Meetings
By Asok Nadhani
10.1 Meetings
a. The word meeting
in its ordinary sense implies coming together of two or more persons face to
face for some purpose and discussion.
b. The meetings of
a company may be classified as follows:
i. Shareholder’s
Meetings
a. Statutory
meeting
b. General Meetings
o
Annual General meetings
o
Extraordinary General meetings.
c. Class Meetings
o
During the lifetime of the company
o
At winding up of the company.
ii. Directors’
Meetings
a. Meetings of
Board of directors
b. Meetings of
Committees of Board
iii. Debenture Holders’ Meeting
iv. Creditors’ Meeting.
10.2 Business at General Meeting
i. The business
transacted in general meeting may be broadly classified into :
a.
Ordinary Business
b.
Special Business
ii.
Ordinary Business (Sec. 173): In case of business transacted in an annual
general meeting, the following business are considered as Ordinary :
a.
Consideration of the Accounts, Directors’ &
Auditors’ Report.
b.
Declaration of Dividend.
c.
Appointment of directors in place of those retiring.
d.
Appointment of auditors and fixing of their
remuneration.
iii.
Special Business (Sec. 173)
a. In the case of
an annual general meeting: Any business other than the ordinary business.
b. In case of other
meetings: All Businesses are deemed to be special business (Business considered
ordinary AGM are even considered special business in other meetings).
c. Some examples of
special business are:
-
removal of a director,
-
issue of rights/bonus shares,
-
election of a person (other than a retiring
director) as director.
d. The Notice must
indicate that the business is special and shall be accompanied by an
explanatory statement stating material facts of each item of Special business
& nature of concern or interest of any Director of Manager. Otherwise the
notice is void and ultra vires.
e. In respect of an
item of special business, explanatory statement of the resolution to be passed
must be annexed to the notice of general meeting. Otherwise, no resolution can
be passed on such item of special business, and any such resolution if passed,
shall be invalid.
f. In case of
special business, ordinary or special resolutions are required to be passed
according to companies Act.
g. If special
business requires approval to any document, the time and place where the
document can be inspected shall be specified in the statement.
10.3 Statutory
Meeting (Sec. 165)
i. Every Public company
limited by shares or guarantee and having a share capital shall after one month
and within six months from the date at which the company is entitled to
commence business, hold the 'statutory meeting'. This is the first
meeting of the shareholders of a public company and is held only once in the
lifetime of a company. If a meeting is held prior to statutory period of one
month, it cannot be said to be a statutory meeting.
ii. The purpose of
statutory meeting is to enable the members to-
a.
Discuss the matters relating to promotion and
formation of the company.
b.
Discuss the success of floatation.
c.
Approve any modification of contracts mentioned in
the prospectus.
d.
Know the financial position and prospects of the
company.
iii.
The Board of directors shall send a Notice of the
meeting to every member of the company within 21 days before (shorter notice is
acceptable if agreed to by all the members entitled to attend and vote at the
meeting) the Statutory Meeting is to be held. The notice of the meeting shall
mention that the meeting is a ‘Statutory Meeting’ & shall also accompany
the Statutory Report. [Sec.
165(2)]
iv. The following companies that are
required to hold a statutory meeting
a.
A Public company limited by shares; or
b.
A Public company limited by guarantee and having
share capital.
v. Following Companies are not required to hold a statutory meeting
a.
A private company limited by shares
b.
A private company limited by guarantee and having
no share capital
c.
A private company limited by guarantee and
having share capital
d.
A private company with unlimited liability
e.
A public company limited by guarantee and having no
share capital.
f.
A public company with unlimited liability.
vi. The Central
Government has exempted government companies from preparing the statutory
report and holding the statutory meeting [Notification No. GSR 579(E)].
10.3.1 Proceedings of
Statutory Meeting
a.
List of members: At the
commencement of the statutory meeting, the Board shall produce a list showing
the names, addresses and occupations of the members of the company and number
of shares held by them respectively. The list shall remain open and accessible
to any member of the company during the continuance of the meeting.
b.
Discussion of matters: The members
present at the meeting may discuss any matter relating to the formation of the
company or any matter arising out of the statutory report.
c.
Passing of
resolutions: Resolutions may
be passed in the statutory meeting, provided its prior notice has been given.
d.
