Changes to Section 249D of the Corporations Act 2001, will remove the rule allowing a small group of investors to call special general meetings for public companies.Partner Andrew Lumsden says it’s timelier than ever to axe the outdated rule, following reforms to reduce red tape for businesses.
“Removal of the 100-member rule will have a positive impact on shareholder participation and will go a long way to managing costs for Australian listed companies.“ASX businesses have been telling the government for decades that it goes against the interests of the majority of shareholders and the company for 100 members holding shares to requisition general meetings,” he says.
Lumsden says many industry groups have lobbied for its abolition since 1982, as it gives an “extraordinary amount of power” to a minority.“It has most often been abused by activists, who seek to compel companies to consider resolutions that further their own agenda, with little regard for the collective benefit of shareholders.
“Shareholder activism is a component of corporate governance. It does not mean that 100 shareholders, who may hold just a tiny fraction of the capital of the company, should be able to put the company to the cost of holding a meeting of their choosing,” he says.Lumsden says it doesn’t signal the end of statutory protection of shareholder rights or democracy, but rather brings Australia in line with other nations who consider share capital value - not just the number of investors.
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