Clause 303: Chairing meetings

570.     This clause provides a default regulation subject to the articles that a proxy may be elected as chairman of a general meeting by resolution of the shareholders passed at the meeting.

Clause 304: Right of proxy to demand a poll

571.     This clause sets out the way in which a proxy may participate in a demand for a poll.

Clause 305: Notice required of termination of proxy's authority

572.     This clause provides a default regulation to replace article 63 of Table A of the 1985 Act. This ensures that, subject to the articles, an appointed proxy's actions at a meeting are valid unless notice of termination of the proxy's authority is given before the meeting starts. The company's articles may specify a longer advance notice period but this cannot be more than 48 hours in advance of the meeting (excluding weekends, Christmas Day, Good Friday and bank holidays).

Clause 306: Saving for more extensive rights conferred by articles

573.     This clause makes clear that the company's articles may confer more extensive rights than are provided for under these new provisions on members and their proxies.

Adjourned meetings

Clause 307: Resolution passed at adjourned meeting

574.     This clause reproduces the effect of part of section 381 of the 1985 Act as it applies to members' meetings. It ensures that a resolution of the members of the company passed at an adjourned meeting is treated as passed on that date and not on any earlier date. The reference to class meetings in section 381 is dealt with by clause 309.

Electronic communications

Clause 308: Sending documents relating to meetings etc. in electronic form

575.     This clause needs to be read together with the provisions about electronic communications to companies in Part 3 of Schedule 5. Taken together these provisions allow a member to communicate with the company by electronic means where the company has given an electronic address in a notice calling a meeting or in an instrument of proxy or proxy invitation.

Application to class meetings

Clause 309: Application to class meetings

576.     This clause applies the provisions of this Chapter with some modifications to meetings of holders of a class of shares.

Clause 310: Application to class meetings: companies without a share capital

577.     This clause applies the provisions of this Chapter with some modifications to meetings of classes of members of companies without a share capital.

CHAPTER 4: PUBLIC COMPANIES: ADDITIONAL REQUIREMENTS FOR AGMS

578.     The requirements for public companies relating to annual general meetings are set out under this Chapter. The main substantive changes to the 1985 Act are, as the CLR recommended, that:

• private companies will no longer be required to hold an AGM. The provisions of this Chapter therefore do not apply to private companies; and

• public company AGMs must be held within six months of their financial year-end.

Clause 311: Public companies: annual general meeting

579.     This clause replaces section 366 of the 1985 Act but will apply only to public companies since private companies are no longer to be required to hold an AGM.

580.     Where section 366 required an AGM to be held each year and not more than 15 months after the previous AGM, a public company will now be required to hold an AGM within 6 months of its financial year-end. This new requirement is intended to ensure that shareholders have a more timely opportunity to hold the directors of a public company to account.

Clause 312: Public companies: notice of AGM

581.     This clause reproduces the effect of parts of section 369 of the 1985 Act relating to the AGM notice. The minimum notice period for calling a public company AGM is 21 days as set out under clause 283(2) (notice required of general meeting) or longer if provided for in the company's articles. An AGM may be called at shorter notice if all members of the company agree.

Clause 313: Public companies: members' power to require circulation of resolutions for AGMs

582.     This clause, with clause 314, replaces sections 376 and 377 of the 1985 Act (to the extent that they relate to resolutions proposed by members to be moved at an AGM).

583.     Members holding at least 5% voting rights or at least 100 members holding on average £100 paid-up capital have the right to propose a resolution for the AGM agenda and to require the company to circulate details of the resolution to all members. A change from the existing legislation is that the shares must in each case carry rights to vote on the relevant resolution.

584.     The key policy change is that, if the members' request is received before the financial year-end, then the members are not required to cover the costs of circulation.

Clause 314: Public companies: company's duty to circulate members' resolutions for AGMs

585.     This clause replaces the remaining parts of sections 376 and 377 of the 1985 Act (to the extent that they relate to resolutions proposed by members to be moved at an AGM). It specifies what a company has to do when it is required to circulate a members' resolution for an AGM.

CHAPTER 5: ADDITIONAL REQUIREMENTS FOR QUOTED COMPANIES

586.     This Chapter imposes new requirements on quoted companies relating to the disclosure on a website of the results of polls at general meetings, and an independent report on a poll if a sufficient number of members demand one. These two measures were recommended by the CLR (Final Report, paragraph 6.39(ii) and (iv)).

