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02 Apr 2012

Voting at Creditors Meetings

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3 min

Frequently at creditors meetings liquidators, acting as chair of the meeting, assess the votes for and against a motion by asking for and counting a “show of hands”. However the Corporations Regulation covering this process says that the resolution must be decided “on the voices”, in the absence of a poll, so is the counting of hands approach valid?

Regulation 5.6.19 of the Corporations Regulations states:

A resolution put to the vote of a meeting must be decided on the voices unless,…. a poll is demanded, before or on the declaration of the result of the voices

Taking a vote “on the voices” would not appear to be an unusual or very difficult task. Indeed Robert's Rules of Order states that “a vote by voice is a regular method of voting on any motion that does not require more than a majority vote for its adoption. In taking a voice vote, the chair puts the question by saying, "The question is on the adoption of the motion to [or "that"] ... [repeating or clearly identifying the motion]. Those in favour of the motion, say aye. [Pausing for response,] Those opposed, say no.” The chair then declares, on the basis of the audible responses, what the result of the vote is.

Given that the regulation appears, by the use of the word “must”, to mandate a vote on the voices, and given that a vote on the voices is not unusual we could be forgiven if we concluded that any other method (except a poll) is not allowed. But the courts have decided otherwise and that despite the precise wording of the section a show of hands approach is acceptable. In No 5 Lorac Avenue and No 10 Lorac Avenue Pty Ltd v Brooke (1995) 13 ACLC446 the court criticized the “on the voices “ approach because of its perceived imprecision and stated that a show of hands could satisfy the requirements of regulation 5.16.19.

Naturally even a show of hands is itself not necessarily precise. For example how does someone holding three proxies vote? Does the liquidator attempt to count the proxy holder as one or three? And of course a show of hands ignores values. So to suggest that a show of hands is more precise than a vote on the voices is not a very compelling argument.

In practical terms, if complete precision is required then a poll should be held. Otherwise, in our opinion, an on the voices approach is the way to go.

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