Senate scrutiny

The Government’s proposal to abolish the so-called 100-member rule has been referred to a senate committee, amid renewed claims that its removal would impinge shareholder democracy.

The Australian Institute of Company Directors has long supported the removal of this rule that allows 100 shareholders to call an extraordinary general meeting. Such meetings can cost up to $1 million to put together and the remaining shareholders bear that cost. Removing the rule would not affect the right of 100 shareholders to have a resolution added to the company’s annual general meeting agenda, so  shareholder democracy would not be damaged.

It is important to consider the practical implications of the 100-member rule when assessing arguments for its retention.

In a large company such as the Commonwealth Bank of Australia, which has over 800,000 shareholders, it has been suggested that the 100 members would represent only 0.013 per cent of shareholders, which is true based on average shareholdings.

However, if we assume each shareholder has only 1,000 shares (and many have far fewer shares) they would represent an even smaller 0.006 per cent (six thousandths of 1 per cent) of the issued shares

If such a rule applied to the Australian parliament, then any group of just 1,900 voters could call a federal election.