more in advance. Again, unless the articles or a board resolution say anything to the contrary, the notice can be written or oral and need not detail an agenda for the meeting.

That is the legal position, but there is a clear contrast here with what today would be regarded as best practice. The Combined Code for listed companies says that boards should meet regularly, there should be a schedule of matters that may only be settled by the board, and directors should be properly briefed. (The ICSA website has further guidance on this.) The Code now requires that the directors’ annual report contains a record of attendance at board and committee meetings.

The articles will usually stipulate a minimum number of directors to form a quorum before the meeting can go ahead. But it is important to realise that:

■having a quorum is not a substitute for giving notice of a meeting. Achieving a quorum will not validate a board meeting if reasonable notice has not first been given to all directors;
■when calculating the quorum, the articles will often exclude any director who cannot vote on a particular resolution, perhaps because they have an interest in a contract under consideration.
Votes at a board meeting will be calculated on the basis of one for each director present, with the chairman having a casting vote in the event of a tie, unless the articles provide for anything different. A director with a personal interest in a matter that is the subject of the vote will usually be excluded from voting, but the articles need to be checked on the point (see the OUT-LAW guide to The company constitution).

In the case of larger companies, if the articles are well drafted, board meetings by telephone or video conference will be permitted. And for smaller companies, board resolutions may often be in writing, signed by all the directors entitled to receive notice.

Where a meeting is held, there is a legal requirement that minutes are taken (and the Companies Act 2006 requires them to be retained for at least 10 years). Minutes allow a director to have their views on a matter recorded– something that can be useful if questions are raised in the future, particularly after an insolvency.

The board can delegate matters to sub-committees, and listed companies are now required by the Combined Code to have audit, remuneration and nomination committees. Resolutions establishing committees may dictate quorum, notice and other requirements; failing that, they will follow the same rules as for the full board.

Annual General Meeting
A public company must hold an annual general meeting once each calendar year, and there must not be more than 15 months between each AGM.

The time and place of the AGM are matters for the board to decide but, given that the AGM is a rare opportunity for shareholders to have their say and to question directors publicly, companies have faced criticism when they have opted for times and venues that make it difficult for many shareholders to attend.

Under the Companies Act 2006, a private company does not have to hold an AGM, though it can if it wants.

The Combined Code states that the chairmen of the board’s audit, remuneration and nomination committees should be sure to attend the meeting so that they can answer relevant questions from shareholders. Shareholder attendance at AGMs is, however, usually very low, with many choosing to vote by proxy on the standard resolutions to be proposed, or not to vote at all.

Periodic furore at directors’ pay packages, and the requirement that the directors’ remuneration report be put to shareholders for approval, may, however, lead to increased numbers at AGMs, and some consequent flexing of shareholders’ muscles.

The main purpose of most AGMs is for the directors 'to lay before the company in general meeting' the previous year’s audited accounts and accompanying reports. Note the wording here – there is no requirement that shareholders approve the accounts or accept them. Shareholders have no ability to reject the accounts. They must stand as they are, having been prepared by the directors and audited by the auditors. The AGM simply provides the opportunity for the directors to present the accounts; the resolution put to shareholders will usually be 'to receive' the accounts and reports.Apart from the accounts, usual business at the AGM will comprise the declaration of any dividend proposed by the board, the appointment of auditors and the fixing of their fees (the latter task usually being delegated to the board), and the election of any directors who are retiring because the articles say they must.

Listed companies will also commonly propose resolutions at the AGM to:

■give directors authority to allot shares, up to a certain limit;
■disapply pre-emption rights on the issue of shares, up to a certain limit;
■renew authority for the company to buy up to 10 per cent of its own shares;
■approve the directors’ remuneration report.
The AGM is not restricted to this business and, in addition, will often be used to put to shareholders resolutions to amend the articles, adopt new share schemes or do anything else that requires their approval.

Shareholders can propose their own resolutions for an AGM but they have to act in sufficient numbers: there must either be at least 100 of them holding a certain amount of paid up share capital, or enough of them to represent at least five per cent of the votes]Extraordinary General Meeting
If something requires shareholder approval and cannot wait until the next AGM, an Extraordinary General Meeting (EGM) will be called. Usually, it will be the directors who convene an EGM, but the shareholders can force the directors to hold an EGM if they collectively own at least one-tenth of the paid up voting share capital. If the board then fails to comply within 21 days, shareholders can go ahead and call the meeting themselves.
As with AGMs, the directors must act in good faith when convening an EGM and should avoid picking a time and place with the intention of making it difficult for shareholders to attend.

Notice
All shareholders are entitled to receive written notice of a meeting unless the articles say otherwise (a smaller company’s articles may often state that notice is only to be given to those shareholders who have provided a UK address to the company). In addition, notice of a general meeting must also be given to each director (whether a shareholder or not) and to the auditors – a point that can often be missed.

The articles will state how notice can be given to shareholders, and it is important that their provisions are followed: failure to do so can invalidate the notice, the meeting and the resolutions passed at it.

