High Court: Appointments to board of Conroy Gold did not comply with company’s notification requirements
A shareholder in Conroy Gold and Natural Resources PLC has lost his application for declarations that the appointment of three new directors to the company’s Board were valid.
Finding that there was a failure to comply with the notification requirements in the company’s articles of association, Mr Justice Max Barrett stated that it was not up to the company to remind a “commercially sophisticated, legally advised shareholder” of the obligations incumbent upon him.
Conroy Gold and Natural Resources PLC is a public limited company incorporated in Ireland. The applicant in the case was Mr Patrick O’Sullivan a 28 per cent shareholder in Conroy Gold.
On 30th May 2017, Mr O’Sullivan served notice, pursuant to s.146 of the Companies Act 2014, of his intention to propose nine ordinary resolutions at a general meeting of the company; related to the removal of six serving company directors and the appointment of three company directors, Messrs O’Sullivan, Heddle, and Johnson.
On 8th June 2017, Mr O’Sullivan requisitioned the directors, pursuant to s.178 of the Companies Act 2014, to convene an extraordinary general meeting (EGM) of Conroy Gold.
At the EGM on 4th August 2017, all resolutions were approved by a majority vote.
The present dispute arose in relation to the validity of three resolutions whereby Mr O’Sullivan sought to have himself, Heddle, and Johnson appointed to the Board.
Mr O’Sullivan sought:
- A Declaration that Conroy Gold’s conduct of the EGM, and in particular the failure to acknowledge and give proper effect to the vote of the members on the Disputed Resolutions concerning the appointment of three new directors constituted the conduct of its affairs in a manner oppressive to Mr O’Sullivan and/or the interests of its members;
- A declaration that the Disputed Resolutions submitted to a vote of the members at the EGM concerning the appointment of the Nominated Directors were validly passed;
- A declaration that the Nominated Directors are entitled to be appointed as directors of Conroy Gold forthwith…
- If necessary, an Order/s setting aside such actions and/or decisions of the Board from the date of the EGM until the hearing of this Application as the court shall deem fit, by reason of this Application as the Court shall deem fit, by reason of the continued wrongful exclusion of the Nominated Directors from the Board of the Respondent.
- Such further or other orders ”.
Article 85/Section 144
The dispute centred on Art.85 of the articles of association of Conroy Gold and certain related provision in s.144 of the Companies Act 2014.
Article 85 of the articles of association of Conroy Gold states:
“No person other than a Director retiring by rotation or retiring pursuant to Article 82(b) hereof shall be appointed a Director at any general meeting unless he is recommended by the Directors or not less than seven nor more than forty two days before the date appointed for the meeting notice executed by a member qualified to vote at the meeting has been given to the Company of the intention to propose that person for appointment stating the particulars which would, if he were so appointed, be required to be included in the Company’s register of Directors together with a notice executed by that person of his willingness to be appointed.”
The primary purpose of such an article is to enable a company to comply with the requirements of the Companies Act 2014 relevant to the appointment of directors.
Justice Barrett identified three points which arose in relation to a failure to comply with Art.85/s.144:
- Where a person is purportedly appointed by resolution of a company’s members to be a director of the company of which they are members and a defect in the process of appointment later becomes manifest, that appointment is invalid.
- A resolution that contravenes the articles of association of a company or the Companies Act 2014 is a nullity, even if passed by a majority of the members.
- The effect of Art.61(a) of the articles of association (upon which Mr O’Sullivan sought to rely) did “no more than state the obvious proposition that a resolution that receives a certain number of votes is deemed to have been passed” – nor did it “make the ineffective effective…The members in general meeting are bound to observe the rules laid down in the articles of association; and the articles of association (and the Act of 2014) make clear that the members in general meeting do not have the power to elect a person as a director where such person is not eligible for appointment”.
Justice Barrett was satisfied that neither the required notices nor the particulars and information required were given to Conroy Gold.
No document purporting to be a nominating member’s notice or a director’s consent notice was ever sent.
None of the communications relied on by Mr O’Sullivan made any reference to the requirements of Art. 85/s.144(4).
Never, within the prescribed timeframe or at all, did Conroy Gold receive a signed consent to act from any of the nominated directors;
Rejecting Mr O’Sullivan’s claim that there was “practical and substantive” compliance with the requirements, Justice Barrett stated that when it came to the applicable notification requirements, there was either compliance or there was not, “and here there was not”. Furthermore, there was no obligation on Conroy Gold to remind Mr O’Sullivan of the notification obligations incumbent upon him.
All reliefs sought by Mr O’Sullivan were refused.
- by Seosamh Gráinséir for Irish Legal News