COMPANY LAW.

Auckland Star, Volume LXI, Issue 218, 15 September 1930, Page 4

COMPANY LAW.

POWERS OF SHAREHOLDERS. COMPARATIVELY HELPLESS. • In an illuminating article published in 1 "The Times" recently, Mr. Henry Morgan, ! president of the British Society of Incor- ' porated Accountants and Auditors, makes interesting reference to the powers o shareholders in determining the policy ol ■ their company. The writer says: . , "That there is so seldom any effective • opposition by shareholders _ to proposals ' and schemes that are obviously against 1 their interests is explained, not so much • bv 'apathy' as by an examination ot the means which shareholders have of exercis- • ing their powers. The law provides that such questions as election of directors, election of auditors, alteration of articles, Schemes for reduction and reorganisation of capital, and schemes for amalgamation with other companies (frequently providing for substantial compensation to directors), must be sanctioned by shareholders in general meeting. This is yet another fallacy. What happens in practice? In the case of ordinary general meetings the notice which sets out the business to be transacted has almost invariably to be posted to shareholders seven clear days before the meeting. Proxies to be used at the meeting must be lodged with the company 48 hours before the time of the meeting, so that there is an interval of practically four days only within which shareholders' opposition to the proposals, in effect those of the directors, can be properly, organised. This is almost an impossibility. When opposition is anticipated the directors send- with the notice of the meeting, at the cost of the company, the forms of proxy, with a request, expressed almost in., the form of a command,, that the proxies should be signed' ind returned to the company. "Thus, although it is an easy matter for the shareholder to indicate his assent to the proposals, it is extremely difficult for him to register his disapproval unless he attends the meeting. Meetings have been held within recent months where the shareholders present have been practically unanimous in opposing the directors' proposals, and yet when a poll is demanded by the chairman and taken, the opposition has been hopelessly outvoted by the use of proxies. "In the case of large companies, where the questions involved have aroused the keenest, public interest, when a poll is taken it is often surprising what a small percentage of the total capital is represented by votes • recorded personally and by proxy. It has been said that where directors have the support of one-thircl or even one-fourth of the shares in a company and the balance is distributed among large numbers of the public the directors can completely control the company in general meetings, even to the extent of securing the three-fourths majority necessary for the passing of special resolutions. "In the winding-up of companies creditors and contributors can_ send their j proxies to the liquidator, directing that their votes shall be recorded either for or against the various resolutions. Jt is surprising, therefore, that shareholders in public cotnpanies should be left so comparatively helpless by the law. which obviously needs amendment in this respect. "The existing law does not operate so harshly where the shareholders in a company.are few in number, but the great development in joint stock enterprise has resulted in there being in many companies an enormous number of shareholders, -many of them situated in remote parts of, the country and abroad."