Resolving member disputes and general meetings

There are two types of member disputes: firstly, disputes over products and services and secondly, shareholder disputes.

The first type should be straightforward: by law you are required to have internal and external dispute resolution procedures relating to your financial products (and soon, credit products) escalating from internal customer service and complaints officers to external ombudsmen. Sometimes these are complex or relate to matters of general legal importance but most can usually be resolved by open communication and understanding.

Disputes with members relating to their position as shareholders (and not as customers) are harder to resolve. Shareholders have a contract with the company (the constitution) and this contract, together with the Corporations Act, determines the rights of members.

One of the fundamental rights of members is the right to participate in company matters including the right to vote at general meetings. So it is not unexpected that disputes occur in relation to the calling of meetings, proxies, meeting procedures and the election of directors.

McKerlie v Drillsearch Energy Ltd [2009] NSWSC 488 dealt with a challenge to a company announcement that its general meeting would be postponed by the chair opening and adjourning it straight away. Not all the directors had agreed.

Justice Barrett of the NSW Supreme Court decided that:
1. ” the general power of directors, under the constitution, to manage the company and to exercise its powers does not allow the directors to postpone a duly convened general meeting. For the directors to be able to do that, there must be some express power given to them by the constitution.”
2. The person who presided as chairman of the proposed meeting could not, consistently with the duties of a chairman, give effect to the postponement.
3. “It will be the duty of the person who presides as chairman of the meeting to consider any question of adjournment of the meeting according to:
(a) the circumstances existing at and in relation to the meeting when it occurs; and
(b) a genuine appraisal of those circumstances made in good faith and in light of the purposes for which the power to adjourn exists.”

As you prepare for your next general meeting it is always wise to have a “run sheet” dealing with these types of issues.

If you need assistance in preparing for your meeting, call Bright Law.

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