Sherborne and F&C Asset Management: Requisitioning an EGM and removing directors
F&C Asset Management (F&C) is an Official List company with a Premium Listing on the Main Market of the London Stock Exchange. Sherborne Investors GP, LLC (Sherborne) is an activist investment company.
Sherborne successfully requisitioned a general meeting of F&C to consider resolutions (i) removing the chairman of F&C and one of its independent non-executive directors and (ii) appointing three directors as nominees of Sherborne. These resolutions were convincingly passed on 3 February 2011. The two existing F&C directors were voted off and the three Sherborne nominees voted on; six existing F&C directors continued in office, meaning that the Sherborne nominees do not constitute a majority of the new F&C board.
This is the second of two posts looking at legal aspects of Sherborne’s F&C activisim (the Sherborne Activism). The first post examined the impact (or non-impact) of the City Code on Takeovers and Mergers (the Takeover Code) on the Sherborne Activism. In this post, we look at the the Companies Act 2006 mechanism that allowed the requisition of the F&C general meeting and the removal of the two directors.
Requisitioning the F&C general meeting
Shareholders can requisition (i.e. require the directors to call) a general meeting of a company if they hold at least 5% of the paid-up capital which carries voting rights. Sherborne directly held approximately 10% when it requisitioned the F&C meeting on 16 December 2010.
The requisition has to state the nature of the business to be dealt with at the meeting, and may have included the text of the resolutions to be moved at the meeting.
The directors of the company must then call the meeting within 21 days from the date that they become subject to the requirement (i.e. the date the notice is received). Sherborne submitted the requisition notice on 16 December 2010 and notice of the meeting was sent by the company on 6 January 2011 – so the meeting was called on the last possible date. The meeting must then be held on a date not more than 28 days after the date of the notice convening the meeting, and the F&C meeting was held on 3 February 2011.
Sections 303 to 306 Companies Act 2006 set out these rules on the requisitioning of a meeting by shareholders.
Removal of the two directors
Shareholders can remove a director by an ordinary resolution (section 168), but must give the company special notice of such a resolution. A resolution to remove a director cannot be passed as a written resolution.
“Special notice” means that notice of the intention to move the resolution must be given to the company at least 28 days before the meeting at which it is moved (section 312). Given the dates above and the need to requisition the meeting, this requirement was easily complied with by Sherborne.
A director whose removal is sought may make written representations (i.e. defend his position) and is entitled to speak at the meeting. The F&C directors did not in fact make these representations, as the board as a whole opposed the Sherborne Activism and stated its opposition (in vain, as it transpired) to Sherborne’s attempt to remove the directors in a circular to shareholders that accompanied the notice of general meeting.
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