Corrs Chambers Westgarth partner Andrew Lumsden has confirmed it is high time the death knell be tolled on the controversial 100-Member rule, which allows a special general meeting to be called at the request of a small group of requisitioning shareholders at Australian public companies.
Mr Lumsden, a corporate M&A specialist, applauded the Federal Government’s proposal to axe the 100-member rule and he has urged that now is the time more than ever to scrap the outdated law.
The proposed reforms are a part of the Government’s drive to reduce red tape for businesses and improve rules for shareholder meetings. The changes will be to Section 249D of the Corporations Act 2001 – commonly known as the 100-Member Rule.
“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,” Mr Lumsden said.
He shares the views of many industry groups who have campaigned for the rule’s removal since 1982. Federal Governments Minister Hockey and Parliamentary Secretaries the Hon Ian Campbell in 2002 and Hon Chris Pearce in 2004, CAMAC and the AICD have all also pressed to reform or abolish the 100 member rule.
“There is broad support for this reform from the business community. 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.”
The 100-member rule places an extraordinary amount of power in the hands of a very small group of people and Mr Lumsden warned of the impacts. Mr Lumsden noted, “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.”
The 100-member rule has forced numerous Australian companies to hold expensive special general meetings by demand of 100 requisitioning shareholders – a very small minority for most modern-day corporations.
“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.”
Australia is the only nation whose corporation law allows for a shareholder numerical test that applies regardless of how much share capital the shareholders hold, it was now time for Australia to be brought into line with other nations.
Mr Lumsden assured that removal of the 100-member rule would enhance rather than destroy corporate democratic process, “Democracy provides for equal rights of participation. The death of the 100-member rule will not be the end of statutory protection of shareholder rights.”
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