Registered office:
14 Curzon Street
London W1J 5HN
11 April 2008
To the Shareholders
Notice of Annual General Meeting
Dear Shareholder
I am pleased to be writing to you with details of our Annual General Meeting (“AGM”) which we are holding at 12 noon on 14 May 2008 at 14 Curzon Street, London, W1 J 5HN. The formal notice of Annual General Meeting is set out on page 2 of this document.
If you would like to vote on the resolutions but cannot come to the AGM, please fill in the proxy form sent to you with this document and return it to our registrars, Computershare Investor Services PLC, as soon as possible. They must receive it by 12 noon on 12 May 2008.
Final dividend
Shareholders are being asked to approve a final dividend of 0.70p per ordinary share for the year ended 31 December 2007. If you approve the recommended final dividend, this will be paid on 20 June 2008 to all ordinary shareholders on the register of members on 30 May 2008.
New Articles of Association
We are also asking shareholders to approve the adoption of new articles of association primarily to reflect the provisions of the Companies Act 2006. An explanation of the main changes between the proposed and the existing articles of association is set out in the Appendix on pages 5 and 6 of this document.
Share Consolidation
The Board considers it is desirable to consolidate the existing Ordinary Shares of the Company as this should assist in reducing the volatility in the share price, thereby enabling a more consistent valuation of the Company. With shares of low denominations and the levels at which the shares have traded in recent times, small absolute movements in the share price can represent large percentage movements, resulting in volatility. The Board also believes that the bid-offer spread on shares priced at low absolute levels can be disproportionate to the share price, to the detriment of shareholders.
Shareholders are therefore being asked to approve a consolidation of the Company’s share capital under which the existing Ordinary Shares of 5 pence each are to be consolidated into Ordinary Shares of 25 pence each on a one for five basis. Further details of the share consolidation proposed are set out in the explanatory notes on page 4 of this document.
Explanatory notes on all the business to be considered at this year’s AGM appear on pages 3 to 6 of this document.
The Directors consider that all the resolutions to be put to the meeting are in the best interests of the Company and its shareholders as a whole. Your Board will be voting in favour of them and unanimously recommends that you do so as well.
Yours sincerely,
Chairman
Inspection of documents
The following documents will be available for inspection at the offices of Slaughter and May, One Bunhill Row, London, EC1 Y 8YY from 14 April 2008 until the time of the AGM and at 14 Curzon Street, London, W1J 5HN from 15 minutes before the AGM until it ends:
. Copies of the Executive Directors’ service contracts.
• Copies of terms and conditions of appointment of the Non-Executive Directors.
. A copy of the existing and the proposed new articles of association of the Company.
This document is important and requires your immediate attention.
If you are in any doubt as to any aspect of the proposals referred to in this document or as to the action you should take, you should seek your own advice from a stockbroker, solicitor, accountant, or other professional adviser.
If you have sold or otherwise transferred all of your shares, please pass this document together with the accompanying documents to the purchaser or transferee, or to the person who arranged the sale or transfer, so they can pass these documents to the person who now holds the shares.
Whether or not you propose to attend the Annual General Meeting, please complete and submit a proxy form in accordance with the instructions printed on the enclosed form. The proxy form must be received not less than 48 hours before the time of the holding of the Annual General Meeting.
Notice of Annual General Meeting
This year’s annual general meeting will be held at 12 noon on 14 May 2008 at 14 Curzon Street, London, W1J 5HN. You will be asked to consider and pass the resolutions below. Resolutions numbered 10, 11 and 13 will be proposed as special resolutions. All other resolutions will be proposed as ordinary resolutions.
1. To receive and adopt the Directors’ Report and Accounts for the year ended 31 December 2007 and the Report of the Auditors thereon.
2. To approve the Directors’ Remuneration Report for the year ended 31 December 2007 set out on pages 24 to 29 of the Directors’ Report and Accounts.
