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Can a general meeting be called without proposing any resolutions?

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Julian
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Can a general meeting be called without proposing any resolutions?

#664145

Postby Julian » May 13th, 2024, 6:01 pm

We have a situation where I live where the freeholders - a limited company owning the freehold with each leaseholder (flat owner) owning a single share in the company - are planning major renovations. The board is working exclusively with a surveyor whose report is estimating likely costs three times higher than the estimates given by two other equally qualified surveyors in their reports. A group of shareholders are very concerned about this and perplexed as to why the board is refusing to consider the other surveyors’ reports and is insistent on proceeding with the most expensive surveyor.

Since well over 5% of shareholders share this concern we asked, as I believe is our right under section 303 of the 2006 Companies Act, that the board convene a general meeting to discuss this issue. We requested some resolutions for that meeting and our request was rebuffed on the basis that our resolutions would need to be special resolutions requiring a 75% majority to pass and as such were unlikely to be passed. This was despite us explicitly proposing them as general resolutions. The board response was allegedly on the advice of its lawyers - the details of that advice have never been disclosed to us. Since the board rejected our first request for a meeting we are now at the stage of exercising our right to convene a general meeting ourselves under section 305 of the same act.

For various reasons we want to soften our approach slightly and focus the attention less on specific resolutions but instead raise our concerns to the wider shareholder audience and get clarification from the board why it seems insistent on progressing only the most expensive option while ignoring the input of two other equally qualified surveyors. In order to try and swerve around any attempt by the board to again block us with claims that our resolutions don’t pass muster because of something the board’s lawyers advised it but that they are not going to disclose to us we would ideally like this second attempt to get a general meeting by convening it ourselves to not include any formal resolutions but instead simply comprise an agenda of pre-announced discussion points related to the issues at hand hence the question in my title - is that legal or must a general meeting have at least one formal resolution on the agenda?

I would also be very interested to hear any other general observations and/or suggestions for other possible way to handle this. The situation is so egregious (for instance neither of the other two surveyor’s reports have been circulated to the shareholders and we only got hold of them via let’s just say a backdoor method) that I would very surprised if raising the issues in a wider shareholder meeting won’t be sufficient to create enough uproar to at least open up some chance of changing the current course.

- Julian

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Re: Can a general meeting be called without proposing any resolutions?

#664150

Postby Hallucigenia » May 13th, 2024, 6:32 pm

I don't know the relevant company law, but even if a resolution is required, surely it must be possible to frame a non-descript one along the lines of MPs having to ask the PM to list his engagements for the day at PMQs? Something like congratulating Jo Bloggs for his 25 years as mayor of the town or whatever?

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Re: Can a general meeting be called without proposing any resolutions?

#664151

Postby tjh290633 » May 13th, 2024, 6:35 pm

Could you not propose a vote of no confidence in the board?

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Julian
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Re: Can a general meeting be called without proposing any resolutions?

#664152

Postby Julian » May 13th, 2024, 7:13 pm

Yeah, the PMQ tactic did occur to me, and the PMQ precedent was also something that I was reminded of, but my concern with any resolution is that the board could claim on the basis of legal advice that it had to be a special resolution so was unlikely to pass and somehow invalidated our request. They are being advised by expensive city lawyers (at our expense!) and we are not. Also, if we make such a resolution too anodyne it could be declared frivolous and I believe there is specific wording in the Companies Act about frivolous or vexatious resolutions.

On the idea of a simple vote of no confidence in the board one issue is that some of the people on the board own multiple flats and there is also another partially overlapping group of people who due to their wealth don’t care about the money and also own multiple flats. Those 2 groups on their own only need 1 extra shareholder to side with them in order to stop a special resolution from being passed and I assume (maybe wrongly?) that a vote of no confidence would be classified as a special resolution. That’s why we’re also worried about the being-declared-special trap for any other resolution we might propose.

- Julian

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Re: Can a general meeting be called without proposing any resolutions?

#664155

Postby Urbandreamer » May 13th, 2024, 7:31 pm

I would tend to argue, that since there is not a scheduled AGM, that an EGM (Emergency General Meeting) is required.

Simply to have the discussion that you feel needed. The term IS frightening, but appropriate in absence of an AGM.

Technically EGM's are general meetings that, unlike AGM's are not scheduled every year (Annual General Meeting).

You might need more than 5% to demand an EGM, however a honest board should take note. Your request will/should be recorded. If numbers rise, questions can be asked as to why such requests were rejected/ignored.

