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Who can convene an extraordinary general meeting?
An extraordinary general meeting (“EGM”) is a meeting of shareholders other than the company’s annual general meeting. Under section 310 of the Companies Act 2016 (“the Act”), an EGM may be convened by either the board of directors or the shareholders. According to section 310(b) of the Act, for shareholders to convene an EGM, the shareholders must hold at least 10% of the issued share capital of a company or a lower percentage as specified in the constitution of the company or if the company has no share capital, by at least 5% in the number of the shareholders.
Further, shareholders of a company have power under section 311 of the Act to require the directors to convene an EGM (“section 311 requisition”). Following a section 311 requisition, the directors are under an obligation to call and hold an EGM in accordance with section 312 of the Act.
When directors fail to convene EGM following a section 311 requisition
There may be a situation where upon a section 311 requisition, the directors default in calling and holding a meeting of shareholders in accordance with section 312 of the Act. Section 312 states that:
- Directors shall call for the meeting within 14 days from the date of the requisition;
- Directors shall hold the meeting on a date not more than 28 days after the date of the notice to convene the meeting;
- Notice of meeting shall include the text of resolution if requests received by company identify a resolution intended to be moved at the meeting;
- Business that may be dealt with at the meeting includes a resolution of which notice is given in accordance with section 312 of the Act; and
- If the resolution is to be proposed as a special resolution, the directors shall be considered as not having duly called for the meeting if the notice of the resolution is not
- given in accordance with section 292 of the Act.
In such event, section 313 of the Act grants power to the shareholders who requisitioned the meeting, or any of the shareholders representing more than one half of the total voting rights of all the shareholders who requisitioned the meeting to directly convene an EGM where the directors have failed to do so.
Pursuant to section 313, the EGM must be convened by the shareholders not later than 3 months from the date on which the directors received the section 311 requisition to call for an EGM.1 Additionally, the EGM shall be convened in the same manner, as nearly as possible, as that in which meetings are requisitioned to be convened by the directors of the company.2
The party who convenes shall bear the costs
In convening an EGM, costs will be expended to arrange for and organise the meeting. The costs and expenses incurred in organizing the EGM would be borne by the party convening the EGM. In other words, if the EGM was convened by the directors, either at its own discretion pursuant to section 310 of the Act or a section 311 requisition, then the company must bear the costs in convening the EGM.
Similar to the above, if the EGM was convened by the shareholders pursuant to section 310(b) of the Act, then the shareholders themselves must pay for the costs of calling and holding the EGM.
Contrasting Position under Section 313 of the Act
Whilst the costs and expenses incurred by shareholders in convening an EGM pursuant to section 310(b) of the Act are not recoverable from the company, this position is in contrast to an EGM convened by shareholders pursuant to section 313 of the Act i.e. an EGM convened by shareholders by reason of the directors’ failure to call and hold a meeting upon a section 311 requisition.
In the latter case, any reasonable expenses incurred by the shareholders requisitioning the meeting shall be reimbursed by the company.3
Additionally, the sum reimbursed shall be retained by the company out of any sums due or to become due from the company by way of fees or other remuneration in respect of the services of the directors who defaulted in calling the EGM pursuant to a section 311 requisition.4
Conclusion
The costs and expenses incurred in arranging and organising an EGM will be borne by the parties convening the meeting. Therefore, shareholders convening an EGM pursuant to section 310(b) will have to pay for the costs of holding the EGM and cannot recover the same from the company. However, where the shareholders convene an EGM under section 313 of the Act following the failure of the directors to duly call a meeting upon a section 311 requisition, any reasonable expenses incurred by the shareholders in convening such EGM shall be reimbursed by the company.
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1 Section 313(3) of the Companies Act 2016
2 Section 313(4) of the Companies Act 2016
3 Section 313(6) of the Companies Act 2016
4 Section 313(7) of the Companies Act 2016
Prepared By: Syed Zomael Hussain & Fozi Addina Mohamad Fozi