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Nolan, Richard (2006)
Languages: English
Types: Article
Subjects:
An analysis of shareholder rights in Britain and their interaction with European Law
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    • 6 This part of the article draws on the author's earlier and fuller examination of shareholder rights in English law, see R.C. Nolan, 'The Continuing Evolution of Shareholder Governance', 65(1) Cambridge Law Journal (2006) p. 92.
    • 7 This part of the article draws on the author's earlier and fuller examination of indirect investors' rights in English law, see R.C. Nolan, 'Indirect Investors: A Greater Say in the Company?', 3 Journal of Corporate Law Studies (2003) p. 73.
    • 8 As to the interpretation of consolidating Acts, see, e.g., Grey v. IRC [1960] A.C. 1; and, more generally, F. Bennion, Statutory Interpretation, 4th edn. (London, Butterworths 2002) pp. 515-518.
    • 14 Hereinafter, 'Table A (1862)'.
    • 15 These regulations drew largely on regs. 22-43 of Table B in the Schedule to the Joint Stock Companies Act 1856. They broadly presage what are now regs. 36-63 of the modern default form of articles, Table A in the Companies (Tables A-F.) Regulations 1985 (SI 1985/805), hereinafter 'Table A (1985)'.
    • 16 The rest of this article will refer only to articles of association, because the overwhelmingly standard practice is to establish shareholders' governance arrangements in a company's articles rather than its memorandum. The author has surveyed the articles as at 16 January 2004 of all the companies constituting the FTSE 100 Index at that date. That survey showed all such arrangements to be in the respective companies' articles. For present purposes, therefore, all references to a FTSE 100 company's articles are references to its articles as they appeared in that survey.
    • 17 Section 16 drew largely on Joint Stock Companies Act 1856, s. 10. Section 16, after much intervening re-enactment, now forms section 14 of the Companies Act 1985.
    • 18 (1883) 23 Ch.D. 14, 35-36.
    • 19 See, recently, Halifax plc v. Halifax Repossessions Ltd. [2004] EWCA Civ 331, [2004] 2 B.C.L.C. 455, at [13], per Arden L.J., and also Welton v. Saffery [1897] A.C. 299 at p. 305, per Lord Halsbury L.C.
    • 20 See, generally, N. Lindley and R.C. l'Anson Banks, Lindley & Banks on Partnership, 18th edn. (London, Sweet & Maxwell 2002).
    • 21 Companies Act 1985, s. 8. The effect of section 8 will be continued by clauses 18-20 of the Companies Bill.
    • 22 There is a very great deal of detailed learning on - and glossing of - section 14 and its various predecessor provisions. See generally the Hon Mrs Justice Arden and D. Prentice, Buckley on the Companies Acts (London, Butterworths 2000) at [14.5]-[14.10]; and P.L. Davies, Gower and Davies' Principles of Modern Company Law, 7th edn. (London, Sweet & Maxwell 2003) pp. 58-65. None of that unsatisfactory detail, or glossing, is relevant for present purposes. What is relevant is the basic principle of statute giving legal effect to consensual arrangements. The effect of section 14 will be continued by clause 34 of the Companies Bill.
    • 23 For confirmation, see, e.g., Table A (1985) or the expressly drafted articles of association of a company such as BP plc.
    • 24 McMillan v. Le Roi Mining Company Ltd. [1906] 1 Ch. 331 adverts to this possibility, though the High Court in fact struck down a postal ballot held by the company, because it could not hold postal ballots consistently with its articles. However, the clear implication is that had the articles been different, so too might have been the result.
    • 25 Re English, Scottish & Australian Bank [1893] 3 Ch. 385 illustrates this possibility, though the case itself concerned a statutory meeting to approve a scheme of arrangement.
    • 26 See D. Impey, et al., The Modern Law of Meetings (Bristol, Jordans 2005); I. Shearman, Shackleton on the Law and Practice of Meetings (London, Sweet & Maxwell 2006); A. Hamer and A. Robertson, Running Company Meetings (Hemel Hempstead, ICSA Publishing 1997).
    • 27 Smyth v. Darley (1849) 2 H.L. Cas. 789, 9 E.R. 1293; Musselwhite v. C.H. Musselwhite & Son Ltd. [1962] Ch. 964; Royal Mutual Benefit B.S. v. Sharman [1963] 1 WLR 581.