3. To elect Rodger Hughes as a director of the Company.
4. To re-elect Piers Pottinger as a director of the Company.
5. To re-elect Paul Richardson as a director of the Company.
6. To re-elect Dave Allen as a director of the Company.
7. To declare a final dividend on the Company’s ordinary shares in respect of the year ended 31 December 2007.
8. To re-appoint Deloitte & Touche LLP, Chartered Accountants, as Auditors of the Company and to authorise the Directors to determine their remuneration.
9. THAT the Board be and it is hereby generally and unconditionally authorised to exercise all the powers of the Company to allot relevant securities (within the meaning of Section 80 of the Companies Act 1985) up to an aggregate nominal amount of £4,439,587, which authority shall expire at the conclusion of the next Annual General Meeting of the Company after the passing of this resolution (unless previously revoked or varied by the Company in general meeting), save that the Company may before such expiry make an offer or agreement which would or might require relevant securities to be allotted after such expiry and the Board may allot relevant securities in pursuance of such an offer or agreement as if the authority conferred hereby had not expired.
10. THAT, subject to the passing of the previous resolution, the Board be and it is hereby empowered, pursuant to Section 95 of the Companies Act 1985, to allot equity securities (within the meaning of Section 94 of the said Act) for cash pursuant to the authority conferred by the previous resolution and/or where such allotment constitutes an allotment of equity securities by virtue of Section 94(3A) of the said Act, as if sub-section (1) of Section 89 of the said Act did not apply to any such allotment, PROVIDED THAT this power shall be limited to:
(i) the allotment of equity securities in connection with a rights issue, open offer or any other pre-emptive offer in favour of ordinary shareholders (excluding any shareholder holding shares as treasury shares) where the equity securities respectively attributable to the interests of such ordinary shareholders on a fixed record date are proportionate (as nearly as may be) to the respective numbers of ordinary shares held by them (subject to such exclusions or other arrangements as the Board may deem necessary or expedient to deal with fractional entitlements or legal or practical problems arising in any overseas territory, the requirements of any recognised regulatory body or stock exchange or any other matter whatsoever); and
(ii) the allotment (otherwise than pursuant to sub-paragraph (i) above) of equity securities up to an aggregate nominal amount of £665,938; and shall expire at the conclusion of the next Annual General Meeting of the Company after the passing of this resolution, save that the Company may before such expiry make an offer or agreement which would or might require equity securities to be allotted after such expiry and the Board may allot equity securities in pursuance of such an offer or agreement as if the authority conferred hereby had not expired.
11. THAT the Articles of Association produced to the meeting and initialled by the chairman of the meeting for the purpose of identification be and are hereby adopted as the Articles of Association of the Company in substitution for, and to the exclusion of, the existing Articles of Association.
12. THAT, with effect from the close of business on 14 May 2008:
(i) all the ordinary shares of 5 pence each in the share capital of the Company (“Ordinary Shares of 5 pence”) then in issue be and are hereby consolidated into ordinary shares of 25 pence each in the share capital of the Company (“Ordinary Shares of 25 pence”) on the basis of five Ordinary Shares of 5 pence being consolidated into one Ordinary Share of 25 pence, each Ordinary Share of 25 pence having the same rights and restrictions as the Ordinary Shares of 5 pence provided that, where such consolidation would otherwise result in any member being entitled to a fraction of an Ordinary Share of 25 pence, such fraction shall, so far as possible, be aggregated with the fractions of an Ordinary Share of 25 pence to which other members of the Company may be entitled and the directors of the Company be and are hereby authorised to sell (or appoint any other person to sell, on behalf of the relevant members), all the Ordinary Shares of 25 pence representing such fractions to any person, and to distribute the proceeds of sale (net of expenses) in due proportion among the relevant members (save that any fraction of a penny which would otherwise be payable shall be rounded down in accordance with the usual practice of the registrar of the Company and save that, in accordance with Article [46] of the Company’s Articles of Association adopted pursuant to resolution 11 above, the Company may retain the net proceeds of sale of such Ordinary Shares of 25 pence representing such fractions where the individual amount of proceeds to which any member is entitled is less than five pounds (£5)) and that any director of the Company (or any person authorised by the directors of the Company) shall be and is hereby authorised to execute an instrument of transfer in respect of such shares on behalf of the relevant members and to do all acts and things the directors consider necessary or expedient to effect the transfer of such shares to, or in accordance with the directions of, any buyer of any such shares; and
(ii) all authorised but unissued Ordinary Shares of 5 pence be and are hereby consolidated into Ordinary Shares of 25 pence, provided that where such consolidation would otherwise result in a fraction of an Ordinary Share of 25 pence, that number of Ordinary Shares of 25 pence which would otherwise constitute such fraction shall be cancelled pursuant to section 121 (2)(e) of the Companies Act 1985.
