In the first of a series of Jordans FAQs, we explore the issues we come across most often:
Q. I act for a company limited by guarantee which is about to convene a general meeting. Some of the members want to appoint proxies but one of the directors says they have no right to do so because the company’s articles (which pre-date the Companies Act 2006) do not allow the appointment of proxies. Is the director correct?
A: The position under section 372 of the Companies Act 1985 used to be that companies not having a share capital were excluded from the requirement to allow their members to appoint proxies to attend and vote at a general meeting in their stead. Therefore it was relatively common for companies limited by guarantee to omit provisions about appointing proxies from their articles and require members to attend in person or not at all.
This situation changed on 1 October 2007 when section 324 of the Companies Act 2006 came into force. Under section 324(1) a member of any type of company has the right to appoint another person to attend, speak and vote at a meeting in his place. The right of members to appoint proxies applies notwithstanding any contrary provisions, or lack of provisions for the appointment of proxies, in the company’s articles.
It also appears that section 324 overrides any restriction in a company’s articles about who a member may appoint as his proxy. For example, articles of older companies sometimes provided that a member could only appoint another member to be his proxy. Such a restriction Is no longer enforceable.
Members of companies often rely heavily on the articles of association for information about their rights and obligations in relation to company meetings and may be unaware that the Companies Act gives them wider rights than older articles might state. As being wrongly prevented from appointing a proxy may lead to bad feeling and potentially more serious conflict between the member and the company, the company should perhaps consider updating its articles to reflect the members’ current rights under the Act.
Another point to bear in mind is that in accordance with section 325 of the Act your company should ensure that every notice of a general meeting includes a statement of the members’ rights to appoint proxies under section 324 and any more extensive rights conferred by the company’s articles.
About the author: Helen Goose LLB is Corporate Legal Services Manager, Jordans Limited
For more information please visit: www.jordans.co.uk
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