Shareholders of a Cyprus company have the right to request that the directors convene an extraordinary general meeting (EGM), and the directors are legally obliged to do so within a specified time. The procedure, known as the requisition of an EGM, is governed by Section 126 of the Companies Law Cap 113.
Many occasions could trigger the requisitioning of an EGM, although such requests occur more often during financially difficult times or in the event of miscommunication between the board of directors and the body of shareholders. The initiative for calling a general meeting and the calling of all other EGMs rests with the board, aside from the legally required annual general meeting and the members' right to request the calling of a general meeting. A shareholder's right to request the calling of a general meeting overrides any contrary provisions in the company's articles of association and applies to companies listed in a regulated market.
The requirements for requisitioning a legally valid EGM are as follows:
- The request can be made only by those who hold at least one-tenth of the company's paid-up share capital and have the right to vote in general meetings, as of the date of the request.
- The request must state the purpose of the EGM, which must be signed by those who requested it and deposited at the registered office of the company. It may consist of several documents signed by one or more of the requisitioning members.
- The board must call the requisitioned EGM within 21 days from the date that the requisition was deposited. If it fails to do so, any part of the members representing over half of the total members with a right to vote may call the EGM within three months from the date that the requisition was deposited.
Statutory and settled case law provides a framework for directors' duties in calling an EGM at the shareholders' request. In addition to adhering to the timeframe, directors must present at the EGM the list of items suggested by the members. If the directors convene an EGM to consider only some of the matters referred to in a requisition, the members would be within their rights to ignore the meeting and convene their own (Isle of Wright Railway Co v Tahourdin (1883) 25 Ch D 320). The directors have the power to review and consider whether the members' proposed resolutions will be motioned to the EGM for voting. Examples include defamatory, vexatious, frivolous or ineffective (ie, contrary to articles) resolutions. The directors are under no obligation to circulate proposed resolutions. However, they must provide a statement in support of their decision not to circulate any proposed resolutions. Moreover, directors are not at liberty to call a meeting on a date which is unsuitable for the members to attend and vote (Cannon v Trask (1875) LR 20 Eq669).
Once the agenda for the EGM has been fixed by the directors (whereby they can add to items proposed by the requisitioning members and annexed to the EGM notice), the agenda is deemed to be final, unless the members unanimously decide to amend it. Courts have upheld grammatical corrections to resolutions in the agenda made during an EGM. The chair also has the right to change the order of items on the agenda. Further, the agenda should indicate whether special attendees will be present (ie, legal advisers or auditors).
The directors have control over the arrangements of the EGM, including its date, time and location, within the set timeframe. However, members maintain certain rights for navigating the requisitioned EGM, including the right to decide which matters are taken into consideration by the board or where statements are circulated in advance of the EGM (eg, where they explain reasons for opposing a resolution).
The ability to request an EGM is a strong weapon in the hands of shareholders at times of trouble (eg, with other shareholders). It affords the opportunity to resolve disputes or address matters regarding the existence of the company and the future of its investments. In order to navigate the procedure for convening an EGM, one should refer to the law and the articles of the company in question, and receive advice on the application of the relevant provisions.
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For further information on this topic please contact Stella Koukounis at Solsidus Law by telephone (+357 22 007700) or email ([email protected]). The Solsidus Law website can be accessed at www.solsiduslaw.com.