What is a Quorum?
A quorum is a prescribed amount of people that must be present at a meeting in order for valid business to be transacted. The focus here is on meetings of directors. However, issues with quorum size can also arise, for example, in relation to meetings of shareholders.
A meeting held with below the required amount of people present is described as being 'inquorate'.
What is the effect of an inquorate Board Meeting?
Where a Board Meeting does not have the required quorum, no valid business can be transacted thereat (subject to the exceptions discussed below).
Examples of times where this may cause significant difficulties may for example include the need for a loan to the company to be approved by the directors at a Board Meeting, the approval of the issue or transfer of shares in the Company or the approval of a director's loan.
How do I know what the quorum is for my company?
The quorum for a Board Meeting should be prescribed by the Company's Articles of Association. Many smaller companies will have been set up using 'Model Articles' (if incorporated after 2008) or "Table A Articles" (if incorporated between 1985 and 2008).
Where unamended Model Articles or Table A Articles have been adopted, the quorum for a Board Meeting shall be two directors. This is often problematic for smaller companies who only have a sole director. How, in these circumstances, may that director transact any valid business or pass any board resolutions at his meetings? A common solution is to change the required quorum.
How do I change the quorum for Board Meetings?
It is perfectly acceptable, under unamended Model Articles or Table A Articles, for a director to set the quorum for Board Meetings. This is something which should be recorded in writing and,
in the interests of prudence, it is often recommended that this is a matter recorded in Board Minutes. It is also acceptable under the Model Articles or Table A Articles for a Board Meeting
to be held which, even if only one director is present, will be considered quorate, provided that the business of the meeting is to appoint a further director. By this means it is possible to appoint further directors if so required.
Should it be necessary, there are also additional measures which may be adopted to change the quorum for Board Meetings. For example, where more in depth restructuring of the Company's Articles is required, the relevant Articles may be amended by a resolution of shareholders. This must be done by 'Special Resolution' and requires that 75% or more of the shareholders agree. Such invasive measures are generally not required however where the object is solely to amend the required quorum. This approach also produces some onerous filing obligations with Companies House.
If you would like to know more, please contact me.
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| Oliver Gray - Trainee Solicitor Commercial Department |
Oliver Gray is a Trainee Solicitor
who works in the Commercial
Department dealing with all areas
of commercial work including
contentious and
non contentious work.
He is based at the firms
Marlborough office.
