Extract - For the purposes of this assessment you are a trainee solicitor with the firm of Bridges, working in the company and commercial department. You have received the following internal memorandum from your supervisor.
Internal memorandum
From: Sheila Edmunds (Supervisor)
To: Trainee
Date:
File reference: SU/TR/Humb/01/0014
I had a meeting today with Margaret Andrews, Managing Director of Humberside Products Limited (_Humberside_), a long standing client. Humberside_s business is essentially designing new light engineering products of various types and then supplying them by sub-contracting their manufacture. They have a very successful track record and are a small but very profitable business.
The board have decided that they wish to bring into the company as a director and shareholder one John Markham. Markham has been working for Humberside for a number of years as a self-employed computer consultant. Humberside_s demand for the type of work that he does has increased substantially over the last couple of years and this has now reached the stage where all Markham_s work is being done for Humberside, and he has become closely involved in the day- to- day work of the company.
Markham and the board of Humberside have now decided that Markham will become a director of Humberside with a six-year fixed term service contract providing for a salary of #60,000 per annum (to be adjusted annually for inflation) and various other benefits. He is to be allotted 100 #1 Ordinary shares in the company (ranking pari passu with the existing capital), at a price of #285 per share (agreed by Markham and all the directors to be the current market value of the shares). This will obviously involve the company in both board and general meetings.
You will see from the attached company details that the directors of Humberside control 80% of the shares already in issue, but the remainder are held non-director shareholders (relatives of one of the original founders) who are not on the board. These non-director shareholders do not generally show very much interest in the running of the company, but can be unpredictable when faced with any major change. The board is united in its wish to proceed with the arrangements set out above and want us to ensure that all legal requirements and procedural matters are properly met. In order that the shareholders do not become unduly alarmed, only the minimum requirements necessary to effect the transaction noted above should be attempted, and a full explanation of the resolutions and the legal background should be given.
Instructions
To this end will you please Prepare:
1. A notice of the extraordinary general meeting, to be held at the company_s registered office at 10.00 a.m. on Monday 4th. February 2002, setting out the details of any resolutions which need to be put to the members. 600 words
2. A draft letter to be sent by the company secretary of Humberside to the company_s shareholders, on the instructions of the board of directors, explaining the various items on the agenda for the EGM, the affect of each of the resolutions, and the legal background.
You need not be concerned with the terms of the service contract, which is being prepared by one of our employment law experts. It will be available for circulation to the shareholders, if necessary. 1300 words
3. By the way, as you will notice, I am one of the minority shareholders in the company. Can you please check any rules which may affect my professional position and advice me of the effect of any such rules in this case? 100 words
Humberside Products limited
Date of incorporation: 18th. March 1953 Company number: 20654 Memorandum and articles New memorandum and articles were adopted on 23rd. June 2001. The memorandum provides that the company is a general commercial company and the articles adopt the 200 version of Table A, without amendment. There have been no changes since then.
Registered office:
Humberside House
7 North Street
Newcastle Upon Tyne
NE1 9DW
Directors:
Margaret Andrews (Managing)
Alexander Clough (finance)
Jennifer Timpson
Samantha Chambers
Kathryn Kemp
Share Capital
The authorised and issued share capital is #10,000 divided into 10,000 shares of #1 each.
Shareholders:
Margaret Andrews 2000
Alexander Clough 2500
Jennifer Timpson 1500
Samantha Chambers 500
Kathryn Kemp 1500
Peter Howes 250
Steven Noble 250
Mary Noble 250
Sheila Edmunds 500
Kevin Patterson 500
Lucy Patterson 250
All shares are #1 ordinary shares and are fully paid.
John Markham_s details are:
John Basil Markham
13 Faraday Street
Gateshead
Tyne and Wear
NE8 5RF
Date of birth: 18.10.48
Nationality: British
Occupation: Computer consultant
Other directorships: None
Answer
Company No: 020654
Humberside Products Limited
NOTICE IS HEREBY GIVEN that an EXTRAORDINARY GENERAL MEETING of the above-named company will be held at Humberside House 7 North Street, Newcastle upon Tyne, NE1 9DW on 4th February 2002 at 10.00 am to consider and, if thought fit, pass the following resolutions which will be proposed as special resolutions and as ordinary resolutions of the company.
ORDINARY RESOLUTIONS
Part 1)
1. "THAT the directors be given general and unconditional authority pursuant to section 80 of the Companies Act 1985 to allot up to an aggregate nominal amount of 10,500 shares of £1 each in the capital of the company provided that this authority, unless renewed, shall expire on the date five years from the date on which this resolution is passed.
2. " THAT pursuant to section 121 of the Companies Act 1985 the authorised share capital of the company be increased from £10,000 to £10,500 by the creation of an additional 500 ordinary shares of £1 each to rank pari passu in all respects with the capital of the company.
3. "THAT pursuant to the articles of association of the company the undersigned being all the directors of the company, hereby resolve THAT the application from Mr John Basil Markham of 13 Faraday Street, Gateshead, Tyne and Wear NE8 5RF for the allotment of 100 shares of £1 each in the capital of the Company be allotted him on the terms of his application".
SPECIAL RESOLUTIONS
We inform you that we intend to propose the following resolution at the extraordinary general meeting referred to in paragraph 1 above:
4. "THAT John Markham be and is hereby appointed as a director of the Company pursuant to Regulations78 of Table A to the Companies Act 1985 such appointment to take effect immediately upon the conclusion of business at this Extraordinary General Meeting".
