Meeting matters: The Chairman’s power of adjournment

About Jessica FaiellaJessica Faiella

Jessica is an associate in the firm’s dispute resolution practice group. She practices in the area of civil and commercial litigation and advises on a wide range of matters including property disputes, estate matters, mortgage enforcement, employment matters, debt collection and immigration. Jessica started with MJM as a Pupil in July 2013 and is a local Bermudian.

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The recent Bermuda case of Oung James v Paladin Ltd [2014] SC (Bda) 67 Com considered the procedural validity of an adjournment of a Special General Meeting (the “Meeting”) by the exercise of the Chairman’s general power to conduct the meeting.

The circumstances surrounding the adjournment were that on the date of the Meeting, the Original Chairman (the “Original Chairman”) opened the Meeting and purported to adjourn the Meeting due to concerns being raised about the fitness of two of the nominee directors, without inviting the shareholders present and entitled to vote to approve this course.

The Chairman took the position that he had successfully adjourned the Meeting. However, following his departure, the remaining shareholders proceeded to elect a new Chairman. The newly elected Chairman (the “New Chairman”) proceeded to offer to the other shareholders the option to adjourn the Meeting. The other shareholders did not vote to adjourn the Meeting and proceeded to move forward with the Meeting and pass the resolutions that were tabled.

The resolutions that were tabled removed various directors of the board (including the Original Chairman) and appointed the two nominee directors to which the Original Chairman had raised concerns over at the start of the Meeting and purportedly the reason the Original Chairman adjourned the Meeting.

Following the Meeting, the Company took the position that the Meeting had been validly held and as such the newly elected Directors were the newly appointed Board of the Company and that the previous Board of Directors (inclusive of the Original Chairman) had been removed from control of the Company.

The previous Board of Directors (including the Original Chairman) took the position that the Original Chairman had validly adjourned the Meeting and that the Resolutions to remove the previous Board of Directors were invalid. Both sets of directors claimed the right to control the company.

The question was, did the Meeting validly continue after the Original Chairman purportedly adjourned and left the Meeting?

The Chief Justice reviewed the relevant Bye-law of the Company which provided:

“The Chairman may, with the consent of any general meeting at which a quorum is present, and shall, if so directed by the meeting, adjourn the meeting from time to time and from place to place as the meeting shall determine…” (Emphasis added)
The Chief Justice concluded that the Bye-law was very clear and gave the power to adjourn a meeting not, fundamentally, to the Chairman, but rather to the meeting itself. The Chief Justice noted that it will be a question of an interpretation of the Bye-laws in any case but in this particular situation he concluded that the relevant Bye-law was quite clear. As such, the Chief Justice granted the declaratory relief sought by the Plaintiff being that the Meeting of the Company was lawfully convened and that the resolutions were validly passed. The new board were properly elected and had control of the company.

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