House of Representatives

Explanatory Memorandum

(Circulated by the authority of the Treasurer, the Hon J. B. Hockey MP)

Chapter 1 - Requesting a general meeting

Outline of chapter

1.1 Items 1, 2 and 10 of Schedule 1 to this Bill amend the Corporations Act 2001 (Corporations Act) to better balance the rights of shareholders to raise issues with a company and the costs to companies of being required to call and hold a general meeting.

1.2 All references in this Chapter are to the Corporations Act unless otherwise specified.

Context of amendments

1.3 Part 2G.2 of the Corporations Act sets out company responsibilities in relation to meetings of members of companies. This Part grants 100 members entitled to vote at a general meeting certain powers in relation to corporations. This includes allowing such groups, at the expense of the company, to:

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require the directors of the company to arrange a general meeting;

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put a resolution on the agenda of general meetings; and

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circulate material to other members.

1.4 Members or groups of members with at least a five per cent of the votes that may be cast at the general meeting have similar powers.

1.5 In large corporations, 100 members may hold a very small percentage of voting shares - often below one per cent. Accordingly a very small percentage of shareholders can require a company to hold a general meeting and to incur the subsequent costs.

1.6 Resolutions that have been proposed in the past at meetings held at the request of 100 members have generally received little support.

Summary of new law

1.7 This Bill amends section 249D so that a general meeting must only be arranged if members with at least five per cent of voting shares make the request.

1.8 One hundred shareholders continue to be able to put a resolution on the agenda of general meetings and circulate material to other members at the expense of the company.

Comparison of key features of new law and current law

Detailed explanation of new law

1.9 Subsection 249D(1) is amended to remove the right of 100 members entitled to vote to request directors of a company to hold a general meeting. [Schedule 1, item 1, subsection 249D(1)]

1.10 Subsection 249D(1A) is repealed to remove the authority of the Corporations Regulations 2001 (the Corporations Regulations) to prescribe a different number of members who may request that a general meeting be held. [Schedule 1, item 2, subsection 249D(1A)]

1.11 The Bill will not change the right for members with at least five per cent of the votes that may be cast at the general meeting to request directors of a company to call and arrange to hold a general meeting.

1.12 Other Corporations Act powers and responsibilities relating to groups of 100 members and members with five per cent of the votes that may be cast at the general meeting are unaffected by the amendments to section 249D.

Application and transitional provisions

1.13 Where at least 100 members who are entitled to vote at the general meeting have requested directors of a company to call and arrange to hold a general meeting before the commencement of this Bill, the amendments to section 249D made by the Bill do not apply. [Schedule 1, item 10, sections 1547 and 1548]