Assemblies or in other words, the meetings of the shareholders in each company. Importance of the assemblies comes from the important role of the shareholders particularly in Public Joint Stock Companies. A role, which is very vital and extremely important for the progress of the company and relative achievement of the goals for which the company has been established.
The shareholders are, in fact and in law, the owners of the company and they are the first party to gain and benefit from the success and profits earned by the company. In fact, it is really hurting to mention that many of the shareholders in our country are not aware of their legal rights and the duties that they are supposed to undertake in lieu of their equity shareholding in the company. This situation needs to be rectified and the shareholders should be encouraged to adopt the culture of playing an active role in their companies.
A valid question arises, what is the situation here? Or in other words, what are the duties of the shareholders according to the provisions of the Company Law? Generally speaking, all current policy matters, future plans and far-end strategies are laid and taken care of by the shareholders of the company. These duties, of course, should always be fulfilled in direct consultation and/or the necessary co-operation of the Board of Directors of the company.
To achieve this goal, the law explains that the shareholders of the public joint stock company shall have two kinds of assemblies or meetings. These two meetings are different in character and in shape because, according to the terms of the law, there is a special duty or task to be undertaken by each of these two meetings. The first type of assemblies or meetings is known as the Ordinary General Assembly (OGA), while the second type of assemblies is known as the Extra Ordinary General Assembly (EOGA). This shows that one of the assemblies of the shareholders is classified as extra-ordinary.
In most cases, there is some confusion or, we could say, some misunderstanding regarding the two assemblies, particularly, in relation to the functions and/or the scope of each one. In fact, I have been involved in some discussions with many top executives in the concerned Ministries and some shareholders, who were all of the opinion that such classification and terminology of the assemblies causes them and, also the public at large, great confusion.
Generally speaking, the Company law, provides for the two types of assemblies and also explains very clearly the difference between the OGA and the EOGA. We have to mention that for each of the two assemblies there are certain requirements and statutory conditions such as: Who calls for the required assembly and why this right is given to him or them? Who chairs the assembly and who attends? What is the required quorum for each assembly? What are the issues or agenda to be discussed in each of the two assemblies? In addition to certain specific legal duties stipulated in the law, the shareholders of the company normally outline the policies to be maintained and implemented by the management of the company. Such parameters, we could say, are normally orchestrated during the OGA. This means that general policy matters are normally taken care of by the OGA. However, in all cases the agenda for each meeting should be given to the shareholders prior to the meeting to enable them to prepare themselves for fruitful contribution. The authority to call for the OGA is vested, according to the terms of the law, with the Board of Directors of the company. In some instances, the law gives the authority to the shareholders and other competent authorities, however, the law makes it mandatory that the Board of Directors shall call for at least one OGA each year.
The law also gives the power to the Board of Directors to call for additional meetings at any time in case there is a need. In practice, we have noticed that Boards of Directors in certain companies appear to suffer from a kind of phobia and therefore they do not want to meet or face the shareholders of the company. While some others may be either egoistic, indifferent or naïve. Hence they sever the link between the Board of Directors and the management of the company on one hand and the shareholders on the other hand. This approach is totally against the provisions of the law and also is against the general principles of good management and corporate governance rules. It should not be forgotten that the shareholders jointly own and hold the public company and this is why they are — holders. From this point comes the importance of the link between the management of the company and the shareholders and this link should always be maintained through the tenure of the company. Good management will do its homework and also ensures the shareholders do theirs too. However, neither the executive management of the company nor the Board of Directors should take matters of routine administration work to the shareholders because this is not their role or primary duty. On the other hand, the EOGA, according to the provisions of the law, shall convene to discuss certain issues such as amendments in the Memorandum of Understanding or the Articles of Association of the company, the new objects of the company as and when duly elected, any increase in duration or tenure of the company, all issues regarding the dissolution or liquidation or merger or acquisition of the company, decisions related to the sales, or any other similar transaction, of the project for which the company has been established. These issues are reserved by the law to the EOGA. In other words, any decision related to the above issues will be deemed void, ab initio, and contrary to the law if they are not taken by this particular assembly.
The law reserves such important issues for the EOGA because legally speaking this assembly or meeting should be attended by number of shareholders who should own at least three-quarters of the capital of the company. It is clear that the Legislature intends to keep issues of major important for the shareholders who hold the majority of the capital because they will be directly affected and, therefore, they should have the right to discuss such issues and take the necessary actions as they deem appropriate for themselves and the company…..
Dr . AbdelGadir Warsama Ghalib
Founder & Principal Legal Counsel
Dr.AbdelGadir Warsama Consultancy
E-mail : awarsama@warsamalc.com
