[Community-Discuss] [rpd] Removal of a director
Andrew.Alston at liquidtelecom.com
Sun Dec 17 22:10:26 UTC 2017
Because what I have to say in here is extremely long – let me start with the summary – because what I had said before hand was not entirely accurate – and the for that I apoligse (and I explain below where I believe I erred and how what I said can still be made to occur even in the event of that error). I have also copied in the community list on this – since I believe this discussion is best moved there – and the only reason I am still sending it to the RPD is that the original questions were asked there. If I can please request that further discussion of this issue go either to the members list or the community list – thanks.
One final point before I get into this – I am no lawyer – I know this – and what I write below is my own interpretation of the companies act and the company’s bylaws – which I have spent substantial time studying. If what I say has any factual inaccuracies – I welcome dissenting opinions that I can further learn from – so long as they are backed by citation of relevant material – objection with no substantiation is meaningless.
The summary though is as follows:
– YES the members can remove a director – the process would be as follows:
1. Utilizing clause 7.6.viii of the bylaws invoke an SGMM – for the purposes of passing a special resolution to amend the bylaws to allow the community to remove a director – and please note – that special resolution could set the required voting percentage to remove said director at whatever they liked – there is now low watermark – it is subject to whatever is in the constitution (as per section 138.2 of the companies act)
2. Once (a) was completed – call a second SGMM – for the express purpose of the removal of one or more directors – send out the notice of said meeting with the required 14 day notice period - and then pass a resolution as permitted by the process performed in (a)
Now – for those who want all the gruesome details – keep reading.
So I’ve had some time – and some of what I said was inaccurate – though not all of it – so let me explain my view point and we can then take it from there:
Firstly – the company has no shareholders – it has members (the registered directors being the ones with the legal liability and the fiduciary responsibility)
What this means is that effectively the Afrinic members are powerless – unless you follow the idea that as non-registered members we hold the same rights as shareholders would. This has been the line from the board many times before this community – though I have occasionally found this to be pretty selective – choosing what suits them as a need for registered members vs standard members.
But – if we are to assume that members have the rights of shareholders – for arguments sake – then we have to refer to two points – one being the companies act and the other being the bylaws.
AfriNIC is a private company – it has 9 members – therefore – we have to discount the following:
Section 138 of the companies act:
(1) Notwithstanding anything in its constitution or in any agreement between it and a director, a director of a public company may be removed from office by an ordinary resolution passed at a meeting called for the purpose that include the removal of a director.
What this means is – in a public company – the shareholders can remove a director – and it doesn’t matter what the bylaws or constitution say – they have the right via a 50% majority at an SGMM to revoke a director.
So – and this is where I err’ed:
(2) Subject to the constitution of a company, a director of a private company may be removed from office by special resolution passed at a meeting called for the purpose that include the removal of the director.
(3) The notice of meeting shall state that the purpose of the meeting is the removal of the director.
What this says is – if the bylaws allowed it – we could remove a director via special resolution at an SGMM – now – it could be argued that the bylaws do not PREVENT this – however – they do offer an alternative – so my guess is – those who say that only directors can remove a director could be technically correct – and it would come down to legal interpretation – it would be interesting to see what happened if someone chose to attempt to invoke this if the board would see fit to fight it or realize that anyone who has managed to get the SGMM together probably has sufficient backing that they have lost the faith of this community – would they let the vote go ahead? Who knows – only the board can answer that.
However – if you add an extra step to what I have said in the past – then it can still be done:
If the SGMM was invoked (as per section 7.6 / section 116 of the companies act referred to below in this email) – then a bylaw amendment could be passed to allow for such a removal – followed by a second SGMM to remove the director. Since notice of a meeting has to be given in specific time frames and the removal of a director requires a dedicated meeting for that purpose – this may require a short time frame between these meetings – but none the less – if you have the votes to remove a director by special resolution – you have the votes to change the bylaws to allow you to do it.
