AGM 2011 Explanatory Notes
The directors unanimously recommend that you vote in favour of the Resolutions as they intend to do in respect of their own beneficial holdings.
Explanatory notes in relation to certain of the business to be conducted at the AGM are set out below.
1. Election and Re-election of Directors (Resolutions 4 to 13)
The company’s articles of association require that directors retire and stand for election at the next AGM of the company following their appointment by the board. Ms Spottiswoode and Ms Fok are therefore standing for election on this basis. Other board members are required to retire and submit themselves for re-election every three years and at least one-third of the board is also required to stand for re-election.
The board has however decided that it will adopt the practice required by the UK Corporate Governance Code whereby all members of the board of directors of FTSE 350 companies will offer themselves for election by the company’s members annually. Accordingly, in keeping with the board’s aim of following best corporate governance practice, all the continuing directors are standing for election or re-election by the shareholders at this year’s AGM.
2. Authority to Allot Shares (Resolution 15)
Resolution 15 seeks shareholder approval for the directors to be authorised to allot shares.
At the last AGM of the company held on 28 May 2010, the directors were given authority to allot ordinary shares in the capital of the company up to a maximum nominal amount of £235,080,000 representing approximately 66% of the company's then issued ordinary share capital. This authority expires at the end of this year's AGM. Of this amount 470,160,000 shares (representing approximately 33% of the company's issued ordinary share capital) could only be allotted pursuant to a rights issue.
Resolution 15 will, if passed, renew this authority to allot on the same terms as last year's resolution (save that the number of shares in question has increased slightly).
The board considers it appropriate that the directors be granted a similar authority to allot shares in the capital of the company up to a maximum nominal amount of £235,100,000 representing approximately 66% of the company's issued ordinary share capital as at 22 March 2011 (the latest practicable date prior to publication of the Notice of Annual General Meeting). Of this amount, 470,200,000 shares (representing approximately 33% of the company's issued ordinary share capital) can only be allotted pursuant to a rights issue. The power will last until the conclusion of the next AGM in 2012.
The intention of the directors is to allot shares upon the exercise of options granted over Securicor plc shares and rolled over into options over the company's shares. As at 22 March 2011, options exist over only 50,000 shares.
The directors do not have any other present intention of exercising this authority. In accordance with best practice, if the directors were to exercise this authority so as to allot shares representing more than one third of the current capital of the company, they would all offer themselves for re-election at the following AGM, although, as noted in 1. above, it is the directors’ current intention to stand for election annually in any event.
As at the date of the Notice of Annual General Meeting, the company does not hold any ordinary shares in the capital of the company in treasury. However, the 5,029,315 shares held within the G4S Employee Benefit Trust and referred to on page 110 (note 37 to the consolidated financial statements) are accounted for as treasury shares.
3. Disapplication of Statutory Pre-emption Rights (Resolution 16)
Resolution 16 seeks shareholder approval to give the directors authority to allot shares in the capital of the company pursuant to the authority granted under Resolution 15 for cash without complying with the pre-emption rights in the Act in certain circumstances. This authority will permit the directors to allot:
(a) shares up to a nominal amount of £235,100,000 (representing approximately 66% of the company's issued share capital) on an offer to existing shareholders. However unless the shares are allotted pursuant to a rights issue (rather than an open offer), the directors may only allot shares up to a nominal amount of £117,550,000 (representing approximately 33% of the company's issued share capital) (in each case subject to any adjustments, such as for fractional entitlements and overseas shareholders, as the directors see fit); and
(b) shares up to a maximum nominal value of £17,632,000, representing approximately 5% of the issued ordinary share capital of the company as at 22 March 2011 (the latest practicable date prior to publication of the Notice of Annual General Meeting) otherwise than in connection with an offer to existing shareholders.
As with Resolution 15, the terms of Resolution 16 are the same as last year's resolution (save that the number of shares in question has increased slightly).
The directors confirm their intention to follow the provisions of the Pre-emption Group's Statement of Principles regarding cumulative usage of authorities within a rolling three-year period. The Principles provide that companies should not issue shares for cash representing more than 7.5% of the company's issued share capital in any rolling three-year period, other than to existing shareholders, without prior consultation with shareholders.
