The High Court in Washer v Negawatt Limited; Maina [2024] KEHC 751 (KLR) held that under Section 280 of the Companies Act, 2015 (the “Act”) it has power to order the convening a meeting of a company where a member of a company has made it impractical to convene a meeting by failing to attend and form a quorum as per the articles of association of a company.
Section 280 of the Act provides:
“(1)This section applies if for any reason it is impracticable:
To convene a meeting of the company in any manner in which meetings of that company may be convened; or
To conduct the meeting in the manner required by the articles of the company or this Act.
(2)The Court may, either on its own initiative or on the application:
Of a director of the company; or
Of a member of the company who would be entitled to vote at the meeting, make an order requiring a meeting to be convened, held and conducted in any manner the Court considers appropriate.”
In this case a member of the Company (the minority shareholder) had declined to attend meetings of the Company despite having been sent several notices of the meetings. All the said meetings had been adjourned because of lack of quorum as the Articles of Association of the Company provided that the quorum for meetings was at least two members. As a result, the Company was unable to conduct its affairs and operate its business.
The Plaintiff, the majority shareholder, filed an application under Section 280 of the Act seeking orders to allow him to convene meetings of the Company with only one member (himself) constituting quorum despite the provisions of the Company’s Articles of Association. The Plaintiff argued that the non-attendance by the other member had made the convening of meetings of the Company impracticable as per Section 280 of the Act thereby granting the Court power to order the convening of the meetings in the manner prayed for by the Plaintiff.
While Section 280 of the Act had been previously applied to allow companies to conduct meetings virtually during the Covid 19 pandemic, in this case it was applied to overcome a quorum challenge caused by non-attendance of a member of the Company.
The Court held that:
“…I find that it is has become impracticable for an AGM of the company to be held because of failure of the interested party to attend and form a quorum. I also find that the applicant has properly invoked this Court’s jurisdiction to enable the company to continue to operate its business unrestricted by the impracticability brought about by the provisions of its Articles of Association as to the quorum.”
The Court quoted with approval the Jersey decision in the case of In the Matter of Inter-Channel Pharmaceuticals Ltd [2002] JRC 116A (10 June 2002) where it was held that “quorum provisions should not be regarded as a right vested in the minority to frustrate the wishes of the majority.”
In its final orders the Court granted leave to the Plaintiff to convene specified meetings of the Company with only one member present constituting quorum notwithstanding the provisions of the Company’s Articles of Association.
This decision is important as it establishes that Section 280 of the Act is a remedy to overcoming quorum challenges caused by non-attendance of meetings by members.
For further discussion on this alert or any other litigation concern, please contact us below.
Leon Ndekei
Corporate and Commercial Litigation
leon@tarraagility.com, partners@tarraagility.com