Now – where did the SGMM parts come from – this comes from both the bylaws and section 116 of the act:
The bylaws state in section 7.6:
7.6 The Registered Members and Resource Members shall, at Annual General Members' Meetings or by way of written resolutions, in addition to the rights conferred by Articles 7.1 and 7.2, have the right to:
(i) consider and adopt by Ordinary Resolution the financial statements of the Company;
(ii) receive any auditor's report;
(iii) consider the annual report;
(iv) determine, by Ordinary Resolution, the general policies for fulfilling the objects of the Company;
(v) approve, in accordance with Section 130 of the Act, a major transaction;
(vi) consider and approve by Special Resolution, if appropriate, proposals for the revocation, amendment or replacement of this Constitution;
(vii) appoint by Ordinary Resolution at each Annual General Members' Meeting the auditor of the Company to hold office until the conclusion of the next Annual General Members' Meeting;
(viii) request the Board, by way of a notice signed by not less than five (5) per cent of the Registered Members and Resource Members, to call a Special General Members' Meeting to vote on one or more resolutions; and
(ix) resolve, by Special Resolution, to put the Company into liquidation.
This is backed by section 116 of the companies act:
116. Special meeting of shareholders A special meeting of shareholders entitled to vote on an issue –
(a) may be called at any time by –
(i) the Board of directors; or
(ii) a person who is authorised by the constitution to call the meeting;
(b) shall be called by the Board on the written request of shareholders holding shares carrying together not less than 5 per cent of the voting rights entitled to be exercised on the issue.
This is however interesting – because once again it lends weight to the fact that the company treats the members as shareholders – even though I have serious doubts as to the legal validity of this – I would be interested in hear independent legal council on this point – do the members of AfriNIC actually have any real power – or is the power all in the hands of the registered members alone – I have a feeling that the latter is the case.
That being said – since the directors are the members – in the event of a vote of no confidence in the entire board – if you assume that once a director leaves office he ceases to be a member – the company would in effect cease to exist – however – because of SR3 referred to below – this now gets even more murky – remove all the directors and you have 9 registered members who have the power to simply either ignore the vote or reappoint themselves in the absence of the community. However – it *IS* possible for the members – under the bylaws – to force an SGMM through 5% of the vote and then vote to put liquidate the company. Therefore – if you wanted to get rid of the entire board – you have the option of calling for an SGMM – gathering the votes – liquidating the company – and being sure that there is an agreed vehicle ready to take over. Though – I actually have no idea what would happen in the event of the members of this community liquidating afrinic – I don’t think IANA ever really contemplated this situation – and it would be *VERY* interesting to know the thoughts of someone on that side as to what the likely outcome would be.
Now – let me refer to the votes that the community voted against.
First – it is inaccurate that I proposed a resolution to allow for the removal of a director by the members – the proposal to do this came from the collective board in 2016 and were tabled at the Mauritian meeting – this was SR16 – the community voted against taking this power for themselves for whatever reason. Secondly – that is not the resolution I had referred to in my last few emails – the resolution that I found completely bizarre in the context of the community was in fact SR3 – which would have changed section 6.3 to read as follows:
6.3 Registered Member - An individual who shall be elected as
Director in accordance with Article 13 below. The Chief Executive
Officer shall automatically also be appointed as a Registered Member,
provided that the said individual shall sign such forms as may be
prescribed by the laws of Mauritius and to contribute Rs 500 (Five
hundred Mauritian rupees only) in the event of the company being wound
up according to Article 22.
(a) For the avoidance of doubt, Registered Members shall be the only
legal entities entitled to have their names entered on the list of
members of AFRINIC filed or to be filed with the Registrar of
Companies in compliance with the Act.
(b) A Director whose tenure of office comes to an end, shall de facto
cease to be a Registered Member and shall complete all the
required formalities in compliance with the Act and/or the bylaws
to this effect.
This section 6.3.(b) was the section I was referring to when I said the community did something incredibly stupid – because it means a director who is not re-elected may effectively choose to never relinquish his registered member status – and that could create a major problem. Just for the record – that vote failed 54 to 22 – or 71.05% - and I personally cast 15 votes in favour from the various places I hold voting rights for – meaning the vote would have failed with a mere 63.93% in favour if I were to remove the votes cast by myself. I find this complete bizarre.
