When you submit your proxy votes it’s normally safe to assume that what you voted on is, well, what is going to get voted on. Maybe not.

Now that the dust has settled on the takeover of GKN plc by Melrose Industries plc it seems like an appropriate moment to take a look at some questions raised by the last days of GKN as a separate corporate entity from the point of view of Corporate Governance and Shareholder Rights at GKN’s final AGM.

First, here’s a brief timeline of events:

•  03/04/2018 GKN AGM Meeting notice issued, the meeting to be held on 03/05/2018.
• 19/04/2018 Majority of GKN plc’s board step down after the offer by Melrose is declared wholly unconditional and the de-listing date is set as 21/05/2018. Several Melrose directors join the GKN board.
• 03/05/2018 the GKN AGM is held and,

o Resolutions 9 & 10 are not put to the meeting as those directors have resigned.
o Resolutions 3-8 are put to the meeting but with different nominees.

The six GKN directors who were to be re-elected under these resolutions according to the meeting notice have already resigned and are replaced at the nominees by the incoming Melrose directors that joined the board pm 19/04/2018.

It’s an established feature of the UK Corporate Governance landscape that Chairs of meetings may amend resolutions, if such amendments are approved at the meeting and any necessary documentation is lodged with the company ahead of the meeting, both hurdles that GKN cleared, so the amendments fall within the letter of the law and the company’s Articles.

However, they raise interesting questions regarding shareholder rights and equal treatment as only shareholders at the meeting were able know that these resolutions had been changed and it appears, from the meeting results, that proxies may have been applied to the amended resolutions. No public announcements of these changes were made, and, other options were, potentially, available;

• The GKN meeting could have been adjourned or postponed until after the de-listing.
• With 14 days between the change in the board and the planned date for the AGM, a well-planned circular could have been sent to shareholders or to call a GM immediately after the AGM or to amend the AGM resolutions.
• A postponement of a week or two to allow a new meeting notice to be issued would not have interfered with the de-listing timeline. Postponing until after the de-listing and conclusion of the takeover could also have been an appropriate course of action and would have ensured fair treatment of all shareholders.

We can also start to think about the requirements under FCA 2014 33 (The Enhanced Listing Regime), depending on how many of GKNs shares Melrose controlled at the time of the meeting; is there a chance that director election resolutions should have their results given both in total and solely for the votes cast by independent shareholders, with the possibility for a ‘spill’ meeting?

Admittedly this scenario is entirely unique, but one must ask if there is, or should be, a ‘materiality’ threshold for the amendment of ordinary resolutions by the Chair of a meeting without prior notice to all shareholders; after all, the ‘business’ of the resolutions did not change, but the individual appointed, in other words, the specificity of the resolution, did.

Last Updated: 22 May 2018