The Federal Court has held that a board may postpone a meeting called by shareholders under section 249F in circumstances where there is a power in the company’s constitution permitting the board to postpone meetings and such power is exercise by the board for a proper purpose and the postponement period is reasonable. In such circumstances, the Court held that the postponement was not an unlawful interference with the statutory right of shareholders under section 249F.
Ten shareholders of CellOS Software Limited (CellOS) holding almost 7% of the issued shares (Convening Shareholders) sought to convene a meeting of CellOS under section 249F of the Corporations Act 2001 (Cth) to consider the composition of the board and the financial position of CellOS. Pursuant to a right granted to it under the CellOS constitution to postpone general meetings, the CellOS board then decided to postpone the meeting by approximately 2 months to the date of the CellOS AGM.
In rejecting the claim by the Convening Shareholders that the postponement was invalid, Middleton J held that:
- the CellOS board had no power to cancel a meeting called by the Convening Shareholders under section 249F but that was not what happened here. The terms of the board resolution showed that the board was intending to postpone (not cancel) the meeting (despite some of the terms of the postponement notice); and
- the decision by the board to postpone the meeting was made for a proper purpose (as evidenced by the board minutes which indicated purposes of wanting to wait until audited accounts were finalised, wanting to deal with everything at the AGM and some possible irregularities with the notice issued by the Convening Shareholders); and
- while the postponement was lengthy, it was reasonable within the meaning of section 249R in the circumstances.
Middleton J also considered whether the constitutional power of the CellOS board to postpone general meetings was invalid in so far as it purported to give the board the power to postpone a meeting called by shareholders under section 249F on a basis that such power would be an unlawful interference with the statutory right of shareholders.
In holding that the power was valid, Middleton J noted the previous case law and commentary but considered the issue afresh and found that:
- on a proper reading, section 249F gives shareholders the power to “call and arrange to hold” a meeting, but that power does not extend to holding or conducting the meeting;
- the language in section 249F can be compared with the language in section 1319 which gives the Court powers in relation to meetings ordered by the Court and refers to giving directions with respect to “the convening, holding or conduct of the meeting”;
- it is well-recognised that the directors have the power to postpone a properly convened meeting if the constitution authorises them to do so (although they must act for a proper purpose and in good faith in doing so).