RE: The force is strong24 Jul 2021 20:02
Yuri and all - are those resolutions a dark, eyebrow-raising, alarming red flag? Perhaps to those who don't understand them.
Resolution 7:
- An ordinary S551 resolution giving authority to allot. Why? It is standard practice to obtain shareholder authority/ permission each year, whether or not the company thinks it is going to use it. A good company lawyer will recommend getting that permission upfront. Why? The idea: keep it in reserve **as a matter of course**. Some companies will state "there are no present plans to undertake rights issue or allot new shares" - here, Steven Cooklin has repeatedly emphasised he sees NO situation where they would need to. Hence, the board considers it desirable to retain the maximum flexibility permitted by corporate governance rules to respond to market developments and enable allotments to take place to finance business opportunities as they arise, which is sensible and what every serious PLC should consider doing at their AGM. So, the main reason: flexibility. In other words, they now have this power to issue shares in place, which means they don't have to wait until a later date for a general meeting to be held, for notice periods to elapse and so on. The other reason is certainty - the directors will have that authority secured - there is no argument later on about whether this power should be granted, whilst avoiding doubt as to whether they can issue. Lastly the classic time and cost argument - if they get this permission, they avoid the time and hassle of holding a separate GM later on. Saves money producing the documentation, having to hold the event. AND, another reason not to worry - in practice there are still limits on how much authority can be gained this way at the AGM - look at the cap in the drafting of OR7. Cross refer the IA SCM guidelines for further information on why this is a standard, uncontroversial resolution, and compare other PLCs to see the commonality. Note, alternatively, some companies retain this power in their articles as standard, but a more routine practice is this one: to request it upfront once a year.
The special resolutions are on a similar wavelength/ have the same reasoning - they all piggyback on each other [come as a package] and continue the important caps and limitations on the authority.
Special resolutions 8 and 9: Why do you need these? Because resolution 7 has few teeth if you don't: you need to also disapply pre-emption rights for it to work effectively. What's happening here is (1) getting s551 authority to allot, (2) passing a special resolution under s570 to disapply pre-emption rights, giving them both the power to issue and, the crux, allowing the directors to **decide* who they grant those to, further increasing flexibility. So now we have (a) a limited authority to allot, in advance, (b) the disapplication, in advance.
If you want to learn more, see the pre-emption group (PEG) statement of principles which sets out the good corp gov. gu
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