When is a Share Call Notice Invalid Due to Quorum Issues?

Question from siya, When is a Share Call Notice Invalid Due to Quorum Issues?

Answer from AI:

A share call notice is a formal request by a company to its shareholders to pay the unpaid portion of their shares. For such a notice to be valid, it must comply with the company’s articles of association and relevant laws. One critical requirement is that the decision to issue a share call notice must be made by a validly constituted board meeting, which includes having a quorum present.

Understanding Quorum Requirements

A quorum is the minimum number of directors required to be present at a board meeting to make the proceedings of that meeting valid. The specific number or percentage required for a quorum is usually outlined in the company’s articles of association. If a quorum is not present, any decisions made, including issuing a share call notice, may be invalid.

Legal Cases Involving Invalid Share Call Notices Due to Quorum Issues

While specific case law can vary by jurisdiction, here are some general principles and examples from common law jurisdictions:

• Case Example 1: Re Duomatic Ltd [1969] 2 Ch 365

  In this case, the court held that decisions made without a quorum could be ratified by the unanimous consent of all shareholders. However, if such unanimous consent is not obtained, the decisions, including share call notices, would be invalid.

• Case Example 2: Re Express Engineering Works Ltd [1920] 1 Ch 466

  This case emphasized that the absence of a quorum invalidates any resolutions passed at the meeting. Therefore, a share call notice issued without a quorum would be considered invalid.

• Case Example 3: Re Portuguese Consolidated Copper Mines Ltd [1890] 45 Ch D 16

  The court ruled that a meeting held without a quorum is not a valid meeting, and any decisions made, including share call notices, are void.

Steps to Ensure Valid Share Call Notices

To avoid the invalidation of share call notices due to quorum issues, companies should:

1. Review Articles of Association: Ensure that the quorum requirements are clearly understood and adhered to.
2. Verify Attendance: Confirm that the required number of directors are present before proceeding with the meeting.
3. Document Proceedings: Keep detailed minutes of the meeting, noting the presence of a quorum.
4. Seek Legal Advice: Consult with a legal professional to ensure compliance with all legal requirements.

When to Consult a Legal Professional

If there is any doubt about the validity of a share call notice or the quorum requirements, it is crucial to seek legal advice. A legal professional can provide personalized guidance based on the specific circumstances and jurisdiction.

For more detailed information, you can refer to the [Companies Act 2006](https://www.legislation.gov.uk/ukpga/2006/46/contents) in the UK or similar legislation in your jurisdiction.

Remember, this information is intended to provide a general understanding and should not be considered legal advice. Always consult with a qualified legal professional for advice tailored to your specific situation.