Website publication of poll results

Clause 315: Results of poll to be made available on website

587.     This clause requires quoted companies to disclose on a website the results of all polls taken at a general meeting. Subsection (1) sets out the minimum information that must be disclosed. Companies may disclose additional information about the poll results if they wish. Subsection (4) imposes a penalty on every officer in default for non-compliance. Non-compliance however does not invalidate the poll, the resolution or other business to which the poll relates.

588.     Clause 327 (requirements as to website availability) sets out the requirements relating to the website on which the poll results must be published.

Independent report on poll

Clause 316: Members' power to require independent report on poll

589.     This clause gives members of a quoted company the right to require an independent report of any poll taken, or to be taken, at a general meeting. The minimum threshold required for the demand is the same as that for requiring the circulation of a resolution - that is members holding 5% of the voting rights or 100 members holding on average £100 of paid-up capital. The members' request must be made within one week of the meeting where the poll is taken. This allows members to decide after a poll is taken whether they wish to require an independent report, for example on a controversial resolution or where there appears to be a problem relating to voting procedures. Members may make their request in advance of the meeting if they wish, but unless the company's articles already require all votes to be taken on a poll, members may need to take steps to ensure that a poll is called.

Clause 317: Appointment of independent assessor

590.     The appointment of an independent assessor must be made within one week of the members' request. This means that the appointment could be made either before or after the meeting depending on when the members' request is made. The independent assessor must be independent (see clause 318) and must not be someone already involved in the voting process for the company.

Clause 318: Independence requirement

591.     This clause prevents a person acting as an independent assessor on a poll if he is too closely connected to the company or an associated undertaking of the company. The independence requirements are set out in subsection (1). They correspond to the independence requirements for an auditor (see clause 811). Subsection (2) allows, but does not require, an auditor to be appointed as an assessor.

Clause 319: Meaning of "associate"

592.     This clause defines "associate" for the purposes of the independence requirements in clause 318.

Clause 320: Effect of appointment of a partnership

593.     This clause provides for where a partnership that is not a legal person is appointed as an independent assessor on a poll.

Clause 321: The independent assessor's report

594.     This clause sets out the minimum information the independent assessor's report must contain.

Clause 322: Rights of independent assessor: right to attend meeting etc

595.     This clause gives the independent assessor rights to attend the meeting at which the poll or polls may be taken and to be provided with information relating to the meeting. He is to exercise these rights only to the extent he considers necessary for the preparation of his report.

Clause 323: Rights of independent assessor: right to information

596.     This clause gives the independent assessor the right to access company records relating to any poll on which he is to report and to the meeting at which the poll or polls may be taken.

Clause 324: Offences relating to provision of information

597.     This clause imposes a penalty on any person listed in subsection (2) of clause 323 (rights of independent assessor: right to information) who fails to comply with the requirement to provide information or explanation relating to the poll on which the independent assessor is preparing a report.

Clause 325: Information to be made available on website

598.     This clause requires the company to publish on a website the independent assessor's report of the poll or polls and sets out the minimum information relating to the assessor's appointment, his identity, the text of the resolution and the assessor's report that must be made available. Subsections (3) and (4) impose a penalty on every officer in default for non-compliance with this requirement. Failure to comply, however, does not invalidate the poll or the resolution or other business to which the poll relates. Clause 327 (requirements as to website availability) sets out the requirements relating to the website on which the independent report must be published.

Supplementary

Clause 326: Application of provisions to class meetings

599.     This clause applies the provisions of this Chapter to meetings of holders of a class of shares of a quoted company.

Clause 327: Requirements as to website availability

600.     This clause sets out the minimum requirements that should apply to information to be published on a quoted company's website under clause 315 (results of poll to be made available on website) and clause 325 (information to be made available on website). The website on which the information is made available must be maintained by or on behalf of the quoted company and must identify the company in question. This provides flexibility as to whether a website is the company's own or one operated by a website service provider. Information published on a website must be kept available for a minimum of two years. Subsection (5) provides a let-out when a company's failure to make the information available on a website for part of the period is wholly attributable to circumstances beyond the company's control.

Clause 328: Power to limit or extend the types of company to which provisions of this Chapter apply

601.     At present the provisions of this Chapter apply to quoted companies as defined in clause 358 (which replaces section 262 of the 1985 Act). This clause confers on the Secretary of State a power to make regulations to limit or extend the types of company to which the provisions of this Chapter apply. The Parliamentary procedure that will apply to such regulations depends on whether they extend or limit the application of the Chapter.