But – while we are on the subject of special resolutions the community voted against – at the same meeting was SR4 – which stated that directors – irrespective of their regional affiliation – must always act in the best interests of AfriNIC – was voted down by the community – it would have inserted the following into the bylaws:
13.6 [new article to be inserted] Notwithstanding the regional
criterion of elections of Directors for seats 1 to 6 (both inclusive) as
specified in Article 13.4(i) and 13.5, all Directors so elected, shall exercise
their powers in accordance with the Act and always act in good faith and
solely in the best interests of the company.
This failed getting less than 48% of the vote (37 for, 41 against) – interestingly enough though – I note in my own tally documents – I voted against this resolution (not that it would have made a difference, it would have changed the voting numbers to 52 for vs 26 against or 66.67% in favour. I have always been curious though as to other people’s reasons for voting against this – though I will explain my own. I believe that If AfriNIC must maintain regionalization of directors – then the regionalization should be total. Either we state that there shall be a western representative nominated by the west and voted by the west, an eastern representative nominated by the east and voted by the east etc – or we say – directors are directors and they serve the best interests of the continent collectively. In my mind however – we are sititng half way in between – where a director from the south or the east – can be elected by majority vote from another region where the region he is meant to be representing ends up having very little say. This is particularly prominent with a seat like indian ocean – where because of the relatively low number of voting members – the indian ocean representative is effectively chosen by the rest of the continent. That being said – and I distinctly remember raising this point – had the items around acting in good faith and solely in the best interests of the organisation been split out some how – THOSE I would have voted for – but I would not and could not vote for continued regionalization is continues to drive factionalism
(And I know there are people who are likely to scream at me about secret ballots – because it’s happened before – so to avoid that happening – let me state here and now – a ballot is secret – but by choice – there is nothing in the act or the bylaws that require me to keep how I voted – or why I voted that way a secret – and in the interests of transparency – I will always declare openly how I voted on an issue concerning Afrinic)
From: Komi Elitcha <kmw.elitcha at gmail.com>
Date: Sunday, 17 December 2017 at 10:57
To: Andrew Alston <Andrew.Alston at liquidtelecom.com>
Cc: Arsène Tungali <arsenebaguma at gmail.com>, "Marcus K. G. Adomey" <madomey at hotmail.com>, rpd <rpd at afrinic.net>
Subject: Re: [rpd] Removal of a director
I don’t know where Andrew is getting his information from and I too would like him to find his computer and verify his claims.
As far as I can see, they are erroneous and misleading. The facts from AfRINIC docs and lists
- only board members (registered members) can recall themselves.
- resource members and the wider community have no powers.
- There was no special resolutions on the matter by Andrew as claimed
- A previous attempt to address this was in the Bylaws review 2016
14 REMOVAL OF DIRECTORS
14.1 A Director shall hold office until:
(i) his term of office expires, without prejudice to Article 13;
(ii) he/she signs a written notice of resignation and delivers it to the address for service on the Company, which notice shall be effective when it is received at that address or at such later time as may be specified in the notice;
(iii) he/she is removed by the affirmative vote of two-thirds of all other Directors;
(iv) he/she otherwise ceases to be a Director pursuant to Section 139 of the Act; or
(v) the Director being the Chief Executive Officer, on the Board terminating his employment as Chief Executive Officer.
Special Resolution 16 (SR16)
Give the Members the power to recall a Director.
Insert a new sub-article 14.1(iv) after the existing 14.1(iii), and re-number the subsequent sub-articles as appropriate; Add a new article 14.2 as follows.
