In a direct bid to break the stand-off over shareholder participation, Chartered Secretaries Australia (CSA), has proposed a two-tiered system for the calling of Extraordinary General Meetings (EGM's) via the shareholder numerical test that recognises the need for shareholders to voice their concerns whilst having regard to the overall size of ownership of companies.

We have proposed system whereby, for the first tier, a reasonable percentage of a company's shareholders would have to agree to force an EGM. A cap would then also apply in direct recognition of companies with very large registers.

The second tier is to judge shareholders on the size of their 'holding parcel'.

Last year several companies came under increasing threat of being hijacked by very small groups of shareholders. AGMs and EGMs are specific opportunities designed to enable legitimate shareholders voice their concerns. The purpose of this survey is to capture members' responses to a two-tiered solution and an insight into members' views on the formula we should propose.

1. Are you in favour of retaining the numerical test for shareholder participation? Yes/No

Yes 59%
No 41%

Comments:

Proportionate to the size of the company.
I would prefer a straight percentage of issued shares (5%) but recognise that may not be acceptable to ASIC. Failing that a combination of 5% of issued shares or a combination of 5% of issued shares or a number relative to the size of the register.
One share, one vote. If you can’t get 5% of the issued capital to agree with your proposal it obviously has little or no merit and you therefore have no chance of getting a majority vote on that proposal at an AGMEGM. So, by definition, the holders of the majority of the shares are entitled to view the EGM requisition as frivolous and vexatious, potentially almost amounting to the oppression of the majority by the minority.
At least not as the sole test.

1a. If so, how many?…… 100? 200? 500? A number relative to the size of the register?

100 200 500 A number relative to the size of the register
7.5% 3.75% 3.75% 37%

Comments:

Say 5% of the register.
I suggest a percentage of the total number of shareholders rather than a fixed number. The percentage could be between 1 & 10% of total number of shareholders. The percentage could be at the lower end of the scale where there are high number of shareholders such as in Telstra.
5% of holders, subject to a cap of 500 (assuming marketable parcel test applies — see below ie shareholders holding less than a marketable parcel don’t get counted in the 5% or in the 500).
Depends on share price (even 1000 shares in a little mining company might only be worth $20–30) — use “marketable parcel”coupled with a minimum of 100 shares.

2. Do you support a two-tier approach? Yes/No

Yes 78%
No 22%

Comments:

Yes — there should be more than simply number of shares that drive this — the value of the holding must be taken into account.
No — only % holding.
Yes — this would allow the larger shareholders to call the meeting. At the meeting all shareholders can decide the resolutions.
Yes — but query whether it should be based on number of shareholders and not one or two shareholders holding a % of capital. Could this not lead to a few shareholders with a large % being able to exert their sway over many shareholders with a small number of shares?

3. Do you believe requisitioning shareholders should be assessed against market capitalisation? Yes/No

Yes 63%
No 37%

Comments:

No — with no par value shares there is no effective difference between a percentage of shares and a percentage of market cap.
No — but I’d suggest something like either the holders of 5% of issued voting capital OR shareholders numbering at least 2% of the total number of voting shareholder provided each of these shareholders holds a marketable parcel.

4. Do you believe there should be a minimum requirement for the size of the shareholding when requisitioning an AGM? If so, what is your preferred "market shareholding"?

The ASX's definition for a "marketable parcel" ($500)

4,000 shares        5,000 shares        Other (please explain)

Yes     78%
No      18.5%

4,000 shares

5,000 shares

Other (Please explain)

7.5%

· Relative to register size

· The ASX's definition for a “marketable parcel” — $500

· Marketable parcel

· Expressed as a percentage of issued capital — say 5%, which would make such a requisition meaningful, but 1% might be equally meaningful in some circumstances

· ASX defined marketable parcel

· 1000 shares

· Marketable parcel

· An amount relative to the size of the company

· 500 or 1000 shares to allow smaller shareholders the power to call an EGM

· Marketable parcel

· 5%

· 5% of issued shares

· ASX’s definition of a marketable parcel ($500)

· ASX’s definition of a marketable parcel

· Marketable parcel — other requirements might be perceived as too high a barrier in an era of shareholder democracy

Comments:

No — provided there are sufficient numbers/value of shareholders that are concerned, I don’t believe that there should be a minimum value holding to entitle an individual shareholder to request. That said, in aggregate that numbers/value should reach a certain minimum before an EGM should be agreed to.
No % of shareholding.

Tim Sheehy
CHIEF EXECUTIVE