Meetings of Company
Meaning:
A company can be defined as a legal establishment encompassing a group of
individuals engaged in operating a business. Management of a company requires
efforts undertaken by a lot of individuals who discuss and deliberate upon issues
before a decision is taken. The decisions are often taken in meetings which is a
formal dialogue between administration of the company (generally the directors
and in some cases members too) who discuss the affairs and business of the
company. The article deals with the meetings that are held in companies and
procedure followed thereof.
Meetings under company law
There are certain kinds of meetings that take place in a company which are
discussed as follows:
1. Statutory Meeting:
Statutory Meeting is the first meeting of the shareholders of a public company. It
must be held within a period of not less than one month nor more than 6 months
from the date at which the company is entitled to commence business. It is held
only once in the lifetime of a company. A private company and a company limited
by guarantee and not having a share capital need not hold such a meeting.
The purpose of the statutory meeting with its statutory report is to put the
shareholders of the company in possession of all the important facts relating to the
new company, what shares have been taken up, what moneys received etc. This
also provides an opportunity to the shareholders of meeting to discuss the whole
situation, the management and prospects of the company.
The Board of Directors must, at least 21 days before the day on which the meeting
is to be held, forward a report, called the ‘statutory report’ to every member of the
company. This report contains all the necessary information relating
to formational aspects of the company for the information of the shareholders.
Contents of Statutory Report:
1. The total number of shares allotted, distinguishing those allotted as fully or
partly paid up otherwise than in cash, the extent to which they are partly paid
up, the consideration for which they have been allotted and total amount
received in cash;
2. An abstract of the receipts and payments under distinctive heads upto a date
within seven days of the date of report;
3. An account of estimate of the preliminary expenses of the company.
4. The names, addresses and occupations of the managing director, director, and
also its secretary and auditors of the company;
5. The particulars of any contract which, and the modification or proposed
modification of which, are to be submitted to the meeting for approval;
6. The arrears, if any, due on calls from directors, managing director or manager;
and
7. The particulars of any commission or brokerage paid, or to be paid, in
connection with the issue or sale of shares to any director, managing director or
manager.
2. Annual General Meeting(AGM)-
According to section 96 of the companies Act 2013, every company public and
private company is required to hold one general meeting in a year supervised by its
directors to evaluate the progress of the company and plan future course of action
which is known as annual general meeting.
An Annual General Meeting (AGM) is held to have an interaction between the
management and the shareholders of the company. All companies except one
person company (OPC) should hold an AGM after the end of each financial year.
A company must hold its AGM within a period of six months from the end of the
financial year.
However, in the case of a first annual general meeting, the company can hold the
AGM in less than nine months from the end of the first financial year. In such
cases where the first AGM is already held, there is no need to hold any AGM in
the year of incorporation. Do note that the time gap between two annual general
meetings should not exceed 15 months.
Procedure to Hold an AGM
Notification – The meeting has to be pre notified which has to be
generally not less than 21 days before the scheduled day. In some cases
the meeting can be called on a short notice
Time and place of meeting – It has to be scheduled in the course of
business hours of the company on a working day and cannot be on a
national holiday. Generally, it has to be the registered office of the
company where the meeting has to take place. It could also be some other
place in the city where the main office is registered.
Due date of the meeting – The meetings are stipulated to be held within
nine months from closing of first financial year of the company and six
months from the closing in subsequent years. Time elapse between two
meetings cannot be more than 15 months. The section also provides that
it is on the discretion of the registrar to extend the time of AGM (not
more than 3 months).
Quorum of AGM –
In case of Public Company–
o 5 if members are less than 1000
o 15 if between 1000-5000
o 30 if more than 5000 members
In case of Private Company - then only 2 that are present will be the
quorum.
In case the quorum for the meeting is not present within half an hour
from the scheduled time, the meeting will be adjourned to the same day
in the next week for the same time and at the same place.
Tribunal calling the meeting – In case of failure to hold meeting in
required time under section 96, the Act provides power to the
Tribunal (which is a quasi-judicial body made to adjudicate disputes
arising out of company law) on submission by any member might call or
provide directions for calling the meeting.
