The court has the power to order a company meeting
A company has two shareholders. The majority shareholder holds enough votes to pass an ordinary or a special resolution, and wants the company to hold a meeting so that a particular resolution can be passed. But the meeting cannot be held because the quorum requirement is two, and the minority shareholder is refusing to attend.
Typically, this might arise where the two shareholders are both directors and have fallen out. The majority shareholder wants to remove the minority shareholder director by ordinary resolution. That resolution has to be passed at a meeting, as the private company written resolution procedure cannot be used to remove a director.
In this situation, the majority shareholder may ask the court to order that a meeting be called and conducted in any manner the court thinks fit. The court has the power to make this order under section 306 of the Companies Act 2006. Sub-section (4) of that section expressly gives the court the power to direct that one member of the company present at the meeting be deemed to be called a quorum.
The court’s power is founded on solving some problem of impracticality in holding the meeting; for example, the court may exercise the power in order to enable the company to move forward and not be hamstrung by a procedural quorum requirement that is preventing a majority shareholder from exercising her legitimate powers. The court would not make an order where, for example, the two shareholders held 50% of the shares each; there would be little point, as any resolution would not be passed, and the court will not exercise its powers under section 306 if that involves preferring one of two equal shareholders.
The granting of an order under section 306 will not prejudice the ability of a minority shareholder to bring an action under the unfair prejudice provisions of section 994 of the Companies Act 2006.
Friendly Corporate PSL
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