Convening Member's Meetings and the Court's Powers to Intervene

2014年 7月 29日

Convening Member's Meetings and the Court's Powers to Intervene

Subject to a company's Memorandum or Articles ("M&As"), the BVI Business Companies Act, 2004 (the "Act") provides that the directors of the company or anyone authorised by the M&As to do so, may call a meeting of members at any time.  The directors must call a meeting if requested to do so in writing by members entitled to exercise at least 30% of the voting rights in respect of the matter for which the meeting is requested (that percentage may be lower if the M&As so provide).

Pursuant to Section 86 of the Act, the BVI Court may order a members' meeting to be held and to be conducted in a particular manner, either: (i) if it considers that it is impracticable for the meeting to be called under the Act or the M&As; or (ii) where the Court considers it to be in the interests of members for a meeting to be called.  These provisions came under the scrutiny of the Commercial Court in Re Amazing Inc.  Amazing Inc had two equal shareholders, Silver Shadow Company Limited ("Silver Shadow") and Winbless Inc ("Winbless").  The entire beneficial interest belonged to a Mr Chang, and the declaration of trust by Winbless of its share in favour of Mr Chang, stated that Mr Chang had the right to dispose of the share by executing any instrument of transfer as agent of Winbless.  Amazing Inc had two directors, also Silver Shadow and Winbless.  Its M&As required the directors to convene a meeting of members on the written request of members holding more than 10% of the voting power.  The quorum for a members' meeting was the presence of a member holding at least 50% of the shares.

The background to the dispute which arose was simple: Mr Chang wanted to transfer Winbless' share to Silver Shadow.  

A board meeting for the purpose of considering the transfer did not proceed, and Silver Shadow's next move was to request the directors to convene a members' meeting for the purposes of removing Winbless from the board.  Without waiting for a response, Silver Shadow then sent out a notice of meeting, which it had signed as director.  Winbless said it would not attend the meeting because it had not been validly convened.  The meeting nevertheless went ahead and Silver Shadow resolved to remove Winbless from the board.  Mr Chang and Silver Shadow then commenced proceedings seeking a declaration that the resolution was effective, alternatively asking the Court to convene a members' meeting itself and to order Winbless to vote in accordance with Mr Chang's instructions.

As far as the meeting was concerned, the Judge agreed with Winbless: it was not open to one director to convene the meeting on its own initiative, bypassing the board.  The fact that the board had a statutory obligation to convene the meeting and that the Act was silent as to what should happen if it did not, did not mean that the Court could step into the gap, and hold that Silver Shadow had been entitled to convene the meeting.

The Court considered very carefully whether it should order that a meeting of members be held, and that Winbless should vote its share as instructed by Mr Chang.  The Court took the view that whilst the first limb of Section 86 of the Act was intended to permit the Court to overcome difficulties in the mechanics of convening or conducting members' meetings, the second limb gave the Court a general power to direct a meeting where a meeting would benefit the membership as a body. 

As to the first limb, the Judge agreed with English authority that "impracticable" did not mean "impossible", the question was whether, as a practical matter, the meeting could be conducted.  The Court should not, however, use the provision so as to destroy entrenched rights or interfere with the balance of power within the company structure.  For reasons which do not affect the scope of this article, the Judge was prepared to proceed on the basis that a members' meeting could not be convened without either Winbless' consent or a Court order, even though his actual view was that it could have been (the quorum for a board meeting being one).  The evidence showed that Winbless had been as uncooperative and obstructive as it could be, albeit within the strict limits of the law.  Winbless was, however, statutorily obliged to join in convening a meeting and there were therefore grounds for making the order.  Given Winbless' behaviour, the Court also directed that if Winbless attended the members' meeting, it must vote in accordance with Mr Chang's wishes.

As to the second limb, the Judge was, understandably, not prepared to speculate as to the sort of situations where the power might usefully be exercised, but was firmly of the view that the present case was not such a situation: the Court could not possibly conclude that a meeting to remove Winbless from the board would benefit the members as a whole; that would entail taking sides in a boardroom dispute.

It will of course be simple enough for a company to ensure that its M&As do make provision for what should happen if the directors do not convene a properly requisitioned meeting, thereby avoiding the majority of the difficulties the Court had to confront in this case.

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