If there is a shareholders' agreement in place in respect of the relevant company (which would typically be the case in a joint venture scenario), the provisions of any such agreement will also need to be taken into account.
The general position
It will almost always be the case that the M&A (replicating the position under the Companies (Standard Table) (Jersey) Order 1992) will state that, generally, the business of a company shall be managed by the directors of such company, subject to any restrictions contained in the M&A and/or the Law.
Which decisions will require shareholder approval?
Under the Law, certain corporate actions must be approved by a special resolution of the shareholders, with the most common actions being:
- changing the company name;
- changing the status of the company;
- alterations to the share capital of the company (including a reduction of capital);
- varying the rights attached to a particular class of shares;
- purchasing the company's own shares;
- approving a merger agreement; and
The M&A may also contain bespoke provisions requiring the directors to seek shareholder approval in respect of specific actions, such as issuing or transferring shares on a non pre-emptive basis, for example. Such bespoke provisions are typically more extensive in companies with multiple shareholders.
What is the threshold for a special resolution?
A special resolution must be passed by a majority of not less than two-thirds of shareholders at general meeting, although the M&A may increase this threshold.
Special resolutions can also be passed by a written resolution signed by such majority of shareholders as may be stipulated in the M&A (which cannot be less than two-thirds), save for a resolution to remove an auditor
A (very brief) note on the duties of directors when making decisions
Although directors' duties are not the subject of this guide, it is worth noting that Article 74 of the Law requires each director, when exercising their powers and discharging their duties, to act honestly and in good faith with a view to the best interests of the company and to exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances.
What if there are concerns regarding the benefit of a decision to the company?
An act or omission of a director will not be treated as being a breach of Article 74 of the Law if:
- the relevant act or omission is authorised or ratified by the shareholders of the company (either unanimously or by such relevant majority as may be stipulated by the M&A); and
- after the act or omission, the company will in a position to discharge is liabilities as they fall due thereafter.
The information contained in this guide is necessarily brief and general in nature and does not constitute legal or taxation advice. Appropriate legal or other professional advice should be sought for any specific matter.