In the most extreme, the board can be replaced as a result of an EGM. Though that seems not to be what you want.

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Re: Can a general meeting be called without proposing any resolutions?

#664157

Postby redsturgeon » May 13th, 2024, 7:51 pm

Urbandreamer wrote:I would tend to argue, that since there is not a scheduled AGM, that an EGM (Emergency General Meeting) is required.

Simply to have the discussion that you feel needed. The term IS frightening, but appropriate in absence of an AGM.

Technically EGM's are general meetings that, unlike AGM's are not scheduled every year (Annual General Meeting).

You might need more than 5% to demand an EGM, however a honest board should take note. Your request will/should be recorded. If numbers rise, questions can be asked as to why such requests were rejected/ignored.

In the most extreme, the board can be replaced as a result of an EGM. Though that seems not to be what you want.


I thought an EGM was an Extraordinary General Meeting.

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Re: Can a general meeting be called without proposing any resolutions?

#664161

Postby Hallucigenia » May 13th, 2024, 8:10 pm

Julian wrote:if we make such a resolution too anodyne it could be declared frivolous and I believe there is specific wording in the Companies Act about frivolous or vexatious resolutions.


Yeah, that's probably fair enough.

IANAL, but I thought the Companies Act 2006 had largely done away with special resolutions as a thing, and looking at 283 (6) of same :

https://www.legislation.gov.uk/ukpga/20 ... ection/283
(6)Where a resolution is passed at a meeting—
(a)the resolution is not a special resolution unless the notice of the meeting included the text of the resolution and specified the intention to propose the resolution as a special resolution


..and it's done on the basis of exceptions, ie they're ordinary resolutions unless the Companies Acts or articles of association specify that something has to be done as a special. So that's the question you ask - if they try and say something needs a special, ask where it is required under the CA or AoA?

Again - IANAL.

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Re: Can a general meeting be called without proposing any resolutions?

#664163

Postby mc2fool » May 13th, 2024, 8:30 pm

Julian wrote:I would also be very interested to hear any other general observations and/or suggestions for other possible way to handle this. The situation is so egregious (for instance neither of the other two surveyor’s reports have been circulated to the shareholders and we only got hold of them via let’s just say a backdoor method) that I would very surprised if raising the issues in a wider shareholder meeting won’t be sufficient to create enough uproar to at least open up some chance of changing the current course.

I can't answer the specific company law points but would make the following comments/suggestions.

a) Have you pored through the company's constitution? That is, the Memorandum and Articles of Association, and Table A of the Companies Act 1985 if the Articles subsume it, as many often do.

b) Has the company issued Section 20 notices? If you don't know what that means, read https://www.lease-advice.org/advice-gui ... es-agents/. "The purpose of the Regulations is to ensure that lessees are protected from (a) paying for inappropriate works, or (b) paying more than would be appropriate. "

The vital points are that the company must undertake a Section 20 consultation for any works that will cost more than £250 per leaseholder and in that they must obtain and present at least two estimates for the works and they must make all of the estimates available for inspection. If they don't or they fail to give appropriate regard to the feedback then you can refuse to pay more than £250 each for the works and/or take them to the first tier tribunal (court).

c) You don't actually need a General Meeting to try to "create enough uproar"; you know where the other leaseholders live ... well, a good number of them ... so could simply write a "leaflet" about the situation and stick copies into every flat's letter box.

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Re: Can a general meeting be called without proposing any resolutions?

#664211

Postby Julian » May 14th, 2024, 8:56 am

I and a number of others have gone over our AoA, Companies Act, Landlord and Tenants Act and the Section 20 regulations in immense detail. We think we understand it but not being lawyers I was hoping to get one very simple reassurance on the legality of a no-resolutions general meeting question.

The problem with all this stuff is the the board is playing quite dirty so my fear (admittedly not shared by all of the rest of the group of shareholders wanting to call a general meeting) is that the board might try to interfere with our attempt to convene the meeting ourselves by using exactly the same tactic it used to refuse our request for it to convene - "the board's lawyers say no". It then becomes a "we say they say" debate where the board simply say "but it is our lawyers saying this so what we say is right and what you say is wrong" argument. That can be rebuffed I suppose by one or both of demanding to see their legal advice (which is actually company legal advice so paid for by the shareholders including us) and/or retaining our own legal advice using our own funds but either approach delays proceedings hence why I am hoping we can avoid that debate entirely by having no resolutions.