CHAPTER 6: RECORDS OF RESOLUTIONS AND MEETINGS

602.     The following provisions replace sections 382, 382A, 382B and 383 of the 1985 Act relating to the records of company proceedings. They should be read in conjunction with the provisions on company records in Part 28. The main changes are the ten year minimum period for keeping records (the 1985 Act envisaged that records would be retained forever); that meetings of directors are dealt with elsewhere (in Part 10 of the Bill); and that the new provisions apply to class meetings.

Clause 329: Records of resolutions and meetings etc

603.     This clause requires all companies to maintain records comprising: copies of all resolutions passed otherwise than at general meetings (which would include all written resolutions), minutes of all proceedings of general meetings, and details of decisions of a sole member taken in accordance with clause 331 (records of decisions by sole member). All records must be kept for a minimum of 10 years. Subsections (3) and (4) impose a penalty on every officer in default for non-compliance.

Clause 330: Records as evidence of resolutions etc

604.     This clause ensures that all records of resolutions or written resolutions and minutes of meetings, where signed off by a director or a company secretary or by the chairman in the case of a general meeting, are evidence of the passing of a resolution or the proceedings at the meeting. In legal proceedings, a litigant will have to accept that the records are accurate unless he can prove that they are not.

Clause 331: Records of decisions by sole member

605.     This clause makes provision for the recording of decisions of a company with only one member.

Clause 332: Inspection of records of resolutions and meetings

606.     This clause requires every company to keep its records available for inspection by members for 10 years. Subsection (5) enables a member to seek a court order to compel the company to make the records available for inspection or to provide copies of the records.

Clause 333: Records of resolutions and meetings of class of members

607.     This clause applies the provisions of this Chapter to resolutions and meetings of holders of a class of shares in the case of a company with share capital or to classes of members in the case of a company without a share capital.

CHAPTER 7: SUPPLEMENTARY PROVISIONS

Clause 334: Meaning of "quoted company"

608.     This clause provides that the definition for "quoted company" is as stated in Part 15 of the Bill.

PART 14: CONTROL OF POLITICAL DONATIONS AND EXPENDITURE

Background and summary

609.     In October 1998 the Committee on Standards in Public Life presented to the Prime Minister its report on the funding of political parties in the UK. The Report recommended that any company intending to make a donation (whether in cash or in kind, and including any sponsorship, or loans or transactions at a favourable rate) to a political party or organisation should be required to have the prior authority of its shareholders. The Government accepted this recommendation, and implemented it through the Political Parties, Elections and Referendums Act 2000 ("the PPERA"). The new regime for control of political donations and expenditure is in Part 10A of the Companies Act 1985, as inserted by section 139 of and Schedule 19 to the PPERA.

610.     Part 14 of the Bill restates the existing provisions in a style consistent with the other clauses, but most of the key elements of the framework established by the PPERA will remain. In particular:

• companies will continue to be prohibited from making a donation to a political party or other political organisation or from incurring political expenditure unless the donation or the expenditure has been authorised, in a typical case by the members of the company;

• a "political donation" will continue to be defined by reference to sections 50 to 52 of the PPERA;

• an approval resolution may authorise the making of donations and incurring of expenditure for a period of not more than four years commencing with the date of the passing of the resolution up to a value specified in the resolution;

• under some circumstances, donations or expenditure by a subsidiary must be authorised by a resolution of the members of the holding company; and the directors of such a holding company will continue to be liable for unauthorised donations by the subsidiary company;

• companies need not seek prior shareholder consent for donations to political parties or organisations except to the extent that the amount or aggregate amount of any such donation together with any other relevant donations made by the company and other companies in the group of which it is a member made in a particular qualifying period exceeds £5,000;

• there are to be no criminal sanctions in relation to the making of unauthorised donations or the incurring of unauthorised political expenditure;

• civil remedies are to be available to a company in the event of breach of the prohibitions and are to be pursued in the normal manner by the company; and there will continue to be available an action under which shareholders may enforce on behalf of the company any of the remedies available to a company.

611.     The main changes from Part 10A of the 1985 Act are that:

• in line with our general approach in the Bill, we have removed references to the general meeting, to make it clearer that private companies can authorise donations and/or expenditure by written resolution;

• a holding company must authorise a donation or expenditure by a subsidiary company only if it is a "relevant holding company" (that is, the ultimate holding company or, where such a company is not a "UK company", the holding company highest up the chain which is a "UK company");

• a holding company is to be permitted to seek authorisation of donations and expenditure in respect of both the holding company itself and one or more subsidiaries (including wholly-owned subsidiaries) through a single approval resolution (clause 340(1));

• companies are to be permitted to table separate approval resolutions in respect of donations to political parties and donations to other political organisations (clause 340(2));