Punishment for default – Section 99 of the companies Act 2013
provides that In case company fails to hold an AGM within the stipulated
time or extension obtained by it, the Tribunal may itself or on an
application made by any director or member order an AGM to be
conducted as per its directions. If the company further defaults in holding
a meeting in accordance with the directions of the Tribunal, the company
and every officer of the company who commit the default shall be
punishable with a fine of up to Rs 1 lakh. In case of continuing default, a
fine of Rs 5,000 per day is levied for each day during which the default
continues.
Delaying the meeting – There may arise sometime situations where the
directors of the company are not able to hold the annual general meeting
though the time has elapsed. No liability on part of directors arises in
such cases as laid down by learned judge in one of the case. L. Kapur v.
Registrar of Companies [1964], 1 Comp. L.J. 21: “…I am satisfied that
the delay in holding the annual general meeting…was due to unavoidable
reasons and that neither the company nor any of its directors…are
individually responsible for the delay which was due to circumstances
entirely beyond their control.”
Validity after delay – Although legal world has been divided on the
validity of an AGM called after defaulting but it is generally considered
valid in the eyes of law after the defaulting members pay a fine.
Matters of Discussion in an Annual General Meeting (Agenda of
AGM):
Various matters or Agenda of discussion at AGM are:
(a). Consideration and Adoption of the Audited Financial Statements.
(b). Consideration of the Director’s Report and Auditor’s Report.
(c). Dividend declaration to shareholders.
(d). Appointment of Directors /replacement of retiring Directors.
(e). Appointment of Auditors and deciding the Auditor’s Remuneration.
(f). Apart from the above ordinary business, any other business may be
conducted as a special business of the Company.
3. Extraordinary general meeting (EOGM) –
Section 100 of companies Act lays down the guidelines for the board to call a
general meeting extraordinary in nature to deliberate upon some matter requiring
immediate attention.
Sometimes, matters requiring immediate consideration by members may crop up
whose consideration cannot be deferred till the next Annual General Meeting. To
meet such emergencies, the companies can provide for holding of emergency
meetings of the members, which are known as Extra ordinary General Meetings.
Regulation 42 provides that all general meetings, other than annual general
meetings, shall be called as extra ordinary general meetings.
Calling the meeting – The board of directors has been vested with
powers to call extraordinary general meeting (they cannot call AGM).
Also the Act provides calling the meeting on requisition made by
members holding not less than 1/10 of shares on day of voting or holding
not less than 1/10 of total voting power. Also national company tribunals
can call EOGMs.
Time – The meeting is called between two AGMs to discuss matter
requiring serious attention.
Nature of business–The matters discussed in the meeting are special in
nature other than mere discussion on dividends, auditors etc. The matter
of urgent importance for instance can be unforeseen costs incurred or
change in association of the company. The matters are the ones which are
not discussed in statutory or general meetings.
Notice of meeting– To all the members in writing or through an
electronic mode of at least 21 Clear Days before convening such meeting.
There has to be an explanation provided with the notice of the meeting
giving details about the objectives of the meeting. In case of only
forwarding a requisition, the company is not bound to provide an
explanation.
Requisitioning the meeting– The demand of members to convene a
meeting is called requisition .The requisitionists(members) can call the
meeting within 3 months of issuing a requisition notice if the board fails
to do so within 45 days (though they have the duty to call it within 21
days). The requisitionists are permitted to go to tribunals if they have
been denied the permission to hold EOGM required that they apply for it
first themselves.
4. Class Meeting:
Such meeting is convened by a particular class of shareholders only and only if
they think that their rights are being altered or if they want to vary their attached
rights, as mentioned u/s 48 of CA’13, and u/s 232 also, if under Mergers and
Amalgamation scheme, meetings of particular shareholders and creditors can be
convened if their rights/privileges are being varied to their interests in such
company.
Creditor’s meetings- Under section 230 of the Act, companies can make
arrangements with creditors. Such arrangements are often discussed in
meeting between the directors, board and creditors. It is known as
meeting of creditors. In some cases the judiciary may also play an
important role in calling meeting of the creditors.
Meeting of debenture holders- Companies are entitled to issues
debentures and to implement the same it calls meeting of debenture
holders. It is between the board of directors and debenture holders to
discuss the rights and responsibilities related to debentures.
Difference Between Annual General Meeting and Statutory
Meeting :
Basis of
Annual General Meeting Statutory Meeting
Comparison
It is the first meeting
It is a compulsory company meeting to
held in a public
be held once a year to keep the
company with share
Definition shareholders updated about the
capital after the
performance of the company and elect
commencement of its
its directors for the forthcoming year.
business.
