Co. Law Paper

Answers to Questions raised in the Consultation Document,
Chapter 7, on Small and Private Companies

by the Company Law Reform Study Group

A. Proposed Simplification
It is considered that the following are desirable and practical proposals:

Question 7. that private companies should be permitted to make provision in their articles for:

	a 14-day notice period for all general meetings;
	to pass written resolutions with less than unanimity, on the basis of a 75 percent and 50 percent majority of votes eligible to be cast, for special and ordinary resolutions respectively;

7.3 that the requirement to notify auditors of written resolutions be abolished;

7.4 that restrictions on financial assistance for the purchase of shares be abolished for private companies;

7.5 that a declaration of solvency required in connection with a reduction in capital, need not be supported by an auditor's report;

7.7 & 7.8 that Section 80, requiring shareholder authorisation for directors to allot shares, should not apply to private companies which have only one class of share;

7.10 that the present requirements on pre-emption should be retained with power in the company's constitution to opt out;

7.11 that the requirement to appoint a secretary shall be abolished;

7.13 & 7.14 that resolutions which require shareholder approval under Part X (which deals with enforcement of fair dealing by directors) shall be able to be given by written resolutions, provided that in the case of a sole director he shall be required to disclose his interests in contracts to the shareholders;

7.15 & 7.16 that an arbitration scheme be introduced to avoid the cost and delays of Section 4.59 actions in the case of disputes arising out of the articles and similar issues, reinforcing the Law Commission's recommendation for greater use of alternative dispute resolution (ADR). However, it is considered that although there should be an assumption in favour of arbitration, the Court's should have discretion to hear suitable cases where both parties do not agree to arbitration.

7.17 & 7.18 We consider that the recommendations for a Model Constitution (MC):

	(a) provide the right basis for a new MC; and
	(b) the proposed amendments to the present Table A are appropriate.

We agree with the proposal that:

7.20 the procedures currently available by means of an elective resolution become the norm, applying automatically unless the company opts for more formal procedures;

7.21 more formal procedures may be dispensed with by means of the special resolution;

7.22 more formal procedures may be adopted by means of an ordinary resolution;

7.23 owner-managed companies should fall within this regime and not be given a separate regime.

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