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CHAIRMAN OR CHAIRPERSON' GUIDE. SUMMARY

In view of the importance of the role, it is common for the articles to determine who should chair the meetings rather than allow the members to elect the chairman at each meeting. The members may remove a chairman appointed by them but have limited powers of removal, if any, where the appointment is determined by the articles. The chairman has a duty to ensure that the meeting is properly conducted, that all shades of opinion are given a fair hearing and that the sense of the meeting is properly ascertained and recorded.

The role of the Chairman of a Board of Directors varies depending on numerous factors, including the other positions with the company the Chairman has. The Chairman might be a CEO as well, or the president, or even all three, Chairman, President and CEO. In addition, if the Chairman is a former CEO of the company, perhaps the person who selected the current CEO, the Chairman may play a very powerful role.

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As a limited company owner you would pay yourself a salary which is subject to PAYE and you will have to complete a Self Assessment tax form each year to assess whether any other tax is due from company benefits etc. You must also deduct PAYE from all employees. Limited companies have a responsibility to deduct NI from all employees - including directors - and also pay Employers National Insurance - ENI. This in effect doubles your national insurance contributions and is one of the most overlooked areas when forming a limited company.

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Chairmen generally are elected by the Board of Directors and preside at Board meetings and at shareholders' meetings. Chairmen frequently serve as officers of the company as well and in some cases are ex officio members of committees.If the Chairman's only position is "Chairman" and not also CEO, President or some other office, then his main role is to lead meetings of the Board of Directors. The leadership role of the Chairman is also influenced by the size of the company and the composition of the Board. Leadership from the Chairman is more critical where the number of Board members is large or the Board is composed of representatives of multiple interest groups than if the Board is small or homogeneous.

Because the Chairman may be called upon to make procedural decisions that can affect issues of importance to conflicting constituencies of the Board or shareholders, it is advisable that the company adopt rules of procedure for meetings of the Board and the shareholders, as well as for committees. Another one of the duties of the Chairman is to call meetings of the Board of Directors and the shareholders. The ability to call a special meeting can be an important power, especially if the Board is divided over a particular issue or over the general direction of the corporation and a regular meeting is not scheduled in the near term.

Check file regarding filing of documentation with Registrar of Companies. Check provision of statutorily required information. Check statutory books for up-to-date entries. Obtain copy of directors' and officers' liability insurance policy and of renewal note. Check if the Articles grant an indemnity against personal costs and liabilities incurred as a result of acting as an officer of the company. Obtain a copy of all loan notes, guarantees, charges, etc.

Appointment of chairman. A general meeting cannot proceed without a chairman for legal and practical reasons. There must be someone to put motions to the meeting, declare the results of voting, and rule on points of order. Articles usually state that the chairman of the board of directors shall chair meetings of the company and make provision for circumstances in which he is not present or is unwilling to act. For example, Table A provides:

The chairman, if any, of the board of directors or in his absence some other director nominated by the directors shall preside as chairman of the meeting, but if neither the chairman nor any such other director (if any) be present within fifteen minutes after the time appointed for holding the meeting and willing to act, the directors present shall elect one of their number to be chairman and, if there is only one director present and willing to act, he shall be chairman. If no director is willing to act as chairman, or if no director is present within fifteen minutes after the time appointed for holding the meeting, the members present and entitled to vote shall cho

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Where there is no director present or willing to chair the meeting, articles like reg. 43 of Table A appear to require the members to elect another member to act as chairman. However, the word 'member' must include a proxy where the articles say that proxies can be counted in calculating whether there is a quorum and only proxies are present (Re Bradford Investments plc [1990] BCC 740). In the same case, it was held that a person who is neither a member, nor a corporate representative nor a proxy may take the chair at the start of the meeting to preside over the election of a chairman. However, the rulings of such a person will be liable to challenge in the courts irrespective of anything contained in the articles, e.g. on the validity of any votes tendered in the election process.