13. THAT, subject to the passing of resolution 12 above and the consolidation of the Company’s share capital taking effect, the Company be and is hereby generally and unconditionally authorised to make one or more market purchases (within the meaning of section 163(3) of the Companies Act 1985) on the London Stock Exchange of up to a maximum aggregate amount of 5,327,504 Ordinary Shares of 25 pence in the capital of the Company (being 10% of the Company’s issued ordinary share capital as at 4 April 2008) at a price per share of not less than 25 pence and not more than 5% above the average of the middle market quotations for such an Ordinary Share, as derived from the London Stock Exchange Daily Official List for the five business days immediately preceding the day of purchase; unless previously revoked or varied, such authority will expire at the conclusion of the Annual General Meeting of the Company to be held in 2009 or, if earlier, 15 months from the date of this resolution, save that the Company may purchase Ordinary Shares at any later date where such purchase is pursuant to any contract or contracts made by the Company before the expiry of this authority.
11 April 2008
By order of the Board
Robert Davison, Secretary
Registered Office:
14 Curzon Street
London W1J 5HN
Registered in England and Wales No. 01983857
Notes
1. A Member entitled to attend and vote at the Meeting is entitled to appoint a proxy to exercise all or any of their rights to attend and to speak and vote on their behalf at the meeting. A shareholder may appoint more than one proxy in relation to the Annual General Meeting provided that each proxy is appointed to exercise the rights attached to a different share or shares held by that shareholder. A proxy need not be a shareholder of the Company.
2. A form of proxy is enclosed. To be valid, the form of proxy must be completed, signed and returned, together with the original (or a certified true copy) of any power of attorney or other authority under which the form of proxy is signed, to the Company’s Registrars, Computershare Investor Services PLC, The Pavilions, Bridgwater Road, Bristol, BS99 6ZY, by post or (during normal business hours only) by hand as soon as possible and, in any event, so that it is received not later than 48 hours before the Meeting or any adjournment thereof.
3. Completion and return of a form of proxy, other such instrument or any CREST Proxy Instruction (as described in paragraph 9 below) will not preclude a Member from attending and voting at the Meeting should he or she so decide.
4. Any person to whom this notice is sent who is a person nominated under Section 146 of the Companies Act 2006 to enjoy information rights (a “Nominated Person”) may, under an agreement between him/her and the shareholder by whom he/she was nominated, have a right to be appointed (or to have someone else appointed) as a proxy for the Annual General Meeting. If a Nominated Person has no such proxy appointment right or does not wish to exercise it, he/she may, under any such agreement, have a right to give instructions to the shareholder as to the exercise of voting rights.
5. The statement of the rights of shareholders in relation to the appointment of proxies in paragraphs 1 and 2 above does not apply to Nominated Persons. The rights described in those paragraphs can only be exercised by shareholders of the Company.
6. Pursuant to Regulation 41 of the Uncertificated Securities Regulations 2001, the Company gives notice that only those shareholders entered on the register of members of the Company as at noon on 14 May 2008 will be entitled to attend and vote at the aforesaid Meeting in respect of the number of shares registered in their name at that time, or if the meeting is adjourned, shareholders entered on the Company’s register of members not later than 48 hours before the time fixed for the adjourned meeting shall be entitled to attend and vote at the meeting. Changes to entries on the register after the relevant deadline will be disregarded in determining the rights of any person to attend and vote at the meeting (or adjourned meeting).
