92 Importance of Company Secretarial for Tax Advisers Importance of Company Secretarial for Tax Advisers Conor Sweeney Head of Company Secretarial Department, Hughes Blake Chartered Accountants Introduction passed, the forms are filed with the Companies Registration Office One of the key roles in company secretarial is the recording and (CRO) and the statutory register is written up to date. implementation of decisions taken by a company. As a Chartered Secretary, my role is to ensure that the meetings at which decisions are to be taken are held correctly, recorded accurately and implemented by the correct persons. As tax advisers, you may provide advice as part of a tax plan on a proposed restructure of a company. The tax plan is not valid unless it has been properly implemented and the necessary resolutions are passed. Therefore, you should advise your clients of the importance of passing the resolutions to give effect to the tax plan; otherwise, it may not be valid. Clients should engage a company secretary or legal adviser to formulate a step plan to implement the tax advice and ensure that the necessary resolutions are We have seen a number of high-profile cases in the courts recently where the decisions of directors and members have not been recorded or these minutes have been misplaced or lost. The prima facie evidence of a decision taken in a company is the signed minutes of the meeting. The purpose of this article is to: ›› establish who has the power to make a decision, i.e., directors or members; ›› explain the different types of resolutions; and ›› discuss how meetings of directors and members are validly held. 2012 Number 4 Before we even consider the above, it is vital to highlight that the articles of association should be reviewed before any meeting is called or decision made so that the rules regarding calling meetings and voting are established. Directors’ or Members’ Approval? The first point to consider when making a decision is who has the power to make the decision. It is a common misconception that directors have total control and have the power to make all decisions in relation to a company. Certain decisions cannot be Importance of Company Secretarial for Tax Advisers 93 ›› approving standard business at an AGM and ›› authorising an increase in the share capital of a company. Special resolution Section 141 of the Companies Act 1963 provides that a special resolution requires that a 75% majority of the members vote in favour of it and that 21 days’ clear notice is given to those members entitled to attend and vote at the meeting. The meeting can be held by shorter notice if approved by the members. made by the directors and must be approved by the members. Extended notice of 28 days must be given if a resolution to remove The most common company type in Ireland is a private limited a director or the auditor is proposed. company, and typically the directors and the members (shareholders) are the same people. From a company law perspective, even though the people may be the same, they have two very different sets of responsibilities when it comes to approving decisions in a company, and dual approval may be required. Types of Resolutions of Members Resolutions are the means to effect decisions of the members of a company. Members’ resolutions can be passed: ›› at an annual general meeting (AGM), ›› at an extraordinary general meeting (EGM) or, alternatively, ›› by way of written resolution if the company’s articles allow. If the resolutions requiring member approval can be determined, we can assume that the directors have the power to make all other decisions. In any case, if the directors are unsure whether they have the power to make a particular decision, they should seek a members’ resolution. Ordinary resolutions The first type of members’ resolution is an ordinary resolution. An ordinary resolution is required to carry out routine, non-contentious business. If the ordinary resolution is being passed at an EGM, 7 days’ clear notice must be given (14 days for a public limited company or a guarantee company). An ordinary resolution requires a simple majority, over 50%, of the member votes to be passed. Some common special resolutions are: ›› alteration of the articles of association, ›› most alterations of the memorandum of association (name, objects, capital clause), ›› variation of class rights, ›› conversion of a company to another company type, ›› provision of financial assistance pursuant to s60 Companies Act 1963, ›› voluntary or court wind-up and ›› provision of guarantees/security (s31 Companies Act 1990, loans to directors and connected persons). The particulars of all special resolutions must be filed on a G1 Form with the CRO. Some ordinary resolutions are required to be filed with the CRO on a G2 Form, including increasing the authorised share capital and placing the company into a creditors’ voluntary liquidation. The G1 or G2 Form should be filed within 15 days with the CRO. Written resolution of members The easiest way to pass resolutions of members is by way of written resolution. If the members have the power in the articles of association of the company to pass written resolutions and all members are in agreement, they are in a position to use this mechanism. The text of the resolution that would have been put Ordinary resolutions are required where the Companies Acts 1963 to the members at a general meeting is signed by all members of to 2009 refer to “passed by the company in general meeting”. the company, and the resolution is deemed to be passed by the Some common ordinary resolutions involve: members without a meeting being held. It must have unanimous 94 Importance of Company Secretarial for Tax Advisers approval and not a majority. Written resolutions can be used to The chairperson shall be one of