Special Committee Companies Bill, 1962 debate -
Wednesday, 6 Mar 1963

SECTION 141.

Mr. D. Costello

I move amendment No. 50 :

To delete subsections (6) and (7) and substitute the following subsection :

" () A resolution shall be an extraordinary resolution when it has been passed in the manner provided in this section for the passing of a special resolution at a meeting of which not less than 7 days notice specifying the intention to propose the resolution as an extraordinary resolution has been duly given."

The object of this section as I understand it is to do away with the distinction heretofore between extraordinary resolutions and special resolutions. The distinction was altered by the 1959 Act and did away with the necessity for having two meetings to pass special resolutions. That of course was a good move. The thing with which I am concerned is any resolution now which heretofore was an extraordinary resolution will be a special resolution and there must be 21 days' notice in order to pass that resolution. Twenty-one days' notice is all right for a special resolution but one can envisage many circumstances in which a company may want to pass an extraordinary resolution in a hurry and pass it in a shorter time than 21 days, as they can now. I know of one case where it is of great importance for a company to pass extraordinary resolutions with speed and it can be done without any inconvenience or any injustice by giving seven days' notice, say, of the meeting to be held. Under present circumstances we must give 21 days' notice and whilst in most cases 21 days probably will not involve any great difficulty there are quite a number of cases where speed would be of great importance and where it would be desirable for the company to have power to pass extraordinary resolutions in less than 21 days. I do not think it is wise to abolish the differentiation that existed between extraordinary resolutions and special resolutions heretofore.

Mr. J. Lynch

As I understand it, the difference between the purpose of extraordinary resolutions and special resolutions has largely disappeared and there is no case for maintaining both. With regard to the point made by Deputy Costello that shorter notice than 21 days might be desirable in certain circumstances, there is provision for shorter notice if the members agree, in subsection (2) of Section 141. I might add that the Jenkins Committee have recommended the abolition of the extraordinary resolution in Britain. There is another precedent by Professor Gower who has prepared certain proposals for the company law of Ghana; he has made a similar recommendation in this respect. If Deputy Costello's amendment were accepted it would continue that distinction which apparently is now regarded as unnecessary and pointless.

Mr. D. Costello

The only matter I am concerned with is the question of speed which can arise in certain circumstances. For all practical purposes the distinction between special resolutions and extraordinary resolutions is unreal but I think it could be advisable to keep the distinction from the point of view of enabling a company to pass extraordinary resolutions at a faster speed than within 21 days' notice. I know that subsection (2) in certain circumstances permits that notice can be shorter but it only applies where all the members having the right to attend and vote so agree. I have in mind at present the reconstruction of the company where the holding of meetings very speedily is of great importance and where otherwise this would hold up things considerably, if 21 days' notice had to be given. In this legislation we are going to provide for 21 days' notice unless the directors can be satisfied that everybody is going to agree. In a number of cases they may agree but you could have a number of cranks who may not agree and that would hold things up. I think there is a case to be made for permitting in certain circumstances that a resolution could be passed on shorter notice.

Mr. Norton

Is it essential that all those who attend should agree ?

Chairman

It is worse than that; it is all those entitled to attend—every member.

Mr. Sweetman

Every shareholder.

Mr. J. Lynch

We have subsections (1) and (2) in our legislation since 1959 consequent on the report of our own Committee. But may I say in reply to Deputy Costello that the purpose of all resolutions is to do something and that something might be important or it might be unimportant. In the case of unimportant or relatively unimportant things an ordinary resolution is sufficient. In the case of important things, it really does not matter whether they are special resolutions or extraordinary resolutions but it is only reasonable, in the case of doing the important thing, that the members of the company ought have in the normal course, reasonable notice and 21 days is reasonable notice.

Mr. Booth

This really is an effort to protect the rights of minority shareholders, is it not ? They might otherwise be prejudiced by special resolutions of which they have not had sufficient notice and were not able to marshall their forces in order to try to protect their own interests. I can see Deputy Costello's point of view and there is a lot in it, that it might impede the company to have to give 21 days' notice but I think there is possibly more to be said for protecting the rights of the shareholders.