Adjournment: The meeting may
adjourn from time to time. At any adjourned meeting, any resolution (of which
notice has been given) whether before or after the former meeting, may be
passed. An adjourned meeting shall have the same powers as the original
meeting. The object of the adjournment may be to provide members with
additional information about the company's affairs.
e.
Consequences of default: If default is made in
complying with the provisions, every defaulting director or officer of the
company shall be punishable with fine extending to Rs. 5.000 (s.165(9)).
Default in holding statutory meeting or delivering statutory report may become
a ground for winding up through the tribunal u/s 433(b).
10.3.2 Statutory Report
Along with the notice of
statutory meeting, a report, called the 'Statutory Report' is to be sent to all
members.
i. Contents of Statutory
Report
The statutory report shall contain information of formation of the
company as follows:
a.
Total shares allotted: The total
number of shares allotted, distinguishing shares allotted as fully or partly
paid-up and also the extent to which partly paid-up shares are paid.
b.
Cash received: The total
amount of cash received by the company in respect of all shares allotted
c.
Abstract of receipts and payments: An abstract of the receipts and payments
made up to a date within 7 days of the report.
d.
Directors and auditors: The names,
addresses and occupations of the directors, auditors, manager and secretary
along with any change occurred in such names, addresses and occupations since
the date of the incorporation of the company.
e.
Contracts: The particulars
of any contract which is to be submitted to the meeting for its approval or
modification.
f.
Underwriting contract: The extent to
which any underwriting contract has not been carried out and the reasons
therefore.
g.
Arrears of calls: Any arrears due
on calls from every director and from the manager.
h.
Commission and brokerage: The particulars
of any commission or brokerage in connection with the issue or sale of shares
and debentures to any director or to the manager.
ii.
Certification of Statutory Report
The statutory report shall
be certified by at least 2 directors of the company (one of them must be
managing director, if there is one). The auditors of the company shall also
certify its correctness regarding shares allotted, cash received in
respect of such shares & receipts and payments of the company.
iii. Delivery of Certified
Statutory Report to Registrar
The Board shall deliver a copy of the certified statutory report to the
Registrar for registration forthwith after copies thereof have been sent to the
members of the company.
10.4 Annual General
Meeting
a.
AGM is an important meeting for safeguarding the
interests of the shareholders. Since the ultimate control of the company should
vest in the hands of shareholders, it is desirable and necessary that they
should meet at least once every year. [Sree Meenakshi Mills Co. Ltd. v. Assistant Registrar of Companies]
b.
Holding of AGM is a statutory requirement for every
company (s.166). Even if a company did not function during the year, AGM must
be held. [Madan Gopal Dey v The State of
West Bengal], [Sree Meenakshi Mills Co. Ltd. v. Assistant Registrar of Companies]
c.
AGM is particularly important because of the nature
of the business transacted at this meeting. Viz.,-
i. Annual accounts
are presented for the consideration of shareholders at an AGM. Thus, they get
an opportunity to discuss the affairs and review the working of the company.
ii.
Appointment or reappointment of auditors is made at
the AGM.
iii.
Dividends are declared in the annual general meeting.
iv. Appointment or
reappointment of directors is made at the AGM. The shareholders can refuse to
re-elect a director whose action they do not approve.
10.4.1
Rules of AGM
a.
Notice of AGM (Sec.
171): The notice of General Meeting shall be given to the members in writing
before 21days of the date of meeting, specifying the date, time and place of
the GM (shorter notice may be given if agreed to by all the members entitled to
vote in the meeting).
b.
Time period of holding AGM (S. 166)
i. First AGM of the
company Ex.10.1
a.
The first AGM is to be held within 18 months of
incorporation.
b.
If AGM is so held, there is no need to hold AGM in
the year of incorporation or the following year.
ii. Subsequent AGM
a.
AGM is to be held within 6 months from the close of
financial year (and within 15 months of previous AGM).
b.
An application seeking extension of time must be
made before the due date for holding the AGM (DCA Clarification).
c.
The Registrar has the discretion to grant extension
upto 3 months. If extension granted : Ex.10.2
§ The last date of
holding the AGM shall be extended by the period of extension granted by the
Registrar.
§ Because of grant
of extension of time, if the time limit for holding the AGM falls in the next
calendar year (i.e., no AGM shall be held in a particular calendar year), it
would be in due compliance of section 166.
d.