7. As at 4 April 2008 (being the last business day prior to the publication of this Notice) the Company’s issued share capital consisted of 266,375,202 ordinary shares, carrying one vote each. The number of shares held in Treasury was 1,132,759 ordinary shares. Therefore, the total number of voting rights in the Company as at 4 April 2008 is 265,242,443.
8. CREST members who wish to appoint a proxy or proxies through the CREST electronic proxy appointment service may do so by using the procedures described in the CREST Manual. CREST Personal Members or other CREST sponsored members, and those CREST members who have appointed a service provider(s), should refer to their CREST sponsor or voting service provider(s), who will be able to take the appropriate action on their behalf.
9. In order for a proxy appointment or instruction made using the CREST service to be valid, the appropriate CREST message (a “CREST Proxy Instruction”) must be properly authenticated in accordance with Euroclear UK and Ireland Limited’s specifications, and must contain the information required for such instruction, as described in the CREST Manual. The message, regardless of whether it constitutes the appointment of a proxy or is an amendment to the instruction given to a previously appointed proxy must, in order to be valid, be transmitted so as to be received by the issuer’s agent (ID 3RA50) 48 hours before the time fixed for the meeting (or any adjournment thereof). For this purpose, the time of receipt will be taken to be the time (as determined by the timestamp applied to the message by the CREST Application Host) from which the issuer’s agent is able to retrieve the message by enquiry to CREST in the manner prescribed by CREST. After this time any change of instructions to proxies appointed through CREST should be communicated to the proxy another way.
10. CREST members and, where applicable, their CREST sponsors, or voting service providers should note that Euroclear UK and Ireland Limited does not make available special procedures in CREST for any particular message. Normal system timings and limitations will, therefore, apply in relation to the input of CREST Proxy Instructions. It is the responsibility of the CREST member concerned to take (or, if the CREST member is a CREST personal member, or sponsored member, or has appointed a voting service provider, to procure that his CREST sponsor or voting service provider(s) take(s)) such action as shall be necessary to ensure that a message is transmitted by means of the CREST system by any particular time. In this connection, CREST members and, where applicable, their CREST sponsors or voting system providers are referred, in particular, to those sections of the CREST Manual concerning practical limitations of the CREST system and timings.
11. The Company may treat as invalid a CREST Proxy Instruction in the circumstances set out in Regulation 35(5)(a) of the Uncertificated Securities Regulations 2001.
12. In order to facilitate voting by corporate representatives at the meeting, arrangements will be put in place at the meeting so that (i) if a corporate shareholder has appointed the chairman of the meeting as its corporate representative to vote on a poll in accordance with the directions of all of the other corporate representatives for that shareholder at the meeting, then on a poll those corporate representatives will give voting directions to the chairman and the chairman will vote (or withhold a vote) as corporate representative in accordance with those directions; and (ii) if more than one corporate representative for the same corporate shareholder attends the meeting but the corporate shareholder has not appointed the chairman of the meeting as its corporate representative, a designated corporate representative will be nominated, from those corporate representatives who attend, who will vote on a poll and the other corporate representatives will give voting directions to that designated corporate representative. Corporate shareholders are referred to the guidance issued by the Institute of Chartered Secretaries and Administrators on proxies and corporate representatives (www.icsa.org.uk) for further details of this procedure. The guidance includes a sample form of appointment letter if the chairman is being appointed as described in (i) above.
EXPLANATORY NOTES TO THE NOTICE OF ANNUAL GENERAL MEETING
The notes on the following pages give an explanation of the proposed resolutions.
Resolutions 1 to 9 and resolution 12 are proposed as ordinary resolutions. This means that for each of those resolutions to be passed, more than half of the votes cast must be in favour of the resolution. Resolutions 10, 11 and 13 are proposed as special resolutions. This means that for each of those resolutions to be passed, at least three- quarters of the votes cast must be in favour of the resolution.
