Notice period conundrums

Picture of a boardroom and notice
By Amanda McKenzie, Business Law tutor

24 October 2016

A notice period conundrum cropped up for one of our students, so Business Law tutor, Amanda McKenzie is on hand with the answers.

“I was wondering about the notice period required for the removal from office of a director or auditor mid-term. I understood it to be an ordinary resolution with 28 days' notice, but in a question which I attempted, the answer is given as ordinary resolution with 14 days-notice.”

Questions relating to the removal of a director/auditor need to be read very carefully. When the company holds a general meeting, the shareholders are entitled to 14 days’ notice. This period can be shortened, however, if, broadly, in the case of a private company, 90% of members with voting rights agree. For public companies, the agreement of at least 95% of members with voting rights is required.

The 28 days’ notice period relates to notice to the company. This is an area which does confuse some students and that's why it is in bold in your notes.

For example, a group of shareholders who want to vote on the removal of the auditor (or indeed a director), have to give the company 28 days’ notice. This means that they have to tell the company 28 days before the meeting is due to be held that they want the resolution voted upon.

The company, in turn, has to give the shareholders, as a body, 14 days’ notice if the resolution is to be voted on at a general meeting.

In summary, questions regarding the removal of an auditor or director need to be read very carefully.

  • Look for the type of meeting which is to be held
  • Find out whether the notice is to the shareholders or to the company.

Related notice periods:

Classes of shares

Where a company has more than one class of share, for example, ordinary shares and preference shares, there could be meetings of the holders of one class of shares, for example, to approve a proposed variation of the rights attached to their shares.

Generally, 14 days’ notice must be given of such a meeting.

Resolution type

Where a company holds a meeting in order for the members to make a decision, there are two types of resolution which may be voted on - an ordinary resolution or a special resolution.

  • Ordinary resolution: 14 days’ notice to be given to the shareholders
  • Special resolution: Notice period will depend on the type of meeting at which resolution is being voted on and. typically, will be either 14 days (for a general meeting) or 21 days (for an AGM).

Topics

  • CA Student blog

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