There must be one AGM in
every calendar year.
iii.
Financial Year
Financial year means the
period for which Profit and Loss Account is prepared. Financial year may be
more than or less than a calendar year, but shall not exceed 15 months.
(It may extend to 18 months, if ROC grants special permission under section
210).
c.
Time, Place and Day of AGM (S.166(2))
i.
Time of AGM. AGM shall be
held during business hours. It must start before the close of business hours
and may continue after close of business hours.
ii.
Day of AGM. AGM shall be
held on a day which is not a public holiday (as defined under Negotiable
Instruments Act, 1881).
A
public company may fix the time for its AGMs in the following two ways:
§ The articles may
prescribe the time for holding AGMs.
§ The company may
pass a resolution in one AGM fixing the time of subsequent AGMs.
iii.
AGM on a public holiday
a.
If a day is declared by the Central Government to
be a public holiday after the issue of notice, AGM can be held on such a public
holiday
b.
Where an AGM is adjourned because of lack of
quorum, it is to be held on the same day, time and place in the next week, even
if that day is a public holiday.
c.
Company licensed under Section 25 may hold an AGM
on a public holiday.
d.
Where a public company has fixed the time for its
subsequent AGM and the day happens to be a public holiday, AGM can be held on
such a public holiday.
e.
If the adjourned AGM comes to be accidentally held
on a public holiday, section 166 is not contravened (DCA clarification).
f.
However, if an AGM is adjourned for the automatic
reappointment of a director, the adjourned meeting cannot be held on a
public holiday [Section 256(4)(a)].
iv. Extension of time if accounts are not ready
a. Delay in
completion of audit of accounts does not ordinarily constitute a special reason
justifying the extension of time under section 166 (DCA clarification).
b. The AGM must be called, whether or not
the annual accounts are ready for consideration at the meeting. If the accounts
are not ready, AGM should be held and adjourned to some future date for laying
of accounts. However, the adjourned meeting must also be concluded within the
statutory period given under section 166 and 210.
c. An AGM shall not
be invalid merely because of the reason that the accounts have not been
laid at the AGM (e.g., where the accounts are not ready).
v.
AGM
held beyond statutory time
An AGM held beyond the due
date is not void and all the resolutions passed at such AGM are valid. However,
the company and every officer of the company who is in default is liable to pay
penalty [Hungerford Investment Trust Ltd. v Tumer Morrison and Co.
Ltd.].
vi.
Holding
two AGMs on the same day
It is permissible to hold two AGMs on the
same day, provided two different notices are sent, and both the AGMs are held
at different time.
vii.
Canceling or
postponing an Annual General Meeting
Where an AGM is convened for a particular date
and notice is served to the members, the Board can cancel or postpone the
holding of the meeting provided the power is exercised bonafide and for
proper reasons. But a better course is to hold the meeting and then adjourn is
to a later date.
viii.
Place of AGM
1.
AGM shall be held only at -
the registered
office of the company; or
some other place
within the city, town or village in which the registered office is situated.
§ If the postal
limits and local limits do not coincide, the wider of the two shall
be considered.
§ The twin cities
of Delhi New Delhi Hyderabad
2.
Holding AGM outside the local limits where
registered office is situated
a.
A private company may fix the place for its
subsequent AGMs in the following two ways:
§ The articles may
prescribe the time for holding AGMs.
§ The company may
pass a resolution AGM fixing the time of subsequent AGMs (provided such
resolution is agreed to by all the members).
b. Where a private
company has fixed holding the AGMs at a specified place, it may hold the AGM at
such place, even though such place is outside the city, town or village in
which the registered office of the company is situated.
ix.
The Central Government may exempt any class of
companies (exemption to a particular company cannot be granted), on request
from the requirements relating to time, place and day of AGM. While granting
the exemption, the Central Government may impose such conditions as it may deem
fit.
x.
Default in
holding AGM
a.
If a company fails to hold an annual general
meeting, the Tribunal may, on the application of any member, call for the
meeting (sec. 167). A general meeting so held shall be deemed to be an annual
general meeting of the company.
b.
The company and every officer of the company who is
in default shall be punishable with fine upto Rs.50, 000. In case of continuing
default, additional fine of Rs.2,500 per day may be imposed.
