Stan holds 6% of the fully-paid ordinary shares of the ASX-listed Mercury Ltd. The company’s constitution contains provisions which are very similar to ss 198A-198C of the Corporations Act. The constitution also empowers a general meeting to declare a dividend provided that it is no higher than that recommended by the company’s board of directors. The constitution does not enable a general meeting to remove a director.
Mercury Ltd has been trading at a loss in recent years and has not declared or paid a dividend since 2004. The company has no profit reserves and the net value of its assets is less than its issued and paid up share capital.
Stan is very unhappy with the way the company is being managed. He seeks your advice on whether, and if so how, he can cause a general meeting of the company to be convened to consider and vote on resolutions to:
(i) Amend the constitution so that the general meeting has an unfettered power to declare dividends.
(ii) Remove and replace each of the company’s directors.
(iii) On the assumption that the resolution altering the constitution is passed, declare a dividend of 4 cents per ordinary share.
Among other matters, your advice to Stan should deal with:
(a) Stan’s power to have a meeting convened and the earliest date that the meeting could be held;
(b) Who would be liable for the costs incurred in holding the meeting;
(c) The power of a general meeting to pass the proposed resolutions;
(d) The rights, if any, of Stan and the current directors to have their respective points of view circulated to members before the meeting is held.