The Companies Act of 2008 introduces flexibility regarding the manner and form of both directors and shareholders meetings, that represents a more practical approach to formal documented decision making. It is imperative that both directors and shareholders take note of these changes and implement it accordingly.
Section 60 allow for resolutions to be validly adopted by a written resolution and not at a meeting of shareholders, known as a “round robin” meeting. If the “round robin” resolution is supported by the same number of voting rights as would have been required at a shareholders meeting, then it is valid. For example, an election of a director that could have been conducted at a shareholders meeting may instead by conducted by “round robin”.
There are some instances where decisions cannot be taken in this manner, for example matters that must, in terms of the 2008 Act or the Memorandum of Incorporation (MOI), be decided at an annual general meeting (AGM). An exception is where a special resolution has been discussed at an AGM. Then that special resolution may be taken either at the meeting, or by a subsequent “round robin” resolution unless the MOI specifies that such a decision must be taken at the AGM.
The requirements for “round robin” resolutions are:
- The resolution must have been submitted for consideration to the shareholders beforehand, and the matter is voted on in writing within 20 business days after the resolution was submitted to them; and
- Within 10 business days after adopting the resolution, in terms of a round robin, the company must deliver a statement describing the results of the vote, consent process, or election to every shareholder who was entitled to vote on, or consent to the resolution.
Reference should also be made to Regulation 7 and Table CR.3 in the Regulations which sets out the deemed delivery dates and times for different methods of delivery. The calculation method for business days is set out in section 5(3) of the 2008 Act.
Section 74 allows for Directors to also make use of substantially similar written round robin resolutions for decision making. A decision adopted by written consent of the majority of directors given in person or by electronic communication is valid, provided each director has received notice of the matter to be decided.
A drawback of “round robin” resolutions is that there is no, or only a limited opportunity for debate on the matter. There is no specific indication as to whether a shareholder (in the case of shareholders meetings), or indeed, a director (in the case of a directors meeting) could object to the method of decision-making and insist on a meeting being held.
A shareholder could exercise his rights under to relief from oppressive or prejudicial conduct under section 163 of the 2008 Act.
If you would like to act on the relief as provided and start formalising decisions by “round robin” resolutions, you are welcome to contact Christa Marais at 021 840 1600 or firstname.lastname@example.org for further information or assistance.