Company
Both public and private companies. Public Companies
Type
Number of Once in the whole
Once a year.
Meetings lifespan of the company.
To keep the shareholders
To keep the shareholders informed
informed about the
about the progress and management of
matters concerning
The objective the company and to enable them to give
incorporation, share
of the meeting their feedback on company issues and
allotments, contracts and
elect the company’s executives for the
prospective ventures of
forthcoming year.
the company, and so on.
Difference Between Annual General Meeting and Extraordinary
General Meeting:
Basis of Annual General Meeting Extraordinary General Meeting
Comparison (AGM) (EGM)
Meaning An Annual General Meeting An Extraordinary General Meeting
(AGM) is the general meeting (EGM) is any meeting other than
which must be held by the the AGM in which business
company every year, to relating to company's management
discuss various business are transacted.
matters.
Basis of Annual General Meeting Extraordinary General Meeting
Comparison (AGM) (EGM)
First meeting Must be held within 9 months No such requirement
of the end of the financial
year.
Business Ordinary business and special Special business only.
business (if any) is transacted.
Day and It can be held on any day It can be held on any day including
Time excluding national holiday, in national holiday, and any time
business hours only. during a day.
Penalty When meeting is not No penalty is prescribed as per law.
summoned within the
stipulated time, penalty is
levied.
Convened by Board Board, Board on requisition of
shareholders, requisitionist or
Tribunal.
Requisition of Meeting:
The demand of members to convene a meeting is called requisition. The requisition
must be in plenty. It shall set out the matters for the consideration of which the
meeting is to be called. It shall be signed by the requisitionists(member involve in
requisition). It must be deposited at the registered office of the company.
According to sub-section (2) of section 100, the board of directors is under
obligation to call extraordinary general meeting on the requisition made by the
following number of members:
In the case Member(s) holding on the date of receipt of the
of company requisition 10% or more of the paid up share
having capital carrying voting rights in regard to the
share subject matter of the resolution which it is
capital intended to be proposed
In the case of Member(s) holding on the date of receipt of the
company not requisition 10% or more of the voting power in
having share regard to the subject matter of the resolution
capital which it is intended to be proposed
Regarding the nature of the right of shareholders, it was held in Life Insurance
Corporation of India v. Escorts Ltd. [(1986) 59 Com Cases 548] that “every
shareholder of a company has the right, subject to statutorily prescribed procedural
and numerical requirements, to call an extraordinary general meeting in accordance
with the provisions of the Companies Act. He cannot be restrained from calling a
meeting and he is not bound to disclose the reasons for the resolutions proposed to
be moved at the meeting nor are the reasons for the resolutions subject to judicial
review.”
Requisites of a valid requisition : The requisitionists shall set out the
matters for the consideration of which the meeting is to be called on the
requisition. The requisition shall be signed by the requisitionists and sent to
the registered office of the company. The mode of service of the requisition
shall be in writing or through electronic mode at least clear 21 days prior to
the proposed date of such extraordinary general meeting.
Board to call extraordinary general meeting upon requisition : Sub-
section (4) of section 100 casts a duty on the board to call the extraordinary
general meeting within 21 days from the date of receipt of a valid
requisition. Such meeting shall be convened on a day not later than 45 days
from receipt of such requisition.
Right of requisitionists to call and convene the meeting: In case the board
fails to call the extraordinary general meeting within 21 days or convenes a
meeting later than 45 days from the receipt, the requisitionists may convene
and hold extraordinary general meeting within 3 months from the date of
requisition. As provided in explanation to rule 17 (2), such meeting needs to
be held at registered office or in the same city or town where registered
office is situated. Further, the meeting shall be convened on a working day.
It was held in Rathnavelusami Chettiar vs M.R.S. Manickavelu Chettiar
[AIR 1951 Mad 542] that where a meeting was called by the requisitionists
and the registered office is not made available to them for holding the
meeting, they may hold the meeting elsewhere.
Re-imbursement of expenses : Where the requisitionists call a meeting due
to failure of the board to call the meeting, reasonable expenses incurred by
the requisitionist in convening the meeting shall be reimbursed by the
company. The expenses so reimbursed shall be deducted from any fee or
other remuneration under section 197 payable directors who were in default.
Section 197 is not applicable to a private company. Hence, such expenses
may be deducted from any remuneration or other entitlements payable to the
directors.
