[ivylen127]

Charles is the managing director of a very profitable policy research company, Prudential Regulatory Research Ltd (PRR). He originally set up this business with his parents in 1994 after graduating from a Bachelor of Commerce degree at the University . PRR’s board has three directors: Charles, his father Winston, who is the non-executive chairman, and Charles’ sister Martha. PRR is not listed on the ASX.

The constitution of PRR includes provisions identical to clauses 1.3, 6.1, 6.2, 7.1, 7.5, 8.1, 9.2, 10.1, 13.1, 13.3 and 18.3 in the constitution of Agco Limited, found on pages 601-616 of the text book, Commercial Applications of Company Law, 10th edition.

PRR’s constitution also provides for ‘A’, ‘B’ and ‘C’ shares. ‘A’ shares have five votes per share at a general meeting of members while ‘B’ shares have four votes per share. ‘C’ shares have one vote per share. Otherwise, ‘A’, ‘B’ and ‘C’ shares have equal rights to dividends and also rank equally on a winding up of the company.

Winston has 10 ‘A’ shares. Charles and Martha have five ‘B’ shares each. Alison (Charles’ ex-wife), has 10 ‘C’ shares. Since her divorce from Charles, Alison never attends meetings, even the annual general meeting usually held in September each year. Rather she always votes by proxy and always appoints Winston as her proxy to vote at his discretion.

The latest board meeting was held this morning (27 March 2009) at 9.00am. All directors were present at the meeting. You were also at the meeting as you are PRR’s new company secretary.

Olivia, Charles’ new wife, was also present at the meeting.
During the meeting Charles told Winston that Olivia should join the board as an additional director, with immediate effect. This was put to a vote: while Winston voted against it, the resolution passed as Charles and Martha voted in favour of it.

Charles then suggested that the ‘A’ shares should only have two votes per share, not five votes. Olivia and Martha agreed. Winston disagreed, saying angrily ‘You can’t do this to me. After all I have done for you.’ The board voted to accept Charles’ proposal, with only Winston voting against it.

The final resolution appointed Olivia as the marketing director. Olivia was not present during the discussion and voting on this particular resolution. While Winston voted against the resolution, the resolution passed as Charles and Martha voted in favour of it. Charles told the meeting that Olivia’s salary should be about $500,000 per year.

Winston is angry about Olivia’s new position as he doesn’t believe that PRR needs a marketing director. His fee as Chairman is $200,000 per year, while Charles is paid $300,000 per year.

Winston is worried that Olivia and Charles are trying to push him out of PRR. Winston wants to call a meeting of PRR’s members as soon as possible to consider the decisions made by the board. All of PRR’s members and directors have agreed to accept email notices, so he thinks this is quite straightforward.

Advise Winston on
(1)whether member approval is needed for any of the decisions made by the board;
(2)the correct procedures he should follow to call a meeting of PRR’s members; and
(3)in relation to the meeting called under (2) and your answer to (1), the documents that PRR needs to give to the members for the meeting.

[Curlyben]

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[AK lawyer]

:)

Good policy, Curlyben.