In circumstances where a decision is to be made by more than one person it is critical that the processes and requirements of the governing documents of the body and/or laws be consulted. This applies to decisions made by directors, shareholders, trustees, unitholders and/or partners.
If the set procedures and requirements are not followed in calling meetings and documenting decisions the decisions made could have no effect. There are also the issues of wasted time and costs and the logistics of having to have a further meeting to do things properly.
Critical matters which those calling meetings, issuing notices or documenting resolutions need to consider include:
- ‡ notice requirements – how long, method, content, recipients;
- ‡ holding a meeting – when, where, by what means;
- ‡ who can participate in the meeting – rights of attendees – voting or non-voting (e.g. a right to be heard);
- ‡ how decisions are made – voting method (e.g. show of hands), proxies, numbers required to pass resolutions, quorum;
- ‡ powers – do the decision makers have the right to make the decision.
To ensure that all decisions made are binding the decision makers (or those advising decision makers) should review the constituent or governing document’s and the law applicable to the entity and the decision being made. Doing so and ensuring compliance gives comfort to the decision makers as to the power of the decision which is being made.
A recent NSW case highlighted the difference between those at a meeting being “eligible to vote” as compared to having an “entitlement to vote” and what constituted a special majority for the purposes of a business merger. These simple concepts have resulted in lost time and money for those involved.
Whilst there is always a risk of a disgruntled or outvoted party taking a different position or interpretation, undertaking a review of the documents and/or obtaining legal advice will mitigate the risks for those making the decision. It is then left to the disgruntled party to pursue its interpretation through dispute resolution procedures, including the courts.