Company operates through two corporate organs namely board of directors and general meeting and both of these organs exercise their corporate duties through the decisions made in board meetings and general meetings to honour Hong Kong corporate formation.
Through the general meeting, members can take part in the decision-making process of the company thus to govern the matters in Corporate way, there is the need to establish some set of rules regarding conductions of General Meetings so that these rules may ensure:
Nature of a General Meeting
As per the common law, it is mandatory to have at least two members presence in the meeting however, there are the cases where one-person meeting also has the probability such as where court ordered to conduct the meeting.
Apart from court ordered meetings, there is the question on the validity and existence of one-person meeting. Scottish Session Court negates the concept of one-person meeting on the basis of non-compliance with the minimum quorum criteria of two persons. But, English Court of Appeal interprets the word “meeting” as the indication of meeting of two or more individuals for but they said that interpretation can be different, depending on the circumstances and the subjected matter. Re Chine Star Enterprise’s case sets the principle for one-person meeting and court referred to Reg.50 which enabled one individual to form a quorum for Hong Kong corporate formation. Court supported their narrative by saying:
As per these arguments, it has been established that article should include a provision to clear the matter of single person meeting (sole proprietorship HK) or at least regarding the issues of adjourned meetings. Model Articles includes the provision as per which it is possible to constitute a quorum with the present members that is if all members do not come within the half hour against the time dedicated for holding the meeting, then the present members can constitute quorum of the meeting through proxy. So, by this it means that regulations allows for the probability of single person meetings.
As of the present scenario, Single person company’s or sole proprietorship HK do exist. The concept of single person companies emerged and enforced in 2004 for the first time in Hong Kong and thus amended Companies Ordinance (Cap.622) allowed the operations of single person companies. In the case of sole membered company, that one individual constitutes the quorum of the general meeting and decisions are taken by that single person itself.
Rules for the Annual General Meeting
Unless Companies Ordinance exempts, every company is required to hold Annual General Meeting at the end of every fiscal year or during anytime but must be held once in a year. In this meeting, directors are supposed to present the copy of company’s financial statements, auditor’s and director’s reports. In addition to this, serving directors are required to retire in this Annual General Meeting and their replacement be appointed in the same meeting too. Annual General Meeting is the forum that lets the members and directors evaluate the progress of the company and gives them direction regarding future ventures and goals for the next year. Where there is no reports of conduction of Annual General Meeting, any member can seek the help of the court and court can intervene and orders for the conduction of Annual General Meeting
Section 610(1)-610(3) of Cap.622 outlines different rules for the private and companies limited by guarantee and for the public companies, regarding the specified time period for the conduction of Annual General Meeting. For the private companies and companies limited by guarantee there is the requirement to held AGM after 9 months of company accounting reference conclusion. Whereas for the public companies there is the requirement for it to held after every 6 months. For the situation where company is failed to hold Annual General Meeting then upon the application of any of its member, court can order to held General meeting in pursuance the failure to hold Annual General Meeting and thus in this situation General Meeting would have the status as that of Annual General Meeting. As per the Section 367 of Cap.622 company’s accounting reference period is analogous to the company’s fiscal year.
Though it is compulsory to hold the Annual General Meeting but there is some exception for the private companies and they can replace the written resolution with that of AGM with the compulsion of sending copies of the reporting documents to each member. For such resolution to stay valid, it is necessary to have the consent of all members and thus stays invalid if majority does not authorise it. However, Cap.622 does not restricts jurisdiction of this alternative to only private companies, public companies can also enjoy this immunity, but practices shows it to be adopted only by private companies. Apart from private, public companies, there is another classification knows as dormant companies which gives them permission not to hold the Annual General Meeting.
Apart from Annual General Meeting, there is another terminology that is Extra-Ordinary General Meeting, commonly knows as EGM. As long as notices has been conveyed to the members who are supposed to be attending EGM, then unlike Annual General Meeting, EGM can be held anytime during the year. However, there is no provision in the Cap.622 and other predecessor ordinances to mention EGM but it’s the company’s articles prerogative to allow for such EGM’s.
In addition to shareholders, there is the terminology called class shares which holds redeemable shares of the company. Class meetings are usually held to have the consent of class shares holders in any matter such as variation in rights of class shares.
