Shareholder and board decision-making — SQE1 BLP question
A worked single-best-answer question on shareholder and board decision-making, with why each wrong option is wrong — the way SQE1 traps candidates.
Greywell Ltd is a private company with four shareholders, each share carrying one vote. Marta holds 50% of the shares, Nils 25%, Omar 15% and Pia 10%. The directors wish to hold a general meeting tomorrow to pass an urgent ordinary resolution. Marta, Nils and Pia consent in writing to the meeting being held on short notice, but Omar refuses. The articles contain nothing relevant to notice.
Can the general meeting be validly held tomorrow on short notice?
- AYes, because a majority in number of the members has agreed to short notice.
- BYes, because members holding more than 75% of the voting shares have agreed to short notice.
- CNo, because the members who have agreed hold less than 90% of the nominal value of the shares carrying a right to vote.
- DNo, because short notice of a general meeting requires the agreement of every member of a private company.
- ENo, because short notice requires the agreement of members holding at least 95% of the voting shares.
Show answer and reasoning
Rule: A private company's general meeting may be held on short notice if agreed by a majority in number of members holding at least 90% of the voting shares (CA 2006 s 307(4)-(6)).
- A A majority in number is necessary but not sufficient; the members must also hold at least 90% of the voting shares. (wrong rule)
- B 75% is the threshold for a special resolution, not for consent to short notice. (wrong rule)
- D Unanimity is not required; a majority in number holding at least 90% suffices. (wrong rule)
- E 95% is the threshold for public companies (or a higher percentage set by the articles), not for this private company. (wrong rule)
Source: Companies Act 2006, s 307(1), (4)-(6)