    • 28 See, e.g., Table A (1985), reg. 39. Such an article is vitally important in practice, because English statute law contains no provision mitigating the common law consequences of failure
    • 39 Business requiring a special resolution, which might commonly be encountered at a company's general meeting, includes various alterations to the company's memorandum (Companies Act 1985, ss. 4-6, 17, 28, 43, 53), alterations to its articles (ibid., s. 9), disapplication of pre-emption rights over unissued capital (ibid., ss. 89, 95), reduction of capital (ibid., s. 135) and authorisation to buy back shares off-market or under a contingent purchase contract (ibid., ss. 164, 165).
    • 40 For example, the alteration of class rights under Companies Act 1985, s. 125(2), or voluntary winding up under Insolvency Act 1986, s. 84(1)(c).
    • 41 See Shaw v. Tati Concessions Ltd. [1913] 1 Ch. 292; Spiller v. Mayo (Rhodesia) Development Co. (1908) Ltd. [1926] W.N. 78 and Holmes v. Keyes [1959] Ch. 199.
    • 42 Such consent might be (i) pursuant to the company's articles, such as Table A (1985), reg. 53; (ii) in the case of a private company, pursuant to Companies Act 1985, ss. 381A-381C and Schedule 15A; or (iii) pursuant to the common law principle of informal unanimous consent (see, e.g., Re Express Engineering Works Ltd. [1920] 1 Ch. 466; Re Duomatic Ltd. [1969] 2 Ch. 365; Cane v. Jones [1980] 1 WLR 1451; Wright v. Atlas Wright (Europe) Ltd. [1999] 2 B.C.L.C. 301; Re Torvale Group Ltd. [1999] 2 B.C.L.C. 605; Euro Brokers Holdings Ltd. v. Monecor (London) Ltd. [2003] EWCA Civ 105, [2003] 1 B.C.L.C. 506, at [61]-[63], per Leslie Kosmin Q.C., [2003] EWCA Civ 105, [2003] 1 B.C.L.C. 506, at [57]-[63], per Mummery L.J.; and EIC Services Ltd. v. Phipps [2003] EWHC 1507 (Ch), [2003] BCC 931, at [121]-[122], per Neuberger J).
    • 43 Companies Act 1862, s. 50.
    • 44 Ibid., s. 129. See MacConnell v. E. Prill & Co. Ltd. [1916] 2 Ch. 57 at p. 62, per Sargant J.
    • 45 See n. 39 above.
    • 46 Companies Act 1985, s. 379A.
    • 47 Companies Act 1985, s. 381A(6).
    • 48 The right of shareholders in a company to remove a director of the company by passing an ordinary resolution to that effect, a right which cannot be ousted by private arrangements, is found in Companies Act 1985, s. 303. The director's right to protest at a proposal to remove him is in Companies Act 1985, s. 304.
    • 49 See, e.g., Re R.W. Peak (Kings Lynn) Ltd. [1998] 1 B.C.L.C. 193, and the more general statements of principle in Wright v. Atlas Wright (Europe) Ltd. [1999] 2 B.C.L.C. 301.
    • 50 See Re R.W. Peak (Kings Lynn) Ltd. [1998] 1 B.C.L.C. 193.
    • 51 See the possibility raised, though not the result reached, in Re Barry Artist Ltd. [1985] 1 WLR 1305.
    • 52 Listing Rules (1966 ed.) rule 1 and Appendix, section A; rule II(a)(iv) and Schedule VII, Part A, paras. F, H and L; (1973 ed.) rule 159 and Appendix 34, Schedule VII, Part A, paras. F, H, L; (1979 ed.) rules 1, 6 and Schedule VII, Part A, paras. F, H, L; (1984 ed.) section 2, chapter 1, rule 2.5 and section 9, chapter 1, paras. 6, 8, 12, 14; (1993 ed.) rules 13.8, 13.28, 13.29 and Appendix 1 to chapter 13, paras. 12, 13, 18, 19, 22; (2000 ed.) rules 9.26, 9.43, 13.28, 13.29; (2005 ed.) rules 9.3.6, 9.3.7, 9.3.9.