In the situation where there is no reporting of general meetings held. Then court can intervene in the situation and can order the holding of general meeting to enable company to transact its business, says Section 570 of Cap.622.
Rules of Calling the General Meeting
Depending on the circumstances, general meeting can be called by directors, members or the court. We shall now discuss these circumstances in detail below:
Meeting Call by the directors
As per the company ordinance Cap.622 and Model Articles, directors have the power to call general meetings. Matter is of slight technical interpretation because it is unclear from the legal provisions that either single director can exercise this duty or the whole board of directors has to put forward to requisition to call general meeting. Deputy Judge Anthony To in Hong Kong Racing Pigeon Association’s case, referred to the statutory implementation of the legislation which provided for the inclusion of singular within plural. However, contradiction of this decision exists. Cozens-Hardy J questioned this interpretation in Re Haycraft Gold Reduction and Mining Co’s case and gave ruling that board must act as a unit and being its declaration of corporate organ, it must act in its unanimous capacity.
Any confusion in Section 565 on the director’s jurisdiction to call meeting is cleared in Section 569 of Cap.622 which empowers two or more directors or proportion of 10% of total board’s composition to call the general meeting and thus emphasise on acting directors as corporate organ. However, if the company’s constitution allows the individual director to call the general meeting then he or she is entitled to call the general meeting.
Members Right to call General Meeting
Where there is existence of board of directors, members are not allowed to call the general meeting directly. They can request the directors to hold the general meeting. Members holding 5% of total voting rights are liable to put forward the requisition to hold general meeting. In addition to this, agenda of resolution must be provided along with the requisition.
If the directors do not act upon this requisition within the 21 days of requisition, then the requestor with more than 50% of voting rights can call the general meeting on the expense of company within three months of date of requisition.
Where board of director does not exist, or sufficient directors are not there to meet the quorum criteria then members representing 10% of total eligible voting members may call the general meeting in the same way as directors would call the general meeting.
Court’s right to call General Meeting
Court has the right to call the general meeting in the manner it should be called or as mentioned in company’s constitution. There is the test to determine court’s right to call the general meeting and as per this test, court may call the general meeting:
The basic question to determine jurisdiction of word “impracticable” is of eminent importance and Wyyn-Parry J in Re El Somberro Ltd noted that word “impracticable” does not implies impossibility instead it refers to the determination of the circumstances in which meeting could be conducted and where there is affirmation in its probability to held, general meeting could be held and convened as per court’s direction. Word “impracticable” basically means of the situation where given the circumstances it is impossible to conduct or call the meeting. For instance, there were two directors of the company and both passed away then pursuant to the requirement of quorum to be two, general neither be called nor be conducted. It can further be illustrated in the case where it the issue is not impossibility, but rather of being inquorate. For example, out of two directors, one is absent, and the quorate requirement is of two then in such circumstances meeting is not impossible but rather subjected to issue of inquorate.
Instead of impracticability, court can intervene in the situation of deadlock also, where the minority shareholders refused to attend the meeting and in their absence issue of quorum may arise. To resolve this issue and to let the business affairs not to get halted and to comply with Hong Kong company formation services, court may order the conduction of meeting in which those shareholders who were falling short of required quorum would constitute their own quorum and continues the company’s operations. The establishment of the impracticability is not a complicated one and just by giving proof that call notice was issued and delivered to the director but he or she didn’t attend the meeting or made his or herself inaccessible, impracticability can be established.
Where there is the reporting of intentional absence of minority shareholders from the meeting as they have already sought legal assistance for remedies for an unfair prejudice. Then in such circumstances court must take extra care and to protect minority shareholders against any harmful or offensive decision of general meeting, conditional orders for the conduction of general meeting should be given and safeguard of their rights must be ensured.
It must be noticed and ensured that court’s order to arrange general meeting to satisfy Hong Kong company formation services should not be adhered to the alteration of shareholder’s agreement. So in the case where shareholder agreements put forwards the condition of presence of certain class share holders to fulfil quorum requirements, court must not order conduction of general meeting. As the case of Manfield Coatings Co Ltd reports that both partied agreed on the terms that no change in company’s ownership and directorial college be take place without the consent of both parties. Cheung J denied to exercise his powers as per Section 570 of Cap.622 to order the conduction of general meeting. This verdict itself authorises the observation that court cannot use Section 570 where there is probability of alteration of shareholder’s agreement.