Resolution 1 – Directors’ Report and Accounts
The Directors are required to present to the Meeting the audited accounts and the Directors’ and auditors’ report for the financial year ended 31 December 2007.
Resolution 2 – Remuneration Report
The Directors’ Report on remuneration is set out in full on pages 24 to 29 of the Annual Report and Accounts.
Resolutions 3 to 6 – Re-election of directors
These resolutions concern the re-election of Directors to the Board.
In accordance with the Financial Reporting Council Code of Corporate Governance (“the Code”) the Board has carried out an evaluation of the performance of each of the Directors, the Board, its processes and Committees. The Chairman confirms that, following the performance evaluation, each of the Directors proposed for re-election continues to be effective and to demonstrate commitment to the role.
Resolution 3 – Rodger Hughes – Senior Non-Executive Director
Rodger Hughes has been appointed as a Director by the Board since the last Annual General Meeting, to fill a vacancy in the role of Senior Non-Executive Director caused by the retirement of Julian Seymour. He is retiring in accordance with Article 80 and the requirements of the Code. The Board recommends his election.
Resolution 4 – Piers Pottinger – Deputy Chairman
Piers Pottinger is retiring by rotation and standing for re-election under the three-year rule. Piers has been a Director of the Company since 1994. The Board recommends his re-election.
Resolution 5 – Paul Richardson – Non-Executive Director
Paul Richardson was re-elected as an independent Director at the 2006 AGM and, in accordance with the requirements of the Code for directors who have served more than nine years since first being elected, submits to annual re-election by shareholders. Paul was first elected to the Board in 1997. The Board recommends his re-election.
Resolution 6 – Dave Allen – Non-Executive Director
Dave Allen is retiring by rotation and standing for re-election under the three-year rule. In addition, in accordance with the requirements of the Code for directors who have served more than nine years since first being elected, he submits to annual re-election by shareholders.
Dave was first elected to the board in 1998. The Board recommends his re-election.
Resolution 7 – To approve the payment of a final dividend
If Resolution 7 is approved by shareholders, the final dividend for the year ended 31 December 2007 will be paid on 20 June 2008 to shareholders whose names appear on the register of members at close of business on 30 May 2008.
Resolution 8 – Reappointment of auditors and auditors’
remuneration
The auditors are required to be reappointed at each Annual General Meeting at which accounts are presented. The Board, on the recommendation of the Audit Committee, which has evaluated the effectiveness and independence of the external auditors, is proposing the reappointment of Deloitte & Touche LLP. It is normal practice for a company’s directors to agree how much the auditors should be paid.
Resolution 9 – Renewal of Board’s authority to allot securities
Under Section 80 of the Companies Act 1985, the directors are, subject to certain exceptions, unable to allot relevant securities without the authority of the shareholders in general meeting. Relevant securities are defined in that Act to include the Company’s ordinary shares or securities convertible into the Company’s ordinary shares.
This resolution will authorise the Board to allot securities in the Company. The Board’s authority will last until the conclusion of the next Annual General Meeting.
The maximum aggregate nominal amount of securities that can be allotted under this authority is £4,439,587, which is equivalent to one third of the issued ordinary share capital of the Company as at 4 April 2008. The Board has no current intention of exercising this authority other than in the exercise of share options as described on page 59 of the Annual Report and Accounts and for the purpose of issuing shares to satisfy deferred consideration obligations.
Resolution 10 – Disapplication of pre-emption rights
The effect of this resolution is to allow the Board to allot shares in the Company for cash other than to existing shareholders in proportion to their holdings. Allotments under this authority may be up to a maximum aggregate nominal amount of £665,938, which is equivalent to approximately 5% of the issued ordinary share capital of the Company (including shares held in treasury), as at 4 April 2008. This authority will also apply to the sale of treasury shares for cash on a non pre-emptive basis (subject to the same maximum limit). The Act permits the Company to purchase and hold up to 10% of its own shares in treasury with a view to possible sale at a future date, rather than cancelling such shares on purchase. The ability to make use of treasury shares will provide the Company with additional flexibility. The resolution will also disapply shareholders’ pre-emption rights on an allotment of shares and the sale of treasury shares for cash under a rights issue with power for the directors to make exclusions or such other arrangements as may be appropriate to resolve the legal or practical problems which might arise. This authority will last until the conclusion of the next Annual General Meeting.