    • 53 Listing Rules (1966 ed.) Appendix, para. 1; (1973 ed.) Appendix 34, para. 2; (1979 ed.) Appendix, para. 1; (1984 ed.) section 1, chapter 1, para. 2; (1993 ed.) rule 13.3; (2000 ed.) rules 1.11-1.14; (2005 ed.) rule 1.2.1.
    • 54 Listing Rules (1993 ed.) rules 13.1 and 13.3; (2000 ed.) rule 13.3 (which followed the language of Amendment 14 of January 2000 to the 1993 ed.).
    • 55 See the Listing Rules (2005 ed.).
    • 56 Listing Rules (2005 ed.) rules 9.3.6, 9.3.7, 9.3.9.
    • 58 As well as Table A (1985), the articles of Amersham plc, Astrazeneca plc, BHP Billiton plc, BP plc and Carnival plc all contain useful examples of the use, and consequent importance, of this freedom. They are far from the only examples. They do, however, give a flavour of relevant current practice: they demonstrate qualitatively what can be, and has been, done. An exhaustive quantitative report on such practice is a project for another time.
    • 59 See Table A (1985), reg. 38.
    • 60 Amersham plc, Art. 50; Astrazeneca plc, Art. 33; BP plc, Arts. 59, 60; Carnival plc, Arts. 100-102. Contrast BHP Billiton plc, Art. 47, giving huge discretion to the company's board.
    • 61 Byng v. London Life [1990] Ch. 170.
    • 62 Amersham plc, Art. 51; Astrazeneca plc, Art. 34; BHP Billiton plc, Art. 53(5); BP plc, Art. 62; Carnival plc, Arts. 103-105.
    • 63 See, e.g., Table A (1985), reg. 39.
    • 64 Amersham plc, Art. 51.5; Astrazeneca plc, Art. 34.5; Carnival plc, Art. 107.
    • 65 BP plc, Art. 55.
    • 66 BP plc, Art. 60(D).
    • 67 See the different techniques adopted by Amersham plc, Art. 74; Astrazeneca, Arts. 43, 55; BHP Billiton plc, Arts. 55(4), 55(1); BP plc, Arts. 71, 80; Carnival plc, Arts. 135, 144, 153.
    • 68 See, e.g., Table A (1985), regs. 45, 46(a), 47-51, 58; Amersham plc, Arts. 55, 57-58, 59(a), 60-64; Astrazeneca plc, Arts. 38, 40-41, 42(a), 43-47; BHP Billiton plc, Arts. 48, 50-56; BP plc, Arts. 64, 66-67, 70(i), 71-74, 80; Carnival plc, Arts. 110, 114-115, 117-119, 133(a), 135, 137-139, 141, 144.
    • 69 BHP Billiton plc, Arts. 2, 54; BP plc, Arts. 2, 69. To similar effect are Amersham plc, Art. 58 and Astrazeneca plc, Art. 41. Carnival plc, Art. 117 envisages amendments to substantive resolutions, but enables the chairman to adjourn consideration of an amended substantive resolution.
    • 70 Amendments to correct clerical or manifest error are commonly permitted: ibid. See also Re Moorgate Mercantile Holdings Ltd. [1980] 1 WLR 227 as regards the amendment of a resolution that requires exact notice (in that case, a special resolution).
    • 71 Amersham plc, Art. 52.2; Astrazeneca plc, Art. 35.2; BHP Billiton plc, Art. 53(2); BP plc, Arts. 63, 74-75; Carnival plc, Art. 110.
    • 72 Hamer and Robertson, op. cit. n. 26, at p. 86, paras. 10.2, 10.4. Note Barton v. Taylor (1886) 11 App. Cas. 197 at p. 204, per Lord Selborne and John v. Rees [1969] 2 WLR 1294 which concerned meetings, but not company general meetings, as well as Byng v. London Life [1990] Ch. 170 at p. 187, per Sir Nicholas Browne-Wilkinson V.-C.
    • 73 Amersham plc, Art. 70; BP plc, Art. 79; Carnival plc, Art. 151. Forfeiture for nonpayment of calls does not amount to an unlawful reduction of capital (Trevor v. Whitworth (1887) 12 App. Cas. 409 at p. 417, per Lord Herschell, p. 429, per Lord Watson and p. 438, per Lord Macnaughten), and so it can be authorised by a company's articles irrespective of the statutory procedures for the reduction of capital or the redemption or repurchase of shares.