On section 20 it actually gives less protection than one might imagine. No section 20 notices have been issues yet but I'm guessing that stage 1 will be sent out in the next week or two. The issue here is that the board is insisting on using this new very expensive "surveyor to the stars" company that is estimating the costs at 3 times the (surprisingly consistent) estimates given by the other two entirely independent surveyors. Our concern is that since those surveyors are used to working on very prestigious properties they will have a list of contractors they like to work with who are also premium priced and since the surveyor is responsible for selecting who is approached for bids we are concerned that the estimates become self-fulfilling prophecies and all the quotes come in high whereas a section 20 process managed by one of the other surveyors would be more likely to yield quotes more in line with their lower estimates. Essentially the expensive surveyor has an incentive to see expensive quotes come in since they would look pretty stupid if the quotes coming in turn out to be 1/3rd of their estimates. Similarly either of the other 2 surveyors would suffer a reputational loss if the quotes came in at 3 times their estimates.

We do have the opportunity during stage 1 of the S20 process to nominate one or more of our own known contractors to bid, of which only one needs to be selected to be included amongst the bidders, but we are not industry experts, this is not a small project, and if we could find a credible contractor to suggest there is always a danger that the expensive surveyor, who is in control of assessing the bids and making a recommendation, simply says that that our nominated contractor's bid is an anomaly and is so much cheaper because they would cut corners, do shoddy work, are disreputable, have not fully understood the specification or any other number of objections. By the time section 20 gets to this stage it really is just a case of the board, as advised by its surveyors, telling us which bid it has chosen to accept and that work is due to commence on some specified date.

- Julian

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Re: Can a general meeting be called without proposing any resolutions?

#664212

Postby Julian » May 14th, 2024, 9:04 am

mc2fool wrote:[c) You don't actually need a General Meeting to try to "create enough uproar"; you know where the other leaseholders live ... well, a good number of them ... so could simply write a "leaflet" about the situation and stick copies into every flat's letter box.

You'd think so. We've tried that but while we have created a few rumblings of concern there hasn't been that much appetite thus far, apart from within this group of us trying to convene a general meeting, to directly confront the board to the extent of demanding a change of surveyors or at least not give the gold-plated surveyor total control of the process. The board is also making various promises to shareholders in response to our concerns expressed in communications we have already sent out to all shareholders e.g. that shareholders will get a vote on whether to proceed at the end of Section 20 Stage 2 but at that point, on current plans, that would simply be a yes/no vote on going ahead with the single probably overly expensive contractor's quote selected by the current surveyor. We just hope that a general meeting is likely to generate more energy and solidarity regarding these concerns.

- Julian

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Re: Can a general meeting be called without proposing any resolutions?

#664223

Postby mc2fool » May 14th, 2024, 10:50 am

Julian wrote:On section 20 it actually gives less protection than one might imagine.

Yes, the obligation is only to give due "regard" to the feedback, although you have identified some other useful aspects, and in any case, even if they go by the book, you can always go to the first tier tribunal if you think they're taking the p.

I'm a little curious as to the overall setup here, 'cos where there is collective enfranchisement its very common for the board to consist largely, if not totally, of lessees, who would, of course, also be stumping up for any over-expensive works. I'm also curious, if there's been no section 20 notices issued yet, how you know the costs already. Has the board already announced those to the lessees?

It also sounds like quite a big complex, in which case you may well have lawyers and industry experts amongst your fellow shareholders. Of course, it's a matter of identifying them....

I understand your OP question, but it's not clear to me why you think that having a general meeting is likely to raise more appetite than the few rumblings of concern you've already raised. More likely to raise a yawn and non-attendance I'd have expected! I suspect the real chance to raise an uproar will come when the section 2 notice of estimates is issued and lessees see how much they're going to be hit for!

BTW, this wouldn't be in E14, would it?

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Re: Can a general meeting be called without proposing any resolutions?

#664242

Postby Julian » May 14th, 2024, 12:08 pm

mc2fool wrote:I'm a little curious as to the overall setup here, 'cos where there is collective enfranchisement its very common for the board to consist largely, if not totally, of lessees, who would, of course, also be stumping up for any over-expensive works.