A person who has legitimately taken the chair in the absence of the chairman may (but need not) vacate it if the chairman subsequently arrives. Any objection to the appointment of a chairman at a meeting should be made immediately as any irregularity in the nomination may be cured by the acquiescence of those present.

Removal of the chairman. A chairman elected by the meeting, e.g. when no director is present or willing to act in that capacity, may be removed by the meeting (Cornwall v. Woods (1846) 4 notes of Cases 555). This is normally done by a motion of no confidence in the chair. If such a resolution is proposed, the chairman should step down until the result of the vote is determined.

It is doubtful whether a person who holds office as the chairman by virtue of the articles and his position in the company (e.g. as the chairman of the board or as a director) can be removed by the members. If the chairman did relinquish the chair under pressure from the members, the selection of a replacement would be determined by the articles, and the members would only have power to appoint their own chairman if there was no other person specified by the articles as a potential candidate who was willing or able to act as chairman.

Chairman's duties. In common law, the person appointed as the chairman of the meeting is deemed to have been given authority by the meeting to regulate its proceedings. As this is a form of delegated authority, the chairman must still act in accordance with the wishes of the majority at the meeting, unless exercising a power conferred by statute or the company's articles of association, or one that the courts have ruled can be exercised by the chairman without reference to the members (e.g. the power to adjourn to restore order). The chairman has an overriding duty to act in good faith in the best interests of the company and is responsible for: the proper conduct of the meeting; the preservation of order; ensuring that all shades of opinion are given a fair hearing; and ensuring that the sense of the meeting is properly ascertained and recorded.

Proper conduct of the meeting. The chairman must ensure that the meeting is conducted in accordance with the requirements of the Act, the company's articles of association and any applicable common law rules, and will normally be guided in this respect by the company secretary. The chairman should not open the meeting before the time specified in the notice and should, as far as possible, ensure that the meeting starts on time and that all the business on the agenda is transacted. The start of the meeting can be delayed in certain circumstances. The most obvious is where there is no quorum, in which case the meeting cannot proceed to business in any case. The chairman can also legitimately delay the meeting to allow members who arrived on time to register and gain admittance. As a rule of thumb, it is not advisable to delay the meeting for any longer than 15 to 20 minutes. Problems that take longer than this to sort out should be dealt with by proposing an adjournment immediately after opening the meeting.

The chairman may rule on any question raised from the floor relating to the conduct of the meeting (Re Indian Zoedone Co. (1884) 26 Ch. D. 70). If his decision is challenged, the matter should be put to the meeting and decided by the majority of those present (Wandsworth and Putney Gas Light Co. v. Wright (1870) 22 LT 404). The following example serves to demonstrate this process.

At a meeting of a public company, a person begins to ask a question but is interrupted by a member on a point of order. The member informs the chairman that the previous speaker is a proxy and therefore has no right to speak at the meeting, and requests that the chairman make a ruling to that effect. The chairman may think that the proxy should be allowed to speak. However, instead of making a ruling to that effect, he should attempt to gauge the feelings of the members by saying: 'I am minded to allow proxies to speak at this meeting. Does anyone else object to this proposal.' If there is no other opposition from the floor, he may rule that the proxy be allowed to speak. If the member still objects, the chairman should perhaps take a proper vote on the matter. If, however, there is significant opposition from the floor, the chairman would be well advised to drop the proposal or risk being defeated on a vote and losing the confidence of the members. It is rare for such issues to be the subject of a poll, although not impossible.

If the chairman conducts the meeting in a certain way or makes a ruling that is not challenged at the meeting, the members present may be deemed to have acquiesced or consented to that conduct. In Carruth v. Imperial Chemical Industries Ltd [1937] AC 707, the directors convened an EGM of the company and two meetings of different classes of shares to be held on the same day and at the same venue to approve a reduction of capital. As one meeting finished, the next meeting was started and each meeting was attended by each of the different classes of member. The resolution of one class of members was challenged on the ground that people who were not members of that class were present at the meeting. The resolution was held to be valid and Lord Russell said:

There are many matters relating to the conduct of a meeting which lie entirely in the hands of those persons who are present and constitute the meeting. Thus it rests with the meeting to decide whether notices, resolutions, minutes, accounts, and such like shall be read to the meeting or be taken as read; whether representatives of the Press, or any other persons not qualified to be summoned to the meeting, shall be permitted to be present, or if present, shall be permitted to remain; whether and when discussion shall be terminated and a vote taken; whether the meeting shall be adjourned. In all these matters, and they are only instances, the meeting decides, and if necessary a vote must be taken to ascertain the wishes of the majority. If no objection is taken by any constituent of the meeting, the meeting must be taken to be assenting to the course adopted.

