This case serves as a reminder that while the power of shareholders under section 249F of the Corporations Act 2001 (Cth) to call a general meeting is an important statutory right, strict compliance with the requirements of the Act (including the proxy requirements under section 250B) is required.
Ten shareholders holding almost 7% of the issued shares in CellOS Software Ltd (CellOS) (Convening Shareholders), who had concerns over the financial viability of CellOS, gave notice of general meeting on 2 March 2017 under section 249F of the Corporations Act 2001 (Cth) (Act) to pass resolutions for the replacement of the entire board (Notice).
In ordering that the Convening Shareholders be restrained from holding the proposed meeting (and declining to exercise the Court’s power to cure procedural irregularities in the Notice under section 1322(4) of the Act) , Middleton J in the Federal Court of Australia found that:
- the wording of section 250B(1) is straightforward; the proxy form must be “received by the company at least 48 hours before the meeting”;
- the Act is silent on whether or not an intermediary can be employed to facilitate the receipt of the proxies by a company, and as such, if receipt by the company occurs within the permitted period, section 250B(1) is relevantly complied with;
- the requirements of the Notice were inconsistent with s 250B(1) because it stated that for proxies to be valid, they must be received by Link Market Solutions (a third party engaged by the Convening Shareholder and as such, not an agent of CellOS) at least 72 hours prior to the proposed meeting. Even if it was anticipated that the proxy forms would eventually be received by CellOS at least 48 hours before the proposed meeting, the 72 hour period in the Notice was 24 hours longer than the required 48 hours, thus giving shareholders 24 hours less time to exercise their votes by proxy;
- while section 249F(2) requires a convening shareholder to call a meeting in the same way as a general meeting is called “so far as is possible”, this does not permit any alteration to the operation of section 250B; and
- the requirements in the Notice that were contrary to section 250B had the potential to cause substantial injustice to shareholders, particularly the 1,600 shareholders who were resident in Singapore (the majority of whom were likely to vote by proxy); and in any event, CellOS was calling a general meeting on 31 March 2017 which would encompass consideration of the matters raised by the Convening Shareholders in the Notice.