- Incorporation
- Constitution (Memorandum & Articles of Association)
- Shares and no par value regime
- Annual returns and financial reporting
- Execution of documents
- Accounts, audit, annual general meetings
- Boardroom excellence
- Meetings and decision making
- Enforcement data and transitional issues
Part 7 - Boardroom excellence
Question 1. Directors’ fee in a private company is to be approved by the Board, but the director must be notified accordingly. Can shareholders object to the decision of the Board and more so if the Board consists of directors who are also shareholders or persons nominated by shareholders?
Answer: The provision of the law allows a shareholder holding at least 10% of the total voting rights to object to the decision of the Board in so far as directors’ fees are concerned. This is in line with the general principle that the shareholders are a different body to that of the Board. The objection must also be for the reasons that the payment is not fair for the company.
The position of the law clearly allows a shareholder who is also a director to object to the decision of the Board. This will allow scenarios where that director/shareholder may not be present at the Board meeting and he now wishes to object, albeit on a different capacity.
Question 2. Why is there a shift in policy in allowing interested parties to vote in related party transactions in a private company?
Answer: The prohibitive policy is premised on the fact that companies should not be transacting with an interested party unless it has been approved at a general meeting.
The prohibitive policy is lifted for private companies where shareholders who are interested in the transaction could also take part in approving the transaction.
In changing the policy, the Government has taken into considerations that there are many genuine transactions that could not be effected by the current prohibitive policy.
In particular, the private companies could not have access to the available resources because such resources are held by interested parties and could not be utilised due the requirements that the resolution must be passed by uninterested shareholders only.
As such, the Government is of the view that whilst the policy requiring prior shareholders’ approval should be maintained, the shareholders should be given the option to proceed with the transactions with full knowledge that the transactions would involve related party, and there should have the full responsibility in approving such transactions.
Source: SSM
