Members’ meetings | Company Law - CLAT PG PDF Download

Annual General Meeting (Section 96)

Every year, companies hold an Annual General Meeting (AGM) to allow members to participate in important decisions. This is a legal requirement for most companies, except for one-person companies.

Timeline for AGMs:

• First General Meeting: Must be held within nine months after the financial year ends. No AGM is required in the year of incorporation.
• Subsequent AGMs: Should occur within six months of the financial year’s end. However, with permission from the Registrar of Companies, this period can be extended by up to three months.

Key Points:

• Companies must hold at least one AGM each year, except for one-person companies.
• The first AGM has a strict deadline, while later AGMs have some flexibility.

Date, Time, and Venue for AGM

• The Central Government has the authority to exempt certain companies from the standard requirements for setting the date, time, and venue for the Annual General Meeting (AGM).
• This exemption is granted subject to specific conditions that the Central Government may impose.

Default in Holding Annual General Meeting

• If a company fails to hold its annual general meeting (AGM) as required, the Tribunal has the authority to call such a meeting upon receiving an application from any member of the company.
• The Tribunal can even order the holding of a one-member meeting if necessary.
• These meetings, called by the Tribunal, will be considered as valid AGMs under the provisions of the Act.
• In case of default, the company and every officer responsible for the default may face penalties as prescribed by law.

Business to be Transacted at an Annual General Meeting (Section 102)

• The business conducted at an annual general meeting (AGM) is referred to as ordinary business, which is why a general meeting is sometimes called an ordinary meeting.
• Items of ordinary business include:
• Consideration of Financial Statements: Reviewing the company’s financial statements, board reports, and auditor’s reports.
• Declaring Dividends: Deciding on the distribution of profits to shareholders.
• Appointment of Directors: Selecting individuals to serve on the company’s board of directors.
• Appointment and Salary Fixation of Auditors: Choosing auditors for the company and determining their remuneration.

Extra-Ordinary General Meeting (Section 100)

• Any general meeting convened and held in a company, other than the annual general meeting (AGM), is classified as an extraordinary general meeting.
• The business conducted at an extraordinary general meeting is referred to as special business, which encompasses all activities except for ordinary business.
• The following diagram illustrates who has the authority to call an extraordinary general meeting:

Authority of Shareholders to Call a General Meeting

Shareholders holding at least one-tenth of the paid-up share capital or voting power can requisition a general meeting. They must sign the matters to be addressed. The Board must call the meeting within 21 days, not exceeding 45 days from the requisition.

Deadlines and Reimbursement

• If the Board fails to meet these deadlines, the requisitioning shareholders can call the meeting themselves within 3 months. The company must reimburse their reasonable expenses by deducting from the fees of defaulting directors.

Right to Call a Meeting

• In L.I.C. of India v. Escorts Ltd, the Supreme Court affirmed that every shareholder has the right to requisition an extraordinary general meeting as per the Act.
• In Rathnavelu Chettiar v. M. Chettiar, shareholders requisitioned a meeting to remove the Managing Director. When directors failed to call the meeting on time, the shareholders did so themselves. Despite the registered office being locked on the meeting day, the court deemed the meeting valid.

Tribunal's Authority to Convene Meetings

• The Tribunal can order the convening of a meeting (other than an annual general meeting) under certain circumstances.
• It can act on its own motion or upon application by any director or members with voting rights.
• The Tribunal may give directions for conducting the meeting, including allowing one-member meetings in person or through proxy (as per Section 98).

Notice of the Meeting (Section 101)

• A notice is required to be given to every member of the company or to his legal representative (in case of a deceased member), every director, and auditor of the company.
• The notice must be given at least 21 clear days before the meeting, either in writing or through electronic means.
• The 21 days’ notice requirement can be waived if at least 95 percent of the members voting at the meeting agree to a shorter notice.
• The notice must specify the date,time, and venue of the meeting, along with the statement of business to be dealt with.
• Failure to send notices inadvertently or non-receipt by any member does not affect the validity of the meeting.

Quorum (Section 103)

For holding a valid meeting, a minimum requisite number of members must attend the meeting to transact the business, which constitutes quorum of the meeting. Following charts, provides at a glance, the quorum required to be present at general meetings:

Adjournment of a Meeting

• If the required number of members is not present within half an hour of the scheduled meeting time, the meeting is adjourned to the same day and time the following week, or as decided by the Board.
• The only exception is when the meeting is called by requisitionists; in that case, the meeting is cancelled instead of being adjourned.
• For regular cases, members present within half an hour of the adjourned meeting constitute the quorum.

Chairman of a Meeting (Section 104)

• A chairman is elected by the members present at the meeting through a show of hands to ensure orderly conduct.
• If a poll is demanded for electing a chairman, the provisions of the Act apply, and the previous chairman continues unless a new one is appointed.

Proxies (Section 105)

• Members entitled to attend and vote at a meeting can participate in the decision-making process by voting in person or through a duly appointed proxy.
• A proxy is a person appointed by a member to attend and vote at the meeting on their behalf. However, the proxy does not have the right to speak on behalf of the member and can only vote in case of a voting by poll.
• Section 105 of the Act outlines the provisions for appointing a proxy. A member can revoke their proxy by giving notice in writing.
• A member can appoint multiple proxies for the same meeting if they hold different shares of the company. However, if the member appoints more than one proxy for the same bunch of shares, all proxies will be jointly and severally liable.

Voting at a Meeting (Section 106)

• Members can participate in the decision-making process of the company by voting at meetings. The right to vote can only be restricted by the company's articles.
• Voting by show of hands is the default method unless a poll is requested or electronic voting occurs. The chairman's declaration and minutes of the meeting record the voting outcome.

Voting by Show of Hands (Section 107)

• Voting by show of hands is the default method for passing resolutions at general meetings unless a poll is requested or electronic voting is used.
• The chairman's declaration and minutes of the meeting record the outcome of the voting.

Voting through Electronic Means (Section 108)

• The Central Government may prescribe rules for certain classes of companies regarding electronic voting by members.
• These rules outline the manner in which members can vote electronically.

Demand for a Poll (Section 109)

• The chairman can order a poll or it can be demanded by a prescribed number of members.
• When a poll is conducted, the chairman requires assistance for scrutinizing votes and preparing a report according to the rules.
• The chairman has the authority to regulate the poll as per the rules.

Postