In our previous post, we looked at basics of a Regular Shareholder Meeting. Today, we will take a closer look at requirements for holding a Special Shareholder Meeting.
A Special Shareholder Meeting may be convened only in the following situations:
- If more than 50 percent of the Board of Directors unable to work or resigned;
- If two (2) or more independent members of the Board of Directors, or shareholders with 10 or higher percent of voting rights has issued a proposal or demand;
- If the loss incurred by the company exceeds 30 percent of the owner’s equity at the time of the last financial report;
- If the company debt has exceeded the owner’s equity for two (2) years in a row, and is a negative figure;
- the Board of Directors has issued a decision;
- the audit committee demanded to convene a special session of the shareholders meeting;
- all other cases specified in the company charter.
Under the Company Law, (61.1.2) it states to convene the a special shareholders meeting if two (2) or more independent members of the Board of Directors, or shareholders with 10 or higher percent of voting rights (further to call “ meeting initiator ”) has issued a proposal or demand, and it closely regulates the procedure of the proposal and its resolution. This is one of the significant differences and regulations between regular and a special shareholder’s meetings.
The Company Law directs that when the above describer 2 or more independent members if the Board of Directors and shareholders with 10 or higher percent of voting rights demand to convene the a special shareholders meeting they must issue the written proposal to the Board of Directors or Executive management reflecting i) meeting initiator’s full name ii) the number of voting shares iii) reason for convening the meeting iv) agenda v) draft resolution.
The Board of Directors (in its absence, the executive body) could decide whether or not to call such a special shareholder meeting within ten (10) business days following the date that they receive the demand. The Board of Directors may decide one of the following two alternatives:
1) Resolve to convene the a special shareholders meeting according to the meeting initiator’s demand. In this case, the meeting should be convened within 45 days of receipt of a valid proposal for a meeting. The company must bear the cost associated with the shareholders’ meeting.
2) If the voting rights of the shareholders demanding the calling of the special meeting do not reach ten percent (10%) of the company`s aggregate voting rights; or none of the issues proposed for the agenda of the special shareholders meeting are within the authority of such meeting the Board of Directors or the executive management shall refuse to the proposal and the decision shall be immediately notified to the Board of Directors member or shareholder proposed the meeting.
If the meeting initiator disagrees with the refusal, they could appeal to the court.
If within 10 days the Board of Directors (in its absence, the executive body) fails to make a decision, the demanding shareholders or an independent member of the Board of Directors may call to convene the a special shareholders meeting independently. In such a case company may bear costs associated or refuse to bear the cost.
Conclusion and Key Differences of Regular Shareholders Meeting and A Special Shareholders Meeting
The key difference between the regular and a special shareholders meeting is the regular meeting shall be convened at least 40 days after the decision was made, and the a special shareholders meeting shall be convened within 45 days after the decision was made.
With regard to the legal consequences, if the regular meeting was not convened within the April (4 months), the Board of Directors authority ruminates in entirety, except the right to convene the shareholders meeting. In case, it failed to convene the a special shareholders meeting, the meeting initiator is entitled to convene the meeting, and if the meeting initiator disagrees with the refusal from the convening the meeting, the meeting initiator may appeal to the court.
In connection with mandatory agenda, the regular meeting must be discussed and approved the Board of Directors conclusion on the operational report and the financial statement of the company. However, the a special shareholders meeting does not have a mandatory agenda item, and it may discuss any issue related to the authority of the shareholders meeting.