Can an obligation to convene an extraordinary meeting of shareholders be forestalled by reference to an alleged illegality under another branch of law? Robert Ryan, an expert and the author of numerous publications on corporate, banking and competition law, analyses the legal implications when competition (or antitrust) law is cited in opposition to long established statutory company (or corporate) law.
Mr. Ryan writes: It is provided under Section 132 of Irish Companies Act, 1963 that the directors of an Irish company:
[S]hall, on the requisition of members of the company holding… not less
than one tenth… of the paid up capital of the company as… carries the
right of voting at general meetings of the company… forthwith proceed
duly to convene an extraordinary general meeting of the company.
It is also provided that:
[If] the directors do not within 21 days from the date of the deposit of the
requisition proceed duly to convene a meeting to be held within 2 months
of the said date, the requisitionists, or any one of them representing more
than one half of the total voting rights of all of them, may themselves convene
a meeting….
Thus, the directors are subject to a statutory duty to convene such a requisitioned meeting; however, there is then a fall back provision enabling the shareholders to convene the meeting themselves should the directors fail to do so, with any reasonable expenses so incurred to be discharged by the company. The foregoing statutory provision is also reflected in Article 55 of the Articles of Association of Aer Lingus Group PLC.
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In its published responses to the Ryanair EGM request submitted in early September 2007, Aer Lingus refused to convene an EGM and stated in its Letter of 17 September 2007 that this was on the following basis:
The Board is advised that the holding of an EGM and the consideration,
passing or implementation of your proposed resolution would plainly give
rise to an agreement or concerted practice restricting or distorting competition,
contrary to Section 4 of the 2002 Act [Irish Competition Act, 2002]
and Article 81(1) of the EC Treaty. In addition, both companies would
have signalled their future intentions, and commercially confidential matters
between competitors would have been disclosed or discussed, which
is unlawful.
Article 81(1), is the relevant provision of the European Union Treaty designed to control anti-competitive arrangements between undertakings. See Smit & Herzog on the Law of the European Union § 164.The foregoing followed an earlier statement by Aer Lingus at the end of August 2007 (in response to the first request for the EGM), which asserted that the proposed resolution was “an attempt by Ryanair to influence and co-ordinate the strategic conduct of Aer Lingus… in clear breach of Competition Law”.