§ If books of a
company are seized by the police, rendering it impossible to call an AGM, the
contravention is not punishable. (Re, Asia Udyog Pvt. Ltd.)
§ If there is only
one member alive (the others having died) when AGM is due to be held, no
penalty shall be imposed for not holding the AGM (state of Kerela v West Coast
Planners Agencies Pvt. Ltd.).
c.
Calling of AGM by the
Company Law Board. The Company Law Board may,
on the application of any member
i.
call a GM which shall be deemed to be an AGM of the
company (s.167);
ii.
give such directions as it thinks fit, including a
direction that 1 member present in person or proxy shall be the
quorum;
iii.
On default of holding meeting u/s 166 or 167, the
company or defaulting officer may be fined upto Rs.50,000 (and Rs.2,500 per day
for continuing default). (s.168)
xi.
S. 171 to 186 regarding provisions of General Meeting
apply to public co. and private co. (which is subsidiary to a Public Co.). (s.
170)
10.5 Extraordinary General
Meeting (Sec. 169)
i.
Apart from Statutory and Annual General meeting,
all other meetings of shareholders are Extra Ordinary General meetings (EGM).
ii.
Ordinarily, EGM is called by the Board whenever it
thinks necessary. If the Board identifies some business which can be transacted
only with the consent of members in GM, the Board either waits till the
ensuring AGM is held, or calls an EGM if the matter is urgent and cannot be
postponed till the ensuing AGM.
iii.
All business transacted at an extraordinary meeting
is treated as special business. Therefore, an explanatory statement must be
given in respect of each proposed resolution (whether ordinary or special
resolution).
10.5.1 Calling of
Extraordinary General Meeting
Extraordinary General
Meeting may be called:
a.
by the Board of Directors [S. 169 (1)]
o
On its Own
o
On requisition of members
b.
By Requisitionists themselves [S. 169(6)]
c.
Ordered by the Tribunal (S. 186)
10.5.1.1 EGM called by Board of Directors
i. The Board of
directors may call an extraordinary general meeting :
-
When required by the Board itself [S. 291 (1)]
-
When requisitioned by members [S. 169 (1)]
ii.
When required by the Board itself: Whenever the
board comes across a business which requires resolution of members in a in
general meeting but cannot wait till the next AGM is held, they may call an
EGM. Some examples of such business are:
-
issue of rights shares
-
increase in the remuneration of managing director,
whole time director, etc.
iii.
When requisitioned by Members: Members may
also ask the Company to hold an EGM as per following rules : [S. 169 (1)]
a.
A requisition signed by specified number of members
is submitted to the company to hold an EGM, at the registered office of the
company
b.
The requisition shall set out the matters to be
considered in the meeting
c.
The requisition is signed by :
o
Holders of at least 1/10th of the paid
up capital (where the company is having share capital)
o
Members representing at least 1/10th of
the voting power (where the company is not having share capital)
d. The Board shall
proceed to call a meeting within 21 days from the date of deposit of a valid requisition.
The meeting shall be held within 45 days from the date of the deposit of the requisition.
10.5.1.2 EGM called on requisitionists
themselves [S. 169(6)]
i. If the Board of
directors fails to call a meeting requisitioned by members, the EGM may be
called by persons as follows : [LIC Vs Escorts Ltd.], [Queen kuries
and Loans Private Limited vs Sheena Jose.]
- by those
who requisitioned
- Holders of at least
1/10th of the paid up capital (where the company is having
share capital)
- Members representing
at least 1/10th of the voting power (where the company is not
having share capital)
ii.
The meeting shall be called in the manner similar
to Directors’ meetings & must be held within 3 months of deposit of
requisition. However, a meeting commenced within 3 months may be adjourned
beyond 3 months of deposit of requisition. [S. 169 (7)]
a. Reimbursement of
expenses. If the Board fails to call an EGM within time specified under section
169, and consequently EGM is called by the requisitionists themselves: [S. 169
(9)]
i. The expenses
reasonably incurred by the requisitionists is calling the EGM shall be repaid
to the requisitionists by the company.
ii. The company
shall deduct the expenses so paid from the remuneration of defaulting
directors.
b.