directors and shall be appointed pass ordinary and special resolutions. for each meeting or for a particular length of time. If directors wish to participate by conference call, the articles must provide for this. Directors’ resolutions Directors may pass resolutions at a validly held directors’ (board) meeting. Directors may also pass resolutions by way of written resolution, instead of holding a directors’ meeting, if the company has the power in the articles of association. The quorum of the meeting depends on what is contained in the articles and should reflect the number of directors of the company. Regulation 102 of Table A provides that the quorum is two directors. Each director has one vote; voting is taken by a show of hands; Types of Company Meetings and resolutions are passed by a simple majority (more than 50%). A company is required to hold certain meetings: The chairperson may have a casting vote in the event of a tie, if ›› a directors’ meeting: to approve and sign the financial statements and to call an AGM; ›› an AGM: held each year, at which the members receive and consider the accounts; ›› an EGM (s40 Companies (Amendment) Act 1983): to be held provided for in the articles of association. Section 145(1) of the Companies Act 1963 provides that the minutes of all proceedings at meetings of directors should be entered in a minute book as soon as possible. The minutes should record, at a minimum, the decisions taken by the directors. The signed minutes should be kept in a minute book. if the net assets fall below half of the called-up share capital; and ›› a directors’ meeting or an EGM to consider decisions that are not part of the normal course of business. General meetings General meetings are members’ meetings, and there are two types: AGMs and EGMs. An AGM is a statutory requirement and must be held each year. An EGM is any other meeting of members The articles of association set out the internal rules of the held to consider and, if thought fit, pass a resolution. Resolutions company, in particular the rules regarding the holding of directors’ of members may also be passed by written resolution if the and members’ meetings. Most articles of association adopt some articles so permit. or all of the provisions of Table A, Parts 1 and 2, of the Companies Act 1963. The articles of association are often tailored to suit the requirements of the company, and they should always be consulted before holding any meeting of a company. Convene a general meeting An AGM must be held in each calendar year. All other meetings of the members are EGMs and may be convened: ›› by the directors, Directors’ meetings Depending on the size and type of company, directors’ meetings are usually infrequent and informal. The Companies Acts 1963 to 2009 do not impose a requirement to hold a directors’ meeting; however, a meeting should be held to consider any issue that is ›› by qualified members holding 10% of the voting rights, ›› by order of the court or ›› on the request of retiring auditors. not part of the normal course of business. Larger companies or Notice quoted companies may hold quarterly or monthly meetings. The notice of general meetings should be sent by post to regis- A directors’ meeting may be convened by any one of the directors. Notice of a directors’ meeting depends on what is contained in the articles of association, and if it is not stated, reasonable notice should be given to all directors. The meeting is invalid if notice is not given to all directors. tered members entitled to receive notice and to attend. The company’s auditor is also entitled to receive notice of all general meetings. The notice periods for general meetings are: ›› the AGM: 21 days clear notice; ›› an EGM to approve an ordinary resolution: 7 days’ notice; and 2012 Number 4 95 Importance of Company Secretarial for Tax Advisers ›› an EGM to approve a special resolution: 21 days’ notice. Minutes The general meeting should be held as per the contents of the Consent to short notice Section 133(3) of the Companies Act 1963 provides that general meetings may be called by shorter notice if the consent of all members and auditors has been obtained in writing. notice, and the minutes should record any decisions taken at the meeting. Any such minute signed by the chairperson shall be prima facie evidence of the proceedings Checklist for holding meetings Proxy forms Section 136(1) of the Companies Act 1963 provides that members entitled to attend and vote may cast their votes in person or by proxy. The instrument appointing proxy must be in writing, and Regulation 70 of Table A provides that proxies must be delivered to the registered office not less than 48 hours before the meeting. Quorum Depending on what is contained in the articles of association, typically the quorum is two members for private limited companies and three members for other company types. After half an hour, if there is no quorum, the meeting is dissolved. ›› Review the articles of association. ›› Who has the power to make the decision, the directors or the members? ›› What is the notice period, and who is entitled to receive notice? ›› What are the voting rights at the meeting? ›› What is the quorum for the meeting to be valid? ›› What are the rules regarding proxy forms? ›› Who is recording the minutes? Voting For a member to be entitled to vote, he or she must be a registered If you are advising a company to make changes to its legal member holding a share with voting rights. Voting is done by a structure, ask who is implementing the changes and whether all show of hands or a poll. On a show of hands, it is one member, one of the steps have been implemented in accordance with your tax vote; and if a poll is demanded, it is one share, one vote. plan. 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