14.1 A Director shall hold office until:
. (i) [no change from previous text]
. (ii) [no change from previous text]
. (iii) [no change from previous text]
. (iv) [new sub-article] he/she is removed in terms of Article 14.2;
. (v) [previous part (iv) re-numbered to (v)]
. (vi) [previous part (v) re-numbered to (vi)]
14.2 [new article] A Director other than the Chief Executive Officer may be removed by a special resolution of Registered Members and Resource Members passed at an Annual General Member Meeting, provided:
(i) At least 10% of all Registered Members and Resource Members petition for the special resolution to be included in the agenda of the meeting
. (ii) The Director who is the subject of the special resolution is given the opportunity to be heard at the meeting;
. (iii) The special resolution is passed with a supermajority of no less than 75% of all votes cast.
The votes results
SR 16: Give the Members the power to recall a Director.
58 YES, 21 NO, 0 Abstain
FAILED with 73% YES votes
Origin and discussions on what became SR16
Andrew's proposed special resolutions to amend bylaws 2015
2017-12-15 14:35 GMT+00:00 Andrew Alston <Andrew.Alston at liquidtelecom.com<mailto:Andrew.Alston at liquidtelecom.com>>:
Right now - I am on holiday with my family - sitting 9 hours behind my normal time zone - and wandering around Disney Land most of the time.
I will clarify and send the documents when I get time to access them - and I remind you - and Arsene - I have zero obligations to give you any information - in any time frame - and how long it takes - that’s up to me - when I have the chance to look up specifics - you will get them - until then - you are quite free to do what I will do to find them - go and read the bylaws and the companies act.
Shrug - btw - I have asked you a couple of things about a year or two ago - I believe the answer I got was something about enjoying a black label and getting back to me - care to go and answer those? I believe someone who has the time to sit and demand answers of others should not need a year to answer other emails
Get Outlook for iOS<https://aka.ms/o0ukef>
From: Arsène Tungali <arsenebaguma at gmail.com<mailto:arsenebaguma at gmail.com>>
Sent: Friday, December 15, 2017 05:37
Subject: Re: [rpd] Removal of a director
To: Marcus K. G. Adomey <madomey at hotmail.com<mailto:madomey at hotmail.com>>
Cc: Andrew Alston <andrew.alston at liquidtelecom.com<mailto:andrew.alston at liquidtelecom.com>>, rpd <rpd at afrinic.net<mailto:rpd at afrinic.net>>
2017-12-15 12:21 GMT+02:00 Marcus K. G. Adomey <madomey at hotmail.com<mailto:madomey at hotmail.com>>:
I think providing an answer to my request should not take so long for an immediate past board member, even if his computer is missing.
Been wondering the same thing.
I hope Andrew comes back soon with details :)
From: Marcus K. G. Adomey <madomey at hotmail.com<mailto:madomey at hotmail.com>>
Sent: Tuesday, December 12, 2017 9:03:50 PM
To: Andrew Alston; rpd
Subject: Re: Removal of a director
Could you point to the bylaws section or the corporate document where 5% of members (registered and resources) can recall a director and vote by super majority?
From: Andrew Alston <Andrew.Alston at liquidtelecom.com<mailto:Andrew.Alston at liquidtelecom.com>>
Sent: Tuesday, December 12, 2017 2:30 PM
Subject: [rpd] Removal of a director
There are those that have said on this list that there is no procedure to recall a sitting board member.
This is fundamentally inaccurate - there is. It requires the signatures of 5% of the membership base to call for it - and following that a vote by super majority.
If I recall there was a resolution proposed to make this easier - first by myself - it was voted down - and second proposed by the board in Mauritius - again it was voted down - so the procedure exists and is as difficult as it is because that is what this community wanted.
This community has a habit of voting against things based on who proposed them then coming and asking for them again later. I really wonder what will happen when a director finishes his term and refuses to hand back his legal membership - and as a result cannot be removed as a member of the company - and as a result no new directors can be appointed. Since that is the status quo that this community voted for and legitimized in Mauritius when they voted against the need for a director to relinquish his status at the end of his term.
Fascinating how this community acts against their own interests and then wants a revisit once the idea becomes “invented here”
Just like it will be curious if that audit policy ever passes and audits are demanded of the authors - some of whom to this day only utilize 25% of their allocated space that they have sat on for close to a decade.
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