Mr. J. Lynch

That is right, and not necessarily of minorities but of all shareholders. Their rights must be protected and surely that is what we are trying to legislate for throughout the Bill.

Mr. Sweetman

Could Deputy Costello give us some indication of what type of matters he has in mind ?

Mr. D. Costello

The sort of things that might arise are alterations of the articles of association in order to put forward a scheme of reconstruction.

Mr. Sweetman

I would be violently against anything less than 21 days in such a case.

Mr. D. Costello

The articles may provide and in fact do provide in some circumstances for the appointment of additional directors by extraordinary resolution which it may be desirable to do in a harry. I would ask the Minister to consider the suggestion that has been made that instead of having all members agreeing to a reduction in time to have it provided that say three-quarters of those who attend and had the right to vote agreed to the reduction.

Mr. Sweetman

It would be rather difficult to do that because you would not know who was going to attend until the actual meeting. If you provided that a certain proportion of the shareholders to a nominal value of so much would suffice the directors could do a quick whip around and say: " We can get 75 per cent of the shareholders. Therefore we can abridge." You could not wait until the meeting to know whether it was going to be valid or not but if you could get 75 per cent of the shareholders having votes at the meeting to agree to an abridging resolution before you issued the notice that might be sufficient.

Mr. J. Lynch

That 75 per cent might be handled by one person and it would be rather hard on the holders of the remaining 25 per cent if that one person could approve by his own consent. As it happens I understand that the law in Britain and Northern Ireland provides for 95 per cent of the shareholders in this case. Our committee said 100.

Mr. Sweetman

I am not tied to the figure.

Mr. D. Costello

Our committee, as I understand it, did not suggest the extinction of the difference between an extraordinary resolution and a special resolution and did suggest changing the method or having a special resolution adopted.

Mr. J. Lynch

The committee recommended the abolition of the confirmatory meeting for a special resolution. When that was done you were left with the situation where you had one meeting for a special resolution and one for an extraordinary resolution. They both require 75 per cent approval and, by virtue of section 133 of the Bill, we are very largely eliminating the difference in respect of length of notice. For those reasons everyone has been pointing out that there is not much point in preserving both types. Many of the law societies and other professional bodies who gave evidence to the Jenkins Committee recommended that extraordinary resolutions should be done away with.

Mr. D. Costello

The Committee suggested that the minimum length of notice convening a meeting should be 14 days unless all members consent to shorter notice. That is paragraph 128. It is a matter of no great consequence. It will only happen I suppose in the great minority of cases where great speed is necessary to be absolutely certain of getting the full majority to agree to a reduction of time. But I agree with abolishing the distinction between the two types of resolutions. That is a good move but I would like to see some way by which the company could get through a resolution in a matter of urgency in a shorter period than 21 days and at the same time safeguard the shareholders' rights.

Mr. Sweetman

Would the Minister consider going back to the recommendation of the Committee leaving only the special resolutions but bringing down from 21 to 14 days the time so as to meet Deputy Costello's point?

Mr. Norton

I do not think anyone wants to interfere with the small man or make him subservient to the rights of the rich man but you will always get the fellow who does not want to be brought into the current line up of thought. I think that is what Deputy Costello is thinking of. As soon as you want to get something done with expedition you cannot convince the awkward character but that there is something wrong because you are taking a short cut. He immediately becomes suspicious and objects. I think I would do what the sensible citizen would do in similar circumstances.

Mr. J. Lynch

There is something in that because in any event the difficult person will have an opportunity of going to the meeting at shorter notice. I should consider the point that Deputy Sweetman has just made and see if we could work in the 14 days notice in certain circumstances.

Mr. D. Costello

Did the Report recommend 14?

Mr. J. Lynch

It did. But we made it 21 days in the Act of 1959.

Amendment, by leave withdrawn.

Question proposed : " That Section 141 stand part of the Bill."

Chairman

Is there anything new in it except the abolition ?

Major de Valera

The only important question on this is how does it differ from the legislation of 1959? That legislation brought the matter reasonably up to date.

Mr. J. Lynch

The main difference has been dealt with in what we have been discussing.

Question put and agreed to.