One of the changes introduced to Table A on 1 October 2007 was the removal of regulation 50.
Regulation 50 stated that "In the case of an equality of votes, whether on a show of hands or on a poll, the chairman shall be entitled to a casting vote."
The reason given by BERR for the deletion of this regulation was that it was inconsistent with sections 281(3) and 282 of the Companies Act 2006, which also came into force on 1 October 2007.
Jordans took advice on this point from Counsel, and was advised that:
- As regulation 50 was inconsistent with the Companies Act 2006, companies which had been formed before 1 October 2007 and which incorporated this regulation in their articles could not rely on this provision. It therefore had the effect of abolishing the chairman's casting vote for all companies.
- It would be possible to give a chairman who was also a shareholder a casting vote by incorporating a clear weighted voting provision in the articles.
Yesterday BERR published a statement on this point in the FAQs section of their website, saying:
- "Is the effect of sections 281(3) and 282 to abolish the chairman’s casting vote
Yes. Nevertheless, we are considering whether there should be a saving to the effect that articles of association in force immediately before 1 October 2007 which gave a casting vote to the chairman of a company meeting should continue to have effect."
This confirms that advice that we have received from Counsel, but indicates that there may be good news in the future for existing companies who want to rely on regulation 50.
The bad news is that there is no indication when BERR are likely to come to a view on this.
Companies for which the casting vote provision is an important part of the decision making process in their companies therefore face a difficult decision.
Should they:
- update their articles to incorporate weighted voting rights for a shareholding chairman?
- consider trying to deal with this outside of the articles by means of a shareholders agreement if they have a non-shareholding chairman?
- wait and see what BERR finally conclude? The danger with the wait and see policy is, of course, that there is no guarantee that BERR will finally decide to introduce a saving provision.
Jordans is providing an articles updating service to include weighted voting rights for a shareholding chairman in place of regulation 50.
For more information please contact Helen Goose on 0117 918 1322 or email her at helen_goose@jordans.co.uk.