Both Resolutions 9 and 10 are consistent with the recommendations of the Investment Committees of the National Association of Pension Funds and the Association of British Insurers.
Resolution 11 – Adoption of new articles of association
It is proposed to adopt new articles of association (the “New Articles”) in order to update the Company’s current articles of association (the “Current Articles”), primarily to take account of changes in English company law brought about by the Companies Act 2006.
The principal changes introduced in the New Articles are summarised in the Appendix. Other changes, which are of a minor, technical or clarifying nature and also some more minor changes which merely reflect changes made by the Companies Act 2006, have not been noted in the Appendix. The New Articles are available for inspection, as noted on page 1 of this document.
Resolution 12 – Share Consolidation
The purpose of the Share Consolidation is, amongst other things, to ensure that the share price and number of shares in issue is appropriate given the size and position of the Company in the UK market. It should also reduce the volatility in the Company’s share price, enabling a more consistent valuation of the Company.
The effect of the Share Consolidation will be that Shareholders on the Company’s register of members at the close of business on 16 May 2008, will, on the implementation of the Share Consolidation, hold one Ordinary Share of 25 pence for every 5 Ordinary Shares of 5 pence. The proportion of the issued ordinary share capital of the Company held by each shareholder following the Share Consolidation will, save for fractional entitlements, remain unchanged. Apart from having a different nominal value, each Ordinary Share of 25 pence will carry the same rights as set out in the Company’s Articles of Association that currently attach to the existing Ordinary Shares.
To effect the Share Consolidation it may be necessary to issue an additional number of Ordinary Shares of the Company so that the Company’s issued share capital following the consolidation is rounded up to the nearest whole pound.
A request will be made to the UKLA and to the London Stock Exchange to reflect, on the Official List and the London Stock Exchange’s main market for listed securities respectively, the consolidation of the existing Ordinary Shares into Ordinary Shares of 25 pence.
New share certificates in respect of the Ordinary Shares of 25 pence are expected to be posted at the risk of shareholders by 27 May 2008 to those shareholders who, at the Share Consolidation Record Date, hold their shares in certificated form along with any fraction payment entitled thereto. These will replace existing certificates which should then be destroyed. Pending the receipt of new certificates, transfers of Ordinary Shares of 25 pence held in certificated form will be certified against the register of members of the Company.
All existing Ordinary Shares held in uncertificated form (that is in CREST) at the record date of 16 May 2008 will be consolidated into Ordinary Shares of 25 pence and CREST accounts will be credited with the new Ordinary Share consolidation shares on 19 May 2008.
Resolution 13 – Purchase of own shares
This resolution, which is contingent upon resolution 12 being passed will allow the Company to make market purchases of up to 5,327,504 of its own Ordinary Shares (representing 10% of the issued ordinary share capital of the Company as at 4 April 2008), at prices not less than 25 pence per ordinary share and not more than 5% above the average of the middle market quotations as derived from the London Stock Exchange Daily Official List for the five business days before each purchase. The Board has purchased and will continue to purchase, Ordinary Shares which will then be used to satisfy deferred consideration obligations, but otherwise has no current intention of exercising this authority and will only purchase shares if the effect will be to increase earnings per share and such purchase is in the best interests of shareholders as a whole.
Any shares purchased in this way will either be cancelled and the number of shares in issue will be reduced or held as treasury shares. This authority will last until the conclusion of the next Annual General Meeting or, if earlier, 13 August 2009.
As at 4 April 2008, the total number of ordinary shares in the Company in respect of which options were outstanding was 7,933,145, representing 2.98% of the Company’s issued ordinary share capital as at that date. If the authority set out in this resolution were exercised in full and the shares were cancelled then the outstanding options would represent 3.31% of the Company’s issued ordinary share capital as at 4 April 2008.
