Monnington v Easier Plc

Section 371 of the Companies Act 1985 permits the court to order a meeting only where it is impracticable either to call the meeting in an authorised manner or to conduct it in the manner prescribed by the articles or the Act. The provision is procedural. It cannot be used to dispense with substantive protections, including special notice for the removal of directors, or as a shortcut to altering the company’s articles. A meeting is not impracticable merely because shareholders seek to secure particular board control at one meeting and would otherwise need to convene a further meeting. The court may also refuse relief in its discretion where the order would effectively rewrite the constitution or support an unreasonable attempt to obtain exclusive control.

The claimant, a shareholder, sought an order under section 371 of the Companies Act 1985 convening an extraordinary general meeting. The proposed resolutions sought to remove the company’s directors, remove any directors appointed shortly before the meeting, and appoint replacement directors.

The application arose after an earlier requisitioned meeting had proceeded following the resignation of two directors and the appointment of two others immediately before the meeting. The claimant argued that a further meeting would be ineffective because special notice could not be given in time for resolutions removing any last-minute appointees. The central issues were whether either statutory condition for section 371 jurisdiction was satisfied and, if so, whether the court should exercise its discretion to make the order.

1. The claim was dismissed. The court had no jurisdiction under section 371.

2. Section 371 creates two alternative jurisdictional conditions: it must be impracticable to call a meeting in a manner in which company meetings may be called, or impracticable to conduct it in the manner prescribed by the articles or the Act. The fact that shareholders might need to convene more than one meeting did not satisfy either condition.

3. It was practicable to call a meeting. The shareholders had previously requisitioned and convened one, and there was no reason why that process could not be repeated.

4. It was also practicable to conduct meetings in the prescribed manner. A meeting could be held to consider the removal of the existing directors and their replacement. If further directors were appointed, a subsequent meeting could be convened after proper special notice under sections 303(2) and 379 and article 88.

5. The claimant’s real objection was to the board’s power under article 82 to appoint directors before the meeting. Section 371 could not be used to disapply the substantive protection afforded to directors by sections 303(2), 304 and article 88, nor to achieve indirectly an alteration of article 82, which required a special resolution.

6. Union Music Ltd and another v Watson and another [2003] 1 BCLC 453 illustrated the usual case of impracticability, where a meeting could not proceed because of the absence of a necessary quorum. That was not the present case. Re British Union for the Abolition of Vivisection [1995] 2 BCLC 1 concerned extreme and unusual facts and did not assist.

7. Alternatively, the court would have refused relief as a matter of discretion. The order sought would have supported an attempt by a 0.5% shareholder to obtain exclusive control of the board and would effectively have altered the company’s constitution.