Directors Responsibilities and Remedies
Exploring how to heal causes of division in the Celtic ranks via accountable and therefore meaningful AGMs –
A link to this Talk from the Terrace podcast with Jeanette Findlay and David Low of the Celtic Trust explains where the relationship between the Celtic Trust and The Celtic Board currently stands (or more accurately doesn’t stand). It is a must listen to anyone concerned about the future direction of travel of Celtic a football club, necessarily run as a business, but has a special place in our hearts.
The Celtic Trust historically provide the main means of seeking accountability from The Celtic Board by forming resolutions agreed by small shareholders seeking answers to questions of concern to them to be tabled and voted on at the annual AGM.
The current breakdown in relationships cannot stop questions of concern being asked or resolutions presented but no one benefits from an acrimonious relationship and that has to change for the good of Celtic as a whole.
In that respect David Low’s comments about the behaviour of Celtic Board Directors rekindled a question from early this year for me which is what are the rights of shareholders and more important the responsibilities of Directors?
To that end I’m no lawyer but Google is our friend and I thought the information from this site setting out Directors’ duties: Six factors that boards cannot ignore under the Companies Act, a useful starting point and this factor seems very relevant for obvious reasons:
“ The need to act fairly between members. This is old law, but remains good under the Companies Act 2006. The private shareholder with a few hundred shares is entitled to the same treatment as the institution with many millions of shares.
The other factor of relevance in terms of decisions made by The Board in 2012 is this one:
The likely long-term consequences of any decision. Promoting a long-term investment culture was a key objective of the government in introducing the Companies Act 2006. Some companies may find themselves with share registers made up of hedge funds and active value investors who look only for short-term returns. Despite that, the relevance of the long view is something a board is required to consider.
In the case of the need to act fairly between members how would small shareholders know if that was being met given what is deemed to be in the Company’s interest is kept from them, in the case of Resolution 12 to 2013 AGM (don’t groan it’s still relevant in this context) for 8 years and we are still waiting.
Regarding the second point, were the long-term emotional consequences of the Board Decision to accept the 5 Way Agreement in 2012 in respect of impact on small shareholders emotions given any consideration at all? Were any measures ever discussed never mind put in place to stop one of the factors that insults the Celtic supports’ intelligence and is part of the cause of the current divide between The Board and the support?
On the basis that The Board are accountable for much of the current situation and division and individual acts by Board Directors can be shown to be a contributing factor, then using legal processes under Corporate Law to seek remedies is a way to change the dynamics of the whole relationship.
In exploring what form a remedy might take, this stood out from a guide to shareholder remedies
“ As well as those remedies, the minority shareholder can sometimes also rely on a negotiated position in the company’s shareholders’ agreement or articles of association, where, if able, it can incorporate provisions that provide it with remedies” (and includes some samples.)
That got me looking at Celtic’s Articles of Association
It is a long document covering all the logistical aspects of share handling (did Celtic live up to their part is a question the CT might be able to answer given the recovery operation the CT have had to undertake to find lost shares) , Meeting logistics like relevant access to microphones for speakers, that I had to insist on at the 2019 AGM, but what I cannot find is any reference to the responsibilities of Directors to shareholders at such meetings and perhaps the absence of such should be an area of concern to shareholders and supporters alike given the possibility David Low mentioned of either a share issue or a takeover for profit?
Should some assurances to help sale of shares if that were to happen be added to the Articles? Should the Articles be changed to protect small shareholders in the event of an unwelcome takeover?
Are these not the sort of remedies that need pursuing if there is sufficient evidence the rights of small shareholders under the Companies Act have not been observed or that Directors have failed in their responsibilities to deal honestly with small shareholders, particularly at AGMs that are supposed to be where accountability based on honest responses to shareholder Resolutions (like Res12) happens.
A personal remedy to protect small shareholders in the future and to restore the purpose of an AGM as a true means of accountability is the addition of the following under the rules for AGM meetings.
Directors’ responsibilities –
When responding to shareholders Resolutions to justify the voting intention of the Board the shareholders should be told the truth, the whole truth and nothing but the truth.
That would be a game changer to give an AGM real meaning and purpose, although turning back the global tide of lies is a task for all followers of the Truth.