    • 74 Amersham plc, Arts. 71-72; Astrazeneca plc, Arts. 53-54; BHP Billiton plc, Art. 64; BP plc, Art. 87; Carnival plc, Arts. 155-156. See also n. 50 above and its accompanying text.
    • 75 Ibid.
    • 76 See, e.g., Table A (1985), regs. 60-63; Amersham plc, Arts. 76-79, 81; Astrazeneca plc, Arts. 58-61, 63; BHP Billiton plc, Arts. 68-71; BP plc, Arts. 81-86; Carnival plc, Arts. 161-167, 169. This is so, even though the right of a shareholder to appoint a proxy is now enshrined in statute by Companies Act 1985, s. 372, as indicated in the text to n. 37 above.
    • 77 See, e.g., Amersham plc, Art. 80; Astrazeneca plc, Arts. 135-142; BP plc, Arts. 157-170. See below, and also Nolan, loc. cit. n. 7.
    • 78 BAE plc, Art. 105(B).
    • 79 See, e.g., BP plc, Art. 62(C).
    • 80 See, e.g., Amersham plc, Art. 80. It is at least arguable that, on its true construction, Companies Act 1985, s. 375 only allows a corporate shareholder to appoint one representative: see P. Myners, Review of the Impediments to Voting UK Shares: Report by Paul Myners to the Shareholder Voting Working Group (London, 2004) p. 27. The ability for a single corporate shareholder to appoint more than one representative is vitally important where the shareholder is a nominee for many different beneficiaries: see ibid., and see also the discussion of Art. 13 of the Directive, below.
    • 81 Such implied terms can exist at common law (see, e.g., Birch v. Cropper (1889) 14 App. Cas. 525 establishing a default presumption of equality amongst shares) or under statute (e.g., Companies Act 1985, s. 370).
    • 89 Note D. Goddard, 'Company Law Reform - Lessons from the New Zealand Experience', 16 Company and Securities Law Journal (1998) p. 236 at n. 42.
    • 90 Note, for example, the speech of Commissioner McCreevy, 'The Future of the Company Law Action Plan', Speech/05/702 (17 November 2005).
    • 91 See n. 82 above.
    • 92 See clauses Part 9 of the Companies Bill.
    • 94 Société Générale de Paris v. Walker (1885) 11 App. Cas. 20.
    • 95 In re Perkins (1890) 24 Q.B.D. 613.
    • 96 See, generally, Snell's Equity (London, 2005) at §§ [28-45]-[28-46].
    • 97 Bradford Banking Co v. Briggs & Co (1886) 12 App. Cas. 29; Mackereth v. Wigan Coal & Iron Co Ltd [1916] 2 Ch. 293.
    • 98 See Salomon v. Salomon & Co Ltd [1897] A.C. 22 at p. 55, per Lord Davey.
    • 99 See Part 73 of the Civil Procedure Rules.
    • 100 Kirby v. Wilkins [1929] 2 Ch. 444 at p. 454, per Romer J. Pending any instructions about voting from the beneficial owner, the registered holder can vote the shares in the beneficiary's interests: see ibid. To the extent that Butt v. Kelson [1952] Ch. 197 casts doubt on the latter proposition, it must be regarded as inconsistent with the fundamental principle that the trustees manage the trust estate impartially, of their own motion and for the benefit of all the beneficiaries, a principle restated in Nestle v. National Westminster Bank plc [1994] 1 All ER 118 at p. 135, per Staughton LJ.
    • 113 Company Law Reform: Final Report, Vol. 1 (London, 2001) § 7.3.
    • 114 A. Underhill and D.J. Hayton, The Law of Trusts and Trustees (London, Butterworths 2003) pp. 466-467.
    • 115 Financial intermediaries will be prima facie subject to regulation by the FSA, because they will conduct a business which requires authorisation from the FSA, see Financial Services and Markets Act 2000, supply security. 19, 22, 23, 31, Part IV and Schedule 2, Part I. Under Art. 66 of the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (SI 2001/544) a few intermediaries might be exempted from regulation by the FSA, but it unlikely that many firms whose business includes acting as a financial intermediary will fall within this exemption.
    • 116 The Principles for Businesses Instrument 2001.
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