The different ways decisions can be taken by your Residents Association Company

There are two ways in which decisions can be made at a shareholder meeting: a vote can be taken by a show of hands or by a poll. Let us first examine the most straightforward situation, before the intricacies of shareholder voting are delved into too deeply. At common law, decisions at a shareholders meeting will be taken first on a show of hands, unless the Articles of Association of that company provide otherwise. Most companies do adopt the Articles of Association provided in Table A of the Companies Act 1985, but it is always prudent to verify whether your company’s articles have been modified in any way. Article 54 of Table A explains the basic rule similar to that at common law. On a show of hands each shareholder has one vote irrespective of the amount of shares he holds, and unless that shareholder owns a particular class of share providing enhanced or restricted rights with regard to the voting procedure. Once a resolution is put to the shareholders, the Chairman, assisted by the Company Secretary, will count the votes. When the result is known the Chairman will declare the resolution has been passed and by section 378(4) Companies Act 1985 and/or Article 47 of Table A that will be conclusive evidence of the result, unless there is fraud on the part of the Chairman: Wall v London & Northern Assets Corp. The Company Secretary will then make the appropriate record in the minutes.

Although voting by a show of hands is a relatively quick and convenient method for dealing with the non-contentious issues on the meeting agenda, it does not always lead to the fairest result. For example, one shareholder may own the majority of the shares but be in the minority when it comes to the number of individual shareholders. Voting by a show of hands means that shareholder can always be outvoted despite having the largest stake in the company (and with the most to lose). This can be extremely damaging if the resolution put to the meeting is controversial; a fair representation of the majority view of the meeting needs to be ascertained. To guard against any unfairness, Section 373 Companies Act 1985 provides the right to demand a poll to:

• any five voting shareholders; or
• any shareholder or shareholder(s) having 10% of the voting rights; or
• any shareholder with 10% of the paid-up share capital with a right to vote

One method by which a shareholder can ensure the right to demand a poll is protected is by splitting his shareholding amongst five nominees. Voting by poll changes the voting procedure so that each shareholder has one vote per share owned (rather than just one vote each). In practice, each shareholder will normally sign a document showing whether they are/are not in favour of the motion and how many votes they are casting. It should be noted that in the case of Haarhaus & Co v Law Debenture Trust Corp that it was established that a poll vote is not confidential, though some privacy maybe gained by appointing independant scrutineers to count the votes. The right to demand a poll under section 373 is so important that it cannot be excluded or curtailed by the Articles of Association, and any attempt to do so will be void: section 373(1) Companies Act 1985. Indeed, Article 46 of Table A goes further to provide additional protection by permitting just two shareholders or the Chairman to call for a poll. Case law has also established that if the Articles do not make any mention of voting by poll, any shareholder may demand one as their common law right: Re Wimbledon Local Board. Proxy voting provides another interesting twist. Table A, unamended, does not give proxies the right to vote on a show of hands but they do have a right under Article 46 to demand a poll and under Article 59 to vote on a poll. In this way, poll voting can be a powerful way for those with the most influence to express themselves.

The Chairman must be careful not to ignore a legitimate demand for a poll vote because case law has established that to do so will result in the vote by show of hands being void: R v Cooper. What if a poll is demanded and then the shareholder relents, wishing to retract his demand? Again, the Chairman must be cautious and check that no other shareholders still want to demand a poll because otherwise Article 84 provides the previous result on a show of hands will stand.

Timing is an important consideration when it comes to voting by poll, as detailed in Article 54. If the poll demanded concerns the election of a Chairman or the question of adjourning the meeting then it must be taken immediately. On all other questions, the poll may either be taken immediately or at any time within 30 days of the poll being demanded. This may give shareholders who were not at the meeting the opportunity to vote at a later date, as postal voting is not allowed unless specifically provided by the Articles. If the poll vote is delayed, then under Article 52 seven days notice of the date and place of a poll must be given (though it can be announced at the meeting).

This article is only a brief overview of the voting procedure at company meetings. However, it has highlighted the important difference in voting procedures at shareholder meetings and the influence it can have on the result of the resolutions put to the meeting. This should be of use to our readers, especially those facing contentious or controversial resolutions at their next shareholders meeting!

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