A quorum is the minimum number of people required at a meeting for the decisions made to be considered valid. Unless otherwise specified in the corporate constitution, under the Corporations Act 2001, a quorum is two members. As a general rule, if a quorum is not present, the meeting cannot proceed.
There may, however, be circumstances in which it is not possible to achieve a quorum as a result of a lack of interest or attendance by members, or unforeseen circumstances for instance. This can provide a major problem in the case that there are only two shareholders. If one of the shareholders is continuously absent at general meetings, then no decisions can be made. Section 249G of the Corporations Act sets out provisions relating to the Court’s powers to order a general meeting.
The case of Laine Commodities Pte Ltd v CS Agriculture Pty Ltd is a Federal Court case from 2021 in which the Court’s power under s 249G was exercised. The circumstances in Laine were such that of the company’s two shareholders, the majority shareholder repeatedly called a meeting, but the minority shareholder refused to attend. The majority shareholder therefore sought a Court order for a meeting to be called under s 249G. The primary legal question in this case was as to the meaning of the word ‘call’; whether it was to be construed as ‘convening’ a meeting. The Court held that ‘call’ included the convening of the meeting and ordered a date for the meeting to occur.
As a result, if a quorum cannot be achieved, a possibility for directors or shareholders is to apply to the Court for an order to hold a meeting under s 249G of the Corporations Act. It is important to note however, that the Court has discretion as to whether or not it calls the meeting. A necessary condition for the Court to exercise its power is that it be ‘impracticable’ for the parties to call the meeting themselves. The word ‘impracticable’ under s 249G connotes a question of fact which must be decided on a case-by-case basis.
Voting without a quorum may, in certain circumstances, be necessary. However, it is important to ensure that you are doing so in a way that is in line with the law so as to ensure that the decisions made are valid.
If you would like to learn more about your rights and duties as a director or shareholder, please contact Warlows Legal for a free consultation.