On 6 February 2012, Beacon Minerals Ltd (Beacon) issued a notice of meeting and proxy form seeking shareholder approval for the sale of one of the company’s mining leases (the Resolution). The proxy form was incomplete as it permitted shareholders to vote for or against the Resolution. On 23 February 2012, Beacon caused a notice to be posted on the ASX announcement board, urging its shareholders to support the Resolution. The notice also included a pre-completed proxy form for voting in favour of the Resolution.
Riverfront Nominees Pty Ltd (Riverfront), a shareholder of Beacon, then commenced proceedings alleging that Beacon’s directors had breached their duties under s181 of the Corporations Act 2001 (Cth) and sought an injunction restraining any pre-completed proxy forms from being dispatched to shareholders.
The Court noted that it is not a breach of a director’s duty to inform shareholders of matters relevant to a resolution being placed before them, or to advise the shareholders to vote one way or other on the proposed resolution. Further, provided directors act in what they honestly see as the interests of the company as a whole, they may pay the reasonable cost of informing members from company funds (but directors cannot ordinarily use company funds to support or oppose, in a partisan way, candidates for election to the board).
The Court held that the proxy form issued with the notice of meeting on 6 February 2012 was a proxy form which provided for a shareholder to vote for or against a resolution, as required under ASX Listing Rule 14.2.1, and rejected Riverfront’s submission that the subsequent dispatch of a pre-completed proxy form negated or defeated the purpose of ASX Listing Rule 14.2.1.
Further, the Court held that the dispatch of a pre-completed proxy form does not in itself constitute an improper exercise of the Beacon directors’ powers, although it was noted that the conclusion may be different if it could be shown that the directors exercised their powers for some ulterior purpose or in some other way improperly exercised their powers.