The Federal Government will abolish the 100 shareholder rule,
but still allow meetings to be requisitioned by 5% of
After many false starts, it seems that the 100 shareholder rule
may finally be headed for the exit.
A general meeting can be requisitioned by 100 shareholders (the
"100 member rule") or shareholders holding 5% of the
voting shares. A new Bill before Parliament aims to abolish the 100
member rule, but still allow meetings to be requisitioned by 5% of
shareholders. Importantly, the Bill appears have bipartisan
The ability of 100 shareholders to requisition meetings has been
used by activist groups to pressure listed companies and promote
non-business agendas. These attempts usually result in additional
publicity as opposed to a favourable shareholder vote, because 100
shareholding activists usually amount to only a miniscule
percentage of the total number of shareholders in a listed company.
Nevertheless, the attempt can be an extremely expensive exercise
for the targeted company, since it has to comply with the request
and convene a general meeting.
Earlier this year, the Federal Government announced its
intention to abolish the 100 shareholder rule (but still allow
meetings to be requisitioned by 5% of shareholders). Commentators
with long memories would remember that previous attempts have
foundered on the rock of Senate opposition. This time around,
however, the rule may finally be abolished: on 28 October, the ALP
caucus decided to back the Bill. The combined votes of the
Coalition and the ALP in the Senate would be enough to ensure that
the amendment Bill is passed by both Houses of Parliament.
The Bill contains some other changes.
These include three amendments to the remuneration report:
the requirement to disclose the value of KMP options that have
lapsed will be replaced by a requirement to disclose only the
number of each KMP's options that have lapsed (and the year in
which those options were granted);
the requirement to disclose the percentage value of each
KMP's remuneration that consists of options will be abolished;
unlisted companies will no longer have to produce a
A earlier draft proposal to require companies to include in
their directors' or financial reports a description of their
process for determining KMP remuneration has not been included in
the Bill currently before Parliament.
When the Government originally released its proposal to abolish
the 100 shareholder rule, the accompanying draft Bill included a
proposal to rewrite the rules governing dividends.
Two of the key proposals were:
clarification that dividends do not require shareholder
approval under share capital reduction rules (provided, of course,
that the dividend constitutes an equal reduction of capital);
the dropping of the much-criticised "balance sheet
test" for determining whether dividends can be declared.
The Bill that is currently before Parliament does not address
any of these issues. There has been no explanation of why it was
dropped or whether the Government intends to pursue these changes
in another Bill.
Clayton Utz communications are intended to provide
commentary and general information. They should not be relied upon
as legal advice. Formal legal advice should be sought in particular
transactions or on matters of interest arising from this bulletin.
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