Dissolution of meeting if quorum is not present. If quorum is
not present within half an hour from the time appointed for holding the
meeting, the extraordinary meeting called upon requisition of members (whether
by the requisitionists themselves or by the Board) shall stand dissolved,
unless the articles provide otherwise.
10.5.1.3 EGM ordered
by Company Law Board (S. 186)
i.
If for any reason it is impracticable for a
company to call, hold or conduct an extraordinary general meeting, the Company
Law Board may order an EGM to be called, held and conducted in such a manner as
it thinks fit (including a direction that 1 member present in person or proxy
shall be quorum).
ii.
The Company Law Board may suo motu exercise its
powers, or on the application of a member or director.
10.6 Requisites of a valid General
Meeting
i.
A meeting must be convened by proper authority.
a. Convened by
Board
§ Articles
generally empower the Board to call a general meeting.
§ Under common
law, the Board has power to call a general meeting even if this power is not
expressly given by the Articles.
§ An individual
director has no power to call a GM.
§ Notice of a GM
given by a secretary or a director without sanction of Board is invalid.
However, the notice may be ratified by the Board. [P.V. Damodara Reddi Vs
Indian National Agencies Ltd.]
b. Convened by
Members : Members who fulfil the requirements of section 169 are eligible to call
an EGM.
c. Convened by the
Company Law Board : The company Law Board is empowered to call an AGM
under section 167 and an EGM under
Section 186.
ii.
Notice of
Meeting
a.
Receiver
of Notice : A proper notice of the meeting should be
given to the members and all others who are entitled to attend the meeting,
such as : (s.172)
i.
every member of the company entitled to vote
ii.
legal representatives of the deceased member
iii.
official assignees of the insolvent member
iv.
auditor of the company
v.
preference shareholders, if the dividend is in
arrears of a specified period as provided u/s 87(2)(b).
b.
Notice
Time:
(s.171)
1. 21 clear day’s
notice
o
Date of issue of notice and date of meeting must be
excluded to the said period of clear 21 days.
o
Where a notice is sent by post, it is deemed to be
served after 48 hours of posting.
o
Intervening holidays (i.e., holidays falling between
the period of sending notice and date of the general meeting) are counted as
period of notice.
o
Thus, notice by post to be valid, must be
dispatched 25 (21 days + 48 hrs. i.e. 2 days + 2 days = 25) days before the
date of the meeting.
2.
Shorter notice (less than 21 days) can be given as
per following rules :
a.
In case of annual general meeting : agreed by all the members.
b.
In the case of any other meetings : agreed by members holding
not less than 95 per cent of the paid-up share capital (in case of company
having share capital) or having not less than 95 per cent of the voting power
exercisable at the meeting (in case of company not having a share capital).
c. If proper notice
of a meeting is not given to every person entitled to receive notice, any resolution
passed at the meeting will be of no effect.
a.
Deliberate omission: Deliberate
omission to give notice even to a single member may invalidate the meeting.
b.
Accidental omission: An accidental
omission (omission which is not deliberate) to give notice or the non-receipt
of notice does not invalidate the proceedings at the meetings. (s.172(3)) [West
Canadian Collieries. Ltd.]
d.
The notice must specify: (s.172)
-
Venue: place, day,
hour of the meeting
-
Agenda: business to be
transacted at the meeting.
-
Contents: Fairly explain
the purpose for which the meeting is called & the notice must not be
misleading.
-
Appointment of
Proxy: Stating that a member is entitled to appoint a proxy (who need not be a
member).
iii. Publication of Proceedings of Meeting
Any report of Proceedings of
any general meeting circulated or advertised must contain all matters required
u/s 193 (s.197).
10.6.1 Quorum for Meeting (Sec. 174)
i.
Quorum is the minimum number of
members who must be personally present to constitute a valid meeting and
transact any business. The quorum is generally fixed by the Articles. The
statutory required quorum is :
5 members for public company & 2 members for other company. The
Articles cannot provide for a quorum smaller than the statutory minimum.
ii. Absence of Quorum
:
a) Articles shall
prevail
Every company may make its
own provisions dealing with the situation of absence of quorum and such
provision will prevail unless it contradicts with any provision of law.
b) Adjournment as per Act
If articles are silent about any situation of 'no
quorum', then provisions of Section 174(3) to 174(5) shall apply as follows:
i. If the Quorum is not present till half an
hour of the appointed time for the meeting:
1. if GM is called on requisition of members,
the GM shall be dissolved.