The chairman cannot close the meeting until all the business has been dealt with. In National Dwelling Society Ltd v. Sykes, the chairman wrongly refused to accept an amendment to a resolution to receive the report and accounts and closed the meeting before all the business had been transacted. The members elected another chairman to transact the unfinished business and adjourned the meeting. It was held that the chairman had acted outside his powers by closing the meeting without its consent before the business had been completed and that the meeting could go on with the business for which it had been convened and appoint another chairman to conduct that business.

Ensuring that all shades of opinion are given a fair hearing. The chairman should seek to ensure that all members who hold different views on a resolution before the meeting are given a fair hearing. To do otherwise would defeat the object of holding the meeting. In particular, the chairman should not curtail the debate unless the minority has had a reasonable opportunity to put its views (Wall v. London & Northern Assets Corporation Ltd [1898] 2 Ch. 469).

Ascertaining and recording the sense of the meeting. In National Dwelling Society Ltd v. Sykes [1894] 3 Ch. 159, it was held that the chairman has a duty to ensure that 'the sense of the meeting is properly ascertained with regard to any question which is properly before the meeting'. In doing so the chairman should put resolutions to a vote, ensure that the votes are properly counted and declare the results of that vote. In order to prevent issues regarding the precise number of votes cast for and against the resolution being re-opened after the meeting, s. 378(4) provides that, unless a poll is demanded, a chairman's declaration that an extraordinary or special resolution has been carried is conclusive evidence of that fact without proof of the number or proportion of votes. The court has refused to intervene in several cases where questions have been raised as to the validity of the chairman's declaration and has confirmed that the word 'conclusive' means exactly that (see Arnot v. United African Lands [1901] 1 Ch. 518; Re Hadleigh Castle Gold Mines [1900] 2 Ch. 419; and Graham's Morocco Co. Ltd, Petitioners, 1932 SC 269). However, the court has intervened in a case where the chairman put a resolution and declared the result in the following fashion: 'Those in favour ... 6. Those against ... 23 but there are 200 voting by proxy and I declare the resolution carried as required by Act of Parliament.' Buckley J refused to hold that the chairman's declaration was conclusive as it was clear from his declaration that he had acted on a mistaken principle (Re Caratal (New) Mines Ltd [1902] 2 Ch. 498).

Articles usually extend the operation of s. 378(4) to other resolutions by stating that a declaration by the chairman that a resolution has been carried or carried unanimously, or by a particular majority, or lost, or not carried by a particular majority and an entry to that effect in the minutes shall be conclusive evidence of that fact without proof of the number or proportion of the votes recorded in favour of or against the resolution. Although the operation of s. 378(4) is not conditional on an entry having been made in the minutes, the minutes will in any proceedings be prima-facie evidence of the proceedings and therefore of the nature of the chairman's declaration.

Every company is required to produce and keep minutes of all proceedings of general meetings (s. 382(1)). The directors can be fined for any default by the company of the provisions of the Act relating to the maintenance of minutes (s. 382(5), s. 383(4) and s. 722(3)). The chairman can be said to have a special duty in this regard in so far as minutes signed by the chairman of the meeting are prima-facie evidence of the proceedings (s. 382(2)).

Chairman's powers. In addition to making rulings on points of order, the chairman will usually have the power: to adjourn the meeting, e.g. reg. 45; to demand a poll, e.g. reg. 46; to rule on the validity of votes at general meetings, e.g. reg. 58; to rule on the validity of an amendment.