Lecture Notes: Professional Negligence and Corporate Meetings

Professional Negligence

Key Concepts:

• Negligence:

  • Focuses on the relationship between an advisor/auditor and the person relying on their advice.
  • The advisor must know that their advice will be acted upon by the advisee.

• Special Relationship:

  • Exists when advice is required for a specific purpose and is communicated for that use.
  • Involves an understanding that the advice will be acted upon without independent inquiry.

Auditor's Liability:

• Case Study: Auditor and Company

  • Auditors provide statements that are relied upon by shareholders.
  • Professional negligence considers if the auditor's duty is to the entire body of shareholders, not individuals.

• Determining Liability:

  • Assess if there is a special relationship akin to the "neighborhood principle" from Donoghue v Stevenson.

Corporate Meetings

Types of Meetings:

• General Meetings (AGM):

  • Previously, AGMs were mandatory for all companies to declare dividends, elect directors, etc.
  • Under new regulations, only public companies must hold AGMs annually.

• Meetings of Members:

  • For private companies, AGMs are not required; instead, they have meetings of members.
  • Convened by the board or members holding at least 10% of share capital.

Regulations for AGMs:

• Timing and Requirements:
  • Must be held within six months of the financial year-end and not more than fifteen months after the last AGM.
  • Public companies must hold an AGM within 18 months of incorporation.
  • Non-compliance can result in fines up to $25,000.

Convening Meetings:

• Members' Role:

  • Members can requisition meetings if directors fail to do so.
  • Must be done in hard copy or electronic form, stating the business and resolutions to be discussed.

• Director's Duties:

  • Must call meetings as required by members.
  • If directors fail, members holding more than half the voting rights can convene.

• Court's Role:

  • Can intervene if it's impractical to call a meeting, allowing for court-ordered meetings.

Case Example:

• National Road and Motorists Association Case:
  • Members requested a meeting concerning board actions.
  • When denied by the board, members appealed to the court.
  • Court ruled meetings must occur within three months of the request.