4. Purchase of own shares (Resolution 17)
Resolution 17 seeks to renew the company's authority to buy back its own ordinary shares in the market as permitted by the Act. The authority limits the number of shares that could be purchased to a maximum of 141,060,000 (representing a little less than 10% of the company's issued ordinary share capital as at 22 March 2011 (the latest practicable date prior to publication of the Notice of Annual General Meeting)) and sets minimum and maximum prices. This authority will expire at the conclusion of the company’s AGM in 2012.
The directors have no present intention of exercising the authority to purchase the company's ordinary shares but will keep the matter under review, taking into account the financial resources of the company, the company's share price and future funding opportunities. The authority will be exercised only if the directors believe that to do so would result in an increase in earnings per share and would be in the interests of shareholders generally. No shares were purchased pursuant to the equivalent authority granted to the directors at the company's last AGM.
As at 22 March 2011 (the latest practicable date prior to the publication of the Notice of Annual General Meeting), there were options over 50,000 ordinary shares in the capital of the company representing 0.0036% of the company's issued ordinary share capital. If the authority to purchase the company's ordinary shares was exercised in full, these warrants and options would represent 0.0039% of the company's issued ordinary share capital.
5. Political donations (Resolution 18)
Resolution 18 is designed to deal with the rules on political donations contained in the Act. Under the rules, political donations to any political parties, independent election candidates or political organisations or the incurring of political expenditure are prohibited unless authorised by shareholders in advance. What constitutes a political donation, a political party, a political organisation, or political expenditure is not easy to decide, as the legislation is capable of wide interpretation.
Sponsorship, subscriptions, payment of expenses, paid leave for employees fulfilling public duties, and support for bodies representing the business community in policy review or reform, may fall within this.
Therefore, notwithstanding that the company has not made political donations requiring shareholder authority in the past, and has no intention either now or in the future of making any such political donation or incurring any such political expenditure in respect of any political party, political organisation or independent election candidate, the board has decided to put forward Resolution 18, which is the same as the resolution on this subject which was passed at the company’s AGM held on 28 May 2010. T
his will allow the company to support the community and put forward its views to wider business and government interests without running the risk of being in breach of the law. As permitted under the Act, Resolution 18 also covers political donations made, or political expenditure incurred, by any subsidiaries of the company.
6. Amendment to Article 92 (Resolution 19)
Institutional guidelines state that a company's articles of association should impose a fixed limit on the level of directors' fees, either individually or in aggregate. Article 92(1) of the company's Articles of Association currently provides for an annual aggregate limit of £750,000.
Resolution 19 is a resolution to replace the current limit in Article 92(1) of the company's Articles of Association with an annual aggregate limit of £1,000,000. The proposed aggregate limit has been calculated by reference to the current number of directors of the company, fees currently paid for the provision of the chairman’s services and the potential to appoint additional non-executive directors to the board.
Under the company's Articles of Association, the fees to be paid to directors in respect of the office of director (such fees are distinct from any remuneration which may be paid to directors in respect of executive employment or other special services to the company) are to be determined by the directors and the proposed amendment should provide the directors with additional flexibility in appointing additional board members if this is seen as desirable and in setting levels of remuneration.
7. Period of Notice for Calling General Meetings (Resolution 20)
Resolution 20 is a resolution to allow the company to hold general meetings (other than AGMs) on 14 days’ notice.
Before the introduction of the Companies (Shareholders' Rights) Regulations 2009 on 3 August 2009, the minimum notice period permitted by the Act for general meetings (other than AGMs) was 14 days. One of the amendments made to the Act by the Regulations was to increase the minimum notice period for general meetings of listed companies to 21 days, but with an ability for companies to reduce this period back to 14 days (other than for AGMs) provided that two conditions are met.
The first condition is that the company offers a facility for shareholders to vote by electronic means. This condition is met if the company offers a facility, accessible to all shareholders, to appoint a proxy by means of a website. The second condition is that there is an annual resolution of shareholders approving the reduction of the minimum notice period from 21 days to 14 days.
The board is therefore proposing Resolution 20 as a special resolution to approve 14 days as the minimum period of notice for all general meetings of the company other than AGMs. The approval will be effective until the company's next AGM, when it is intended that the approval be renewed. The board will consider on a case by case basis whether the use of the flexibility offered by the shorter notice period is merited, taking into account the circumstances, including whether the business of the meeting is time sensitive.