Royal Assent is expected in the near future for the Corporations Legislation Amendment (Deregulatory and Other Measures) Bill 2014 which will abolish the “100 members rule”. That rule permitted a block of 100 shareholder members to force the directors of a listed company to hold an extraordinary general meeting, even if those shareholders had very small holdings. Calling an EGM can be expensive for a listed entity with a large shareholder base as well as frustrating if the resolutions proposed are doomed to failure and the true purpose of the EGM is for publicity or to place public pressure on the directors of the company.
Memorably, in 2012, activist group GetUp! convinced 257 Woolworths shareholders to require the company to hold an EGM to consider a resolution limiting poker machine bets to $1. Woolworths made an unsuccessful appeal to the Federal Court to rescheduled the EGM to co-incide with the Annual General Meeting of the company, telling the Federal Court the costs of holding the EGM were in the order of $550,000. At the EGM, the resolution was overwhelmingly voted down.
Once the Bill has received assent, activist shareholders will need to acquire a voting block of 5% of the shares on issue in order to be able to force the company to call an EGM. Based on the average capitalisation of an ASX200 company, this will require that shares worth in excess of $100 million will need to vote in favour of an EGM being held, placing a far higher cost on this form of shareholder activism.
For more information please contact Simon Gallant.