It's a slightly strange block. There have been people here who bought 30+ years ago when it was very run down(*) with flats selling quite cheaply even relative to the overall market at the time. Unsurprisingly many of those people are now retired and were never mega-earners in the first place. 30 years later the block has been significantly improved and some of the newer buyers are extremely wealthy at least by my standards (net worth well into 8 figures) and have at times even included a few very well-known celebrities so the lessees are somewhat split into 2 groups with some people who don't have much spare cash at all vs those for whom the difference between contributing an extra £5K or an extra £25K in any given year is really pretty immaterial to them. The current board is 2/3rds controlled by people from the mega-rich group. For the record I sit somewhere in between those two groups. It's also worth noting that none of the mega-wealthy group use their flat here as their main residence but rather a second or third home that most don't rent out but instead leave vacant to use as a pied-a-terre when they are in the country.

(*) One of my neighbours who did buy her flat over 30 years ago tells the story of the day they moved in. It was in such a state that her then very young daughter on entering the flat for the first time immediately burst into tears and said "mummy, are we really this poor?"

I'm also curious, if there's been no section 20 notices issued yet, how you know the costs already. Has the board already announced those to the lessees?

On the costs you are correct, we don't know costs. What we have are 3 unconnected surveyors' estimates of the likely costs based on their own individual surveys of the current condition of the building. It is obviously correct to point out that those are estimates and not costs but our concern is that there is a significant danger that those estimates will translate at least approximately into actual bid prices depending on the surveyor chosen to manage the section 20 bidding process. If it is the surveyor whose estimates are almost 3 times higher than the other two is chosen (as is currently the case) then it would be embarrassing for them if all the quotes came in at a third of their estimates so there would be an incentive for them to to choose premium-priced bidders. On the other hand if one of the other surveyors was chosen to manage the process it would be embarrassing for them if all the quotes came in at 3 times their estimates so they would be more likely to push back on costings and be looking at selecting bidders who are known to offer good value for money.

BTW, this wouldn't be in E14, would it?

No, not E14.

- Julian

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Re: Can a general meeting be called without proposing any resolutions?

#664298

Postby Maroochydore » May 14th, 2024, 5:21 pm

redsturgeon wrote: I thought an EGM was an Extraordinary General Meeting.


You are absolutely correct.

Who can convene an extraordinary general meeting?

An extraordinary general meeting (“EGM”) is a meeting of shareholders other than the company’s annual general meeting. Under section 310 of the Companies Act 2016 (“the Act”), an EGM may be convened by either the board of directors or the shareholders. According to section 310(b) of the Act, for shareholders to convene an EGM, the shareholders must hold at least 10% of the issued share capital of a company or a lower percentage as specified in the constitution of the company or if the company has no share capital, by at least 5% in the number of the shareholders.

Further, shareholders of a company have power under section 311 of the Act to require the directors to convene an EGM (“section 311 requisition”). Following a section 311 requisition, the directors are under an obligation to call and hold an EGM in accordance with section 312 of the Act.

When directors fail to convene EGM following a section 311 requisition....


https://www.legal500.com/developments/t ... recovered/

Julian
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Re: Can a general meeting be called without proposing any resolutions?

#664383

Postby Julian » May 15th, 2024, 8:50 am

Maroochydore wrote:
Who can convene an extraordinary general meeting?

An extraordinary general meeting (“EGM”) is a meeting of shareholders other than the company’s annual general meeting. Under section 310 of the Companies Act 2016 (“the Act”), an EGM may be convened by either the board of directors or the shareholders. According to section 310(b) of the Act, for shareholders to convene an EGM, the shareholders must hold at least 10% of the issued share capital of a company or a lower percentage as specified in the constitution of the company or if the company has no share capital, by at least 5% in the number of the shareholders.

Further, shareholders of a company have power under section 311 of the Act to require the directors to convene an EGM (“section 311 requisition”). Following a section 311 requisition, the directors are under an obligation to call and hold an EGM in accordance with section 312 of the Act.

When directors fail to convene EGM following a section 311 requisition....


https://www.legal500.com/developments/t ... recovered/


Thank you, that's a useful summary that you linked to and I think a sentence in that link implicitly answers my original question...

Notice of meeting shall include the text of resolution if requests received by company identify a resolution intended to be moved at the meeting;


My bolding - that "if" says to me that a meeting request may or may not "identify a resolution intended to be moved at the meeting", hence presumably a subsequent <you (the board) failed to convene the meeting so we (the shareholders) will> notice of EGM issued by shareholders also may or may not "identify a resolution intended to be moved at the meeting" so yes, a meeting with no resolutions intended to be moved at the meeting is acceptable.

- Julian


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