Shareholders’ Rights in Annual General Meetings

As companies are owned by their shareholders, general meetings or shareholder meetings are a way for shareholders to internally discuss the affairs and business of the company. Shareholders also make important decisions concerning the company during such meetings.

In this article, we take a brief look into the items that a shareholder should be aware of, apart from whether or not door gifts or free food will be provided!

Notice of Meeting

A notice of meeting is a document containing the details of the general meeting being called, including the agendas and resolutions which will be discussed during said meeting. Notices of meetings may be accompanied by circulars or statements setting out the proposed business of the meeting. At the very least, the text of resolutions sought to be passed must be set out and sufficient information must be contained in the notice to enable a prudent member to determine his attendance at the meeting. Failure to do so may give rise to a ground for concerned members to invalidate the proceedings at the meeting (Hup Seng Co Ltd v Chin Yin [1962] MLJ 371).

Generally, the notice for an annual general meeting for a public company must be circulated at least 21 days before the date of the meeting. If the meeting being called is an ordinary general meeting, then notice must be circulated 14 days before. Meanwhile, for private companies, the notice of meeting shall be circulated at least 14 days before the date of the meeting unless the meeting is being called to pass a special resolution. In the latter case, the notice of meeting must be circulated 21 days before.

However, for both public and private companies, the constitution of the company could modify these timeframes in order to require longer notice periods. 

If a member with full knowledge of the general meeting and its agendas, chooses to be absent from the meeting or to abstain from voting, he is bound by the decision of the voting members and cannot later raise any complaints or objections in regard to the same, unless it can be shown that there was a non-disclosure of material fact in the notice of meeting.

Notwithstanding this, the court is generally reluctant to invalidate the proceedings of an AGM due to technical irregularities on the notice of meeting so long as no grave injustice is caused to the members of the company. For instance, in Ronald Felix Hardin v Nora Hardin & Anor [2017] MLJU 867, the plaintiff complained that he was not served with the notice of meeting, and only knew of the AGM through his brother, who was also a shareholder. The Court did not invalidate the meeting as no substantial injustice was caused to the plaintiff since he did have prior knowledge of the meeting.

Voting

Generally, each shareholder is entitled to have one vote for each ordinary share. On the other hand, preference shareholders in public companies do not have voting rights even though they may enjoy other rights of ordinary shareholders, such as attending the general meetings.

During the AGM, eligible shareholders vote on current affairs of the company, including but not limited to issues such as the appointment of directors, dividend payments, and choice of auditors.

There are two types of resolutions in general, namely the ordinary resolution and the special resolution. Members with voting rights or proxies appointed by the members are entitled to vote on both resolutions. A simple majority, which means more than half of the total number of votes cast, is required to pass an ordinary resolution. On the other hand, a special resolution requires at least 75% of valid votes in its favor.

Special resolutions effectively ensure that an effort is made to gain wider support for key decisions in a company. The special resolution regime helps to protect minority shareholders against important decisions being taken without proper consideration, which usually involve those affecting the company's constitution such as amendments to the company’s constitution, and changes to the share capital of the company.

Appointment of Proxies

Shareholders of a company may appoint proxies to attend general meetings on their behalf if they are unable to attend. Proxies are third parties appointed to act on behalf of the absent shareholder and essentially hold similar rights as any other shareholder at the meeting, namely to attend, speak and vote. The fundamental right of a member to appoint a proxy is also expressly provided in statute, namely Section 334(1) of the CA 2016.

In order to appoint a proxy, a proxy form is filled up by the shareholder. The proxy form shall clearly name and identify the proxy and may also contain instructions for voting – which the proxy is bound by.

Election and Removal of Directors

The unfettered powers of shareholders also include the power to remove directors with poor performance or those who disregard the interest of the company. In private companies, shareholders may exercise their power to remove a director by passing an ordinary resolution even before the expiration of the director’s tenure of office. On the other hand, the shareholders must observe the requirements under Section 206 of the CA 2016 when removing a director of public companies, which include a special notice in a resolution for removal of a director and that removal of a director can only take effect when that director’s successor has been appointed.

It is worth noting that there is a significant difference between ‘removal of director’ and ‘retirement of director’. Directors are statutorily required to retire in the instances provided under Section 205 (3) CA 2016 and this usually occurs by rotation. While retired directors can be (and are often) reappointed, this decision ultimately lies with the shareholders of the company who must vote on the same at general meetings.

The “Q&A” Session & the Right to Speak

A shareholder’s right to speak during a meeting is also a right conferred by statute. Members must be given the opportunity to question the board of directors and the business decisions made by them. Shareholders are also entitled to expect that directors give full and frank disclosure of all matters to allow the shareholders to have a clear picture of the company’s affairs and to make informed decisions at the general meetings.

General meetings give shareholders the precious opportunity to make queries to the board of directors and hold them accountable for the decisions and policies made. It is therefore important that shareholders be given the chance to speak out and discuss the decisions of the board which have direct bearing over the shares held by them.

There are various rights afforded to shareholders to safeguard their interests in a company through general meetings. Only where these rights are compromised or violated, is legal redress worth pursuing.

To find out more about general meetings and the rights of shareholders in relation to the same, tune in to our webinar on 11.11.2021 at 8.00pm. Interested? Register here.