5. THAT by virtue of section 95(1) of the Act and Section 89(1) of the Act shall not apply to the allotment of shares pursuant to the authority conferred by the Resolution numbered 1 above.
6. THAT the draft contract of Employment be available at the meeting to be entered into between John Markham (a newly appointed director as per the Resolution numbered 3 above) and the Company for a period of six years.
Dated…………………………………………………………………………
Signature…………………………………………………………………….
A member entitled to attend and vote at the meeting convened by this Notice is entitled to appoint a proxy to attend and vote on a poll (Unless Articles may provide otherwise proxies may vote only on a poll)
EGM Documentation: Consent to short notice
Humberside Products Limited
Consent to short notice
To: The Directors
We, the undersigned, being a majority in number of the Members having a right to attend and vote at the E G M convened by the attached Notice of Meeting and together holding not less than 80% in nominal value of the shares giving the right to attend and vote at such Meeting, hereby consent to the convening of such Meeting for the day and place mentioned in such Notice for the purposes set forth therein and to the proposing and passing of the Resolutions specified in such Notice notwithstanding that less than the full period of notice thereof required under the Companies Act 1985 and the Articles of Association of the company shall have been given.
Dated……….200
Signed (Members)
Print of Special Resolution:
Company No: 020654
THE COMPANIES ACT 1985
COMPANY LIMITED BY SHARES
SPECIAL RESOLUTION OF
Humberside Products Limited
At an Extraordinary General Meeting of the Company held at Humberside House 7 North Street, Newcastle upon Tyne, NE1 9DW on 4th February 2002 at 10.00 am the following Resolutions were passed as Special Resolutions.
"THAT John Markham be and is hereby appointed as a director of the Company pursuant to Regulations78 of Table A to the Companies Act 1985 such appointment to take effect immediately upon the conclusion of business at this Extraordinary General Meeting".
"THAT by virtue of section 95(1) of the Act and Section 89(1) of the Act shall not apply to the allotment of shares pursuant to the authority conferred by the Resolution numbered 1 above."
"THAT the draft contract of Employment be available at the meeting to be entered into between John Markham (a newly appointed director as per the Resolution numbered 3 above) and the Company for a period of six years."
Chairman…………..
(Note: Ordinary Resolutions must also be filed at Companies House)
Minutes of EGM
Minutes of an Extraordinary General Meeting of Humberside Products Limited held at Humberside House 7 North Street, Newcastle upon Tyne, NE1 9DW on 4th February 2002 at 10.00 am.
Present: Margaret Andrews (Managing Director), Alexander Clough, Jennifer Timpson (Company Secretary), Samantha Chambers and Kathryn Kemp(Chairman).
1. The secretary announced that consent to the Meeting being held at short notice had been given by the requisite majority of members entitled to attend and vote at the Meeting.
2. The Chairman announced that a quorum was present under the Articles of Association.
3. The Chairman proposed and other members present seconded the Resolutions set out in the Notice of Meeting number 1
to 6. It was put to the meeting and carried unanimously on a show of hands.
4. There being no other business the Meeting was closed.
Signed (Chairman)…….
Dated………………….
Part 2)
BRIDEGES SOLICITORS
234 South Street
Bridge House
Newcastle upon Tyne
Tel: 0123456789
Our Ref: SU/TR/Humb/01/0014
1 March 2005
To all shareholders of Humberside Products Limited ("the Company")
(Address of individual shareholder)
Dear
Re: Matters relating to the Appointment of John Markham
Please find enclosed herewith a Notice of Extraordinary General Meeting with the proposed changes and resolutions. This letter is intended to help you to understand various documents and resolutions needed to implement the change.
The Board of the Company has decided to appoint an additional director and therefore has requested Mr John Markham to join the board as a Director and shareholder. As you all are aware John has been working for the Company for the last fifteen years as a self-employed computer consultant and especially in the last couple of years the demand for his type of work has increased considerably. As a result John has become closely involved in the day to day work of the company. Therefore to reward his hard work, contribution towards the success of this company and commitment, the board is keen to appoint him as a director on six year fixed term service contract with a salary of £60,000 plus benefits. In addition to this John will become a shareholder of the company and willing to buy 100 shares at a market price, agreed by the Board with John, of £285 per share. Although this would dilute your shareholding it is a necessary change which reflects the growth of the business and sends out the message that this organisation rewards the contribution towards the building up the business from its staff very well.
In order to implement the proposed changes there are number of documents need to be prepared and filed at the Companies House to comply with the Company Law requirements. I have explained these documents below and would like to invite you to read these carefully.
1. As shareholders of the Company you have right to attend and vote at the general meetings.
2. At the Extraordinary General Meeting there are two types of resolutions which have been proposed. The business at the meeting can only be carried out by passing the appropriate resolution.
3. An ordinary resolution needs a simple majority of votes that is over 50% in favour in order it to be passed at the meeting. If equal number of votes are in favour and against the resolution then a chairman's casting vote can be used if it is provided in the Articles. As the Company has adopted Table A without change article 50 would apply which gives the chairman a casting vote.
4. The importance of a casting vote is to avoid deadlock situations.
5. A special resolution requires three quarters majority in favour of that resolution in order it to be passed. A special resolution is required by the Companies Act to alter the Articles of the Company and to exclude pre-emption rights on the issue of shares. A special resolution is needed to increase the share capital and to authorise the directors to do so.
6. Section 80 of Companies Act 1985 restricts the power of the directors to issue shares. Therefore it is necessary to authorise the directors to issue shares by altering the company's articles. The authorisation is given by for a particular reason i.e. in order to bring Mr Markham on Board by issuing him 100 shares.
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