Legislation introduced in 2000 allows notices to be sent electronically (by e-mail or fax) if a shareholder is in agreement. Since January 2007, a company has also been able to use a website.

Documents and information to be sent to shareholders can be posted on a website if a shareholder resolution allowing this has been passed (or the articles permit it). Shareholders can opt out and still require hard copies through the post. In any event, each time a document is put on the website shareholders must be told, usually by hard copy letter.

Where a notice is sent through the mail, the articles will stipulate first or second class post and when the notice is deemed given, usually 48 hours after posting. An AGM for a public company requires 21 clear days’ notice; all other meetings – a private company AGM (if held) and all EGMs – only need 14 clear days. For these purposes, 'clear days' means exclusive of the day on which the notice is deemed served and the day of the meeting.

An example will explain the way this works: a plc AGM notice may be posted on July 1. If the articles state that notices sent by post are served 48 hours later (excluding weekends and bank holidays), notice will be deemed given on July 3. Day 1 of the notice period will then be July 4; day 21 will be July 24, which means that the meeting can be held on July 25. Note that the 14 and 21 day time limits apply from October 2007, unless a company’s articles require longer notice. Before that date, all AGMs require 21 clear days, as do all special resolutions.

For listed companies, the Combined Code requires the AGM notice and related papers to be sent to shareholders at least 20 working days before the meeting.

The notice must give sufficient indication of the business of the meeting, so that a shareholder can decide whether to attend or not. This will usually be achieved by setting out in full the resolutions to be proposed at the meeting; and with special resolutions, it is a requirement that their full text is given, and no amendment of substance is made. The notice must also tell shareholders that they can appoint a proxy to attend and vote in their place at the meeting.

These notice periods can be dispensed with if, in the case of a private company, agreement is given by those holding at least 90 per cent of the nominal value of the voting shares. For a public company, that figure goes up to 95 per cent, though a plc’s AGM always has to be called on full notice.

Special notice
In two specific situations 'special notice' may be required:

■removing an auditor and appointing an auditor where there has been a change since the last AGM;
■removing a director.
Special notice is a commonly misunderstood concept. Special notice is not given by the company, but to the company by a shareholder.

Notice to move the relevant resolution must be given to the company at least 28 days before the meeting. Having received the special notice, the company must inform shareholders of the resolution when it gives notice of the meeting.

Shareholder circulars
Anything other than the routine AGM resolutions is likely to require some form of explanation to shareholders by the board in the form of a letter or circular. In the case of a listed company, the Listing Rules contain requirements for such a circular. For example, the directors must say whether they believe the proposal is in the best interests of shareholders as a whole, and they must recommend which way shareholders should vote.

Unless the circular is dealing with standard business of the type described in the Listing Rules, it must be submitted to the UK Listing Authority for approval before it is sent to shareholders.

Resolutions
There are three types of resolution, each with a different purpose and distinct requirements:

■ordinary – unless companies legislation or the articles require anything different, an ordinary resolution will be sufficient for all decisions to be taken by general meetings of shareholders. If proposed at a plc AGM, 21 clear days’ notice will be necessary; if proposed at a private company AGM or at any EGM, only 14 clear days are needed (these limits are effective from October 2007, subject to the company’s articles). An ordinary resolution will be passed if a simple majority of those shareholders who are present and vote are in favour. If a poll is called, it needs a simple majority of all the votes cast (one share giving one vote, unless the articles say differently). Note: it is a simple majority of those who vote, not of all shareholders – or even of all who attend the meeting.
■special – matters that are less routine and of more importance, such as changes to the articles of a company, a change of name or a switch from being a private to a public company, or vice versa, will require a special resolution. Unless proposed at a public company AGM, 14 clear days’ notice of the resolution must be given (prior to October 2007, 21 clear days are needed). The notice must clearly state that a special resolution is to be proposed and it needs the support of 75 per cent of those voting or, on a poll, 75 per cent of the votes cast.
■written – historically, it has been possible for many resolutions of the members of a private company to be passed without a meeting provided all the shareholders who would otherwise be entitled to vote sign a written copy (not necessarily the same piece of paper, just the same wording). The Companies Act 2006 relaxes this rule so that only shareholders with more than 50 per cent of a private company’s shares have to agree an ordinary resolution; for a special resolution, the figure goes up to 75 per cent. The resolution must still be circulated to all shareholders (it is a criminal offence not to do so) but there is no need to get a signature if a shareholder’s agreement is signified in writing in some other way, such as an e-mail. This change, effective from October 2007, allows much greater use of written resolutions and means there will be little reason ever to hold a shareholder meeting for a private company.
Shareholders do not have to wait for the directors to propose a resolution: those holding at least five per cent of the votes can require the company to circulate their own resolutions. Any resolution circulated to the shareholders will lapse if it has not been agreed to by the necessary majority within 28 days.

Note that written resolutions still cannot be used by public companies.