• companies will be required to seek authorisation for donations to independent candidates at any election to public office held in the UK or other EU member state and for expenditure by the company relating to independent election candidates;

• the clauses provide greater clarity for companies about the provision of facilities (for example, meeting rooms) for trade union officials by introducing a specific exemption for donations to trade unions (clause 347). The Bill does not introduce a specific exemption in relation to paid leave for local councillors because this does not constitute a political donation under either Part 10A of the 1985 Act or the Bill;

• there are important changes to the rules on ratification and liability in cases of unauthorised donations or expenditure;

• the special rules in respect of the parent company of a non-GB subsidiary undertaking (sections 347E and 347G of the 1985 Act) are not reproduced;

• The new provisions will apply to Northern Ireland.

COMMENTARY

Clause 336: Political parties, organisations etc to which this Part applies

612.     This clause establishes the general scope of these provisions by explaining how they apply in respect of donations to:

• political parties;

• political organisations other than political parties;

• independent election candidates at any election to public office;

and to political expenditure by the company.

Clause 337: Meaning of "political donation"

613.     This clause defines a "political donation" for the purposes of this Part by reference to sections 50 to 52 of the Political Parties, Elections and Referendums Act 2000. It reproduces the effect of section 347A(4) of the 1985 Act, except that it includes donations to independent election candidates.

Clause 338: Meaning of "political expenditure"

614.     This clause defines "political expenditure" for the purposes of this Part.

615.     It reproduces the effect of section 347A(5) of the 1985 Act, except that it extends the definition to expenditure incurred by the company in relation to independent election candidates.Authorisation required for donations or expenditure

Clause 339: Authorisation required for donations or expenditure

616.     This clause prohibits a company from making a donation or incurring political expenditure unless the transaction or the expenditure is authorised by a resolution of the members of the company and/or, where appropriate, the holding company. It reproduces the effect of section 347C(1) and (6) and section 347D of the 1985 Act, except that:

• in line with our general approach in the Bill, the clause does not refer to the general meeting, to make it clear that private companies can authorise donations and/or expenditure by written resolution;

• a donation or expenditure by a subsidiary company must be authorised by the members of the company and by members of a "relevant holding company" (rather than by the members of each holding company within a group). A "relevant holding company" is the ultimate holding company or, where such a company is not a "UK company", the holding company highest up the chain which is a "UK company";

• a resolution is not required on the part of a company that is a wholly-owned subsidiary of a "UK company" (rather than of any holding company, as in section 347D of the 1985 Act);

• the clause does not reproduce the prohibition (in section 347C(5) of the 1985 Act) on retrospective ratification of breaches of the rules.

Clause 340: Form of authorising resolution

617.     This clause reproduces the effect of section 347C(2) and (4) of the 1985 Act, but with the following changes:

• under subsection (1), a holding company may seek authorisation of donations and expenditure in respect of both itself and one or more of its subsidiaries (including wholly-owned subsidiaries) in a single approval resolution. The subsidiaries do not need to be named in the resolution;

• under subsection (2), a company may pass separate approval resolutions in respect of donations to political parties and donations to other political organisations.

Clause 341: Majority required for authorising resolution

618.     This clause provides that the shareholder approval required is approval by way of ordinary resolution, subject to anything in the company's articles requiring a higher majority (or unanimity). It reproduces the effect of section 347C(3)(a) of the 1985 Act.

Clause 342: Period for which resolution has effect

619.     This clause provides that an approval resolution may seek authorisation for the making of donations and incurring of expenditure for a period of not more than four years. It reproduces the effect of section 347C(3)(b) of the 1985 Act.

Clause 343: Liability of directors in case of unauthorised donation or expenditure

620.     This clause imposes civil liability on directors where unauthorised donations are made or unauthorised political expenditure is incurred. The liabilities are owed to the company and are to be pursued in the normal manner by the company; that is they will be pursued by the directors in the exercise of the management powers conferred by the articles of association, and directors will be subject to the general duties set out in Chapter 2 of Part 10 in the conduct of the company's business.

621.     The clause largely reproduces the effect of section 347F of the 1985 Act, but:

• only a director of the company and of a "relevant holding company" may be liable in respect of an unauthorised donation or unauthorised expenditure. This reflects the new rules relating to the authorisation of donations or expenditure by subsidiaries in clause 339;

• a director will be permitted to apply to the court for relief under clause 759 of the Bill (general power of the court to grant relief in case of honest and reasonable conduct), which restates section 727 of the 1985 Act.

622.     The conditions under which directors may be exempted from liability (currently set out in section 347H of the 1985 Act) are not reproduced in the new regime.