2. if GM is called otherwise than on
requisition of members, the GM shall adjourn to:
§ such day, time and place as the Board
determines.
§ if Board does not so determine the day,
time and place, the GM shall adjourn to same day, time and place in the next
week.
ii.
If at the adjourned meeting also, a quorum is not
present within half an hour, the members present shall be the quorum.
iii.
The quorum should be present at the commencement of
General meeting. The quorum need not to be present throughout or at the time of
taking vote on any resolution.
iv.
For the purposes of quorum, only members present in
person are to be counted (i.e, proxies not counted, even if the articles so
provide).
v.
Where the total number of members of a company fall
below the minimum required for quorum, all the members should be present for a
valid quorum.
vi.
Preference
shareholders
are not counted in quorum unless:
§ The proposed
business includes any item of business directly affecting their rights.
§ Preference
shareholders have earned voting rights (Section 87).
vii. The person
appointed as representative under section 187(by Corporations) and 187A (by President
& Governors), if personally present, is counted as quorum.
viii. Joint holders of
shares are counted as one member (however, in Jarnail Singh v Bakshi
Singh, it was held that 3 joint holders present in the GM shall be counted
as 3 members personally present).
ix.
Persons who are not members (e.g. auditors,
secretarial staff, a director who is not a member, special invitees etc.),
although present in the meeting, .are not counted in quorum.
x.
Quorum is always presumed to be present in the
general meeting, unless questioned at the general meeting or the records show
otherwise.
10.6.1.1
One
man quorum
a.
A single member does not constitute a quorum even
if:
§ he holds almost all the shares which
carry voting rights; or
§ he holds proxies
from all other members; or
§ it is an
adjourned meeting under section 174 (Since, Sec 174 says 'members').
b. Single member
quorum/One man quorum is possible in the following cases:
§ A member present
in more than one capacity is counted separately in each such capacity. In such
a case, one person may form the quorum.
§ In a class
meeting, where all the preference shares were held by one member, it was held
that the quorum was present [East v Bennet Bros. Ltd.].
§ If an annual
general meeting is called upon order made by the Company Law Board, one member
(whether present in person or proxy) shall be the quorum if the order of
Company Law Board included such a direction (Section 167(1)).
§ If an
extraordinary general Meeting is called upon an order made by the Company Law
Board, one member (whether present in person or proxy) shall be the quorum if
the order of Company Law Board included such a direction (Section 186).
10.6.2 Chairman of Meeting (Sec. 175)
a. Every General meeting
must be presided by a chairman of the meeting.
Chairman shall be
determined as per the provisions contained in the Articles of a company. The
provisions of Regulations 50 to 52 of Table A are given below:
§ The chairman of
the Board shall act as chairman of every general meeting (Regulation 50).
§ If there is no
chairman of Board or if he is not present within 15 minutes or is unwilling to
act as chairman, the directors present shall choose one of them as chairman
(Regulation 51).
§ If no director
is willing to act as chairman or if no director is present within 15 minutes,
members present shall choose one of them as chairman (Regulation 52).
b. If Articles do
not provide for chairman of a meeting, the following rules apply:
i.
The members personally present at the meeting shall
elect one of themselves to be the chairman of the meeting on a show of hands.
ii.
If a poll is demanded on the election of the
chairman, it shall be taken forthwith. In such a case, the chairman elected on
a show of hands shall exercise all the powers of the chairman. If some other
person is elected as chairman as a result of the poll, he shall be the chairman
for the rest of the meeting.
iii.
Non-member as a chairman: Usually,
chairman is a member. However, where the articles of a company provide that
chairman of Board shall preside over the GMs, a director who is a non-member
may also be a chairman of the GM (unless article require holding of
qualification shares by directors). He can also use his casting vote in case of
tie.
iv.
Protem Chairman: If the
chairman designated in the Articles is not present, then the meeting itself
elects a protem (temporary) chairman. If subsequently the designated chairman
arrives, the temporary chairman vacates his chair.
v.
Proxy as a chairman : A proxy cannot be
appointed as a chairman.
For more details,
refer to Business & Corporate Laws by Asok Nadhani, BPB Publications, www.bpbonline.com,
bpbpublications@gmail.com
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