As at 4 April 2008 the Company has purchased 1,232,759 ordinary shares pursuant to the equivalent authority granted to the Board at the 2007 Annual General Meeting.
Notes
1. Directors and their interests
There was no change in the interests of the directors in the share capital of the Company between 10 March 2007 and 4 April 2008. The interests of the directors as at 10 March 2007 are set out on page 29 of this Report and Accounts.
2. Substantial interests
At 4 April 2007 the following interests, other than those of the Directors set out on page 29, in 3% or more of the issued share capital had been notified to the company.
Number of ordinary shares % of ordinary share capital
WPP Group Plc 55,183,593 20.80
Fidelity Investments 26,003,323 9.80
Aberforth Partners 22,941,000 8.65
AXA Rosenberg 10,562,452 3.98
BGI 8,450,532 3.31
APPENDIX
EXPLANATORY NOTES OF PRINCIPAL CHANGES TO THE COMPANY’S ARTICLES OF ASSOCIATION
1. Articles which duplicate statutory provisions
Provisions in the Current Articles which replicate provisions contained in the Companies Act 2006 are in the main to be removed in the New Articles. This is in line with the approach advocated by the Government that statutory provisions should not be duplicated in a company’s constitution. Certain examples of such provisions include provisions as to the form of resolutions, the variation of class rights, the requirement to keep accounting records and provisions regarding the period of notice required to convene general meetings. The main changes made to reflect this approach are detailed below.
2. Form of resolution
The Current Articles contain a provision that, where for any purpose an ordinary resolution is required, a special or extraordinary resolution is also effective and that, where an extraordinary resolution is required, a special resolution is also effective. This provision is being removed as the concept of extraordinary resolutions has not been retained under the Companies Act 2006.
The Current Articles enable members to act by written resolution. Under the Companies Act 2006 public companies can no longer pass written resolutions. These provisions have therefore been removed in the New Articles.
3. Variation of class rights
The Current Articles contain provisions regarding the variation of class rights. The proceedings and specific quorum requirements for a meeting convened to vary class rights are contained in the Companies Act 2006. The relevant provisions have therefore been amended in the New Articles such that the reference to sanction by “extraordinary” resolution has been replaced by reference to “special” resolution and the necessary quorum for a variation of class rights meeting is raised from one to two persons (holding at least one-third of the issued shares of the class in question).
4. Convening extraordinary and annual general meetings
The provisions in the Current Articles dealing with the convening of general meetings and the length of notice required to convene general meetings are being removed in the New Articles because the relevant matters are provided for in the Companies Act 2006. In particular, an extraordinary general meeting to consider a special resolution can be convened on 14 days’ notice whereas previously 21 days’ notice was required (although in practice the Company will continue to comply with the requirement under the Combined Code on Corporate Governance to provide 14 working days’ notice).
5. Fractions
The New Articles reflect the provisions of the Listing Rules in relation to any fractions of shares which result from a share consolidation or otherwise. If a shareholder’s entitlement includes a fraction which does not exceed £5.00 in value (net of expenses), the directors have authority to sell it for the company’s benefit. In all other circumstances, the fraction will continue to be sold for the benefit of the shareholder, as under the Current Articles.
6. Votes of members
Under the Companies Act 2006 proxies are entitled to vote on a show of hands whereas under the Current Articles proxies are only entitled to vote on a poll. The time limits for the appointment or termination of a proxy appointment have been altered by the Companies Act 2006 so that the articles cannot provide that they should be received more than 48 hours before the meeting or in the case of a poll taken more than 48 hours after the meeting, more than 24 hours before the time for the taking of a poll, with weekends and bank holidays being permitted to be excluded for this purpose. The New Articles give the directors discretion, when calculating the time limits, to exclude weekend and bank holidays. Multiple proxies may be appointed provided that each proxy is appointed to exercise the rights attached to a different share held by the shareholder. The New Articles reflect all of these new provisions.
7. Age of directors on appointment
The Current Articles contain a provision requiring a director’s age to be disclosed if he has attained the age of 70 years or more in the notice convening a meeting at which the director is proposed to be elected or re-elected. Such provision could now fall foul of the Employment Equality (Age) Regulations 2006 and so has been removed from the New Articles.
8. Conflicts of interest
The Companies Act 2006 sets out directors’ general duties which largely codify the existing law but with some changes. Under the Companies Act, from 1 October 2008 a director must avoid a situation where he has, or can have, a direct or indirect interest that conflicts, or possibly may conflict with the company’s interests. The requirement is very broad and could apply, for example, if a director becomes a director of another company or a trustee of another organisation. The Companies Act 2006 allows directors of public companies to authorise conflicts and potential conflicts, where appropriate, where the articles of association contain a provision to this effect. The Companies Act 2006 also allows the articles of association to contain other provisions for dealing with directors’ conflicts of interest to avoid a breach of duty. The New Articles give the directors authority to approve such situations and to include other provisions to allow conflicts of interest to be dealt with in a similar way to the current position.
There are safeguards which will apply when directors decide whether to authorise a conflict or potential conflict. First, only directors who have no interest in the matter being considered will be able to take the relevant decision, and secondly, in taking the decision the directors must act in a way they consider, in good faith, will be most likely to promote the company’s success. The directors will be able to impose limits or conditions when giving authorisation if they think this is appropriate. The authority for directors to authorise conflicts or potential conflicts will only apply from the date that the statutory duty on directors to avoid conflicts arises (1 October 2008). Prior to this date, any conflicts that arise will be dealt with in a similar way to the current position, in accordance with Article 91(E) and following.
It is also proposed that the New Articles should contain provisions relating to confidential information, attendance at board meetings and availability of board papers to protect a director being in breach of duty if a conflict of interest or potential conflict of interest arises. These provisions will only apply where the position giving rise to the potential conflict has previously been authorised by the directors. It is the Board’s intention to report annually on the Company’s procedures for ensuring that the Board’s powers to authorise conflicts are operated effectively.
9. Notice of board meetings
Under the Current Articles, when a director is abroad he can request that notice of directors’ meetings are sent to him at a specified address and if he does not do so he is not entitled to receive notice while he is away. This provision has been removed, as modern communications mean that there may be no particular obstacle to giving notice to a director who is abroad.
10. Records to be kept
The provision in the Current Articles requiring the Board to keep accounting records has been removed as this requirement is contained in the Companies Act 2006.
11. Distribution of assets otherwise than in cash
The Current Articles contain provisions dealing with the distribution of assets in kind in the event of the Company going into liquidation. These provisions have been removed in the New Articles on the grounds that a provision about the powers of liquidators is a matter for insolvency law rather than the articles and that the Insolvency Act 1986 confers powers on the liquidator which would enable it to do what is envisaged by the Current Articles.
12. Electronic and web communications
Provisions of the Companies Act 2006 which came into force in January 2007 enable companies to communicate with members by electronic and/or website communications. The New Articles allow communications to members in electronic form and, in addition, they also permit the Company to take advantage of the new provisions relating to website communications. Before the Company can communicate with a member by means of website communication, the relevant member must be asked individually by the Company to agree that the Company may send or supply documents or information to him by means of a website, and the Company must either have received a positive response or have received no response within the period of 28 days beginning with the date on which the request was sent. The Company will notify the member (either in writing, or by other permitted means) when a relevant document or information is placed on the website and a member can alwaysrequest a hard copy version of the document or information.
13. Directors’ indemnities and loans to fund expenditure
The Companies Act 2006 has in some areas widened the scope of the powers of a company to indemnify directors and to fund expenditure incurred in connection with certain actions against directors. In particular, a company that is a trustee of an occupational pension scheme can now indemnify a director against liability incurred in connection with the company’s activities as trustee of the scheme. In addition, the existing exemption allowing a company to provide money for the purpose of funding a director’s defence in court proceedings now expressly covers regulatory proceedings and applies to associated companies.
14. General
Generally the opportunity has been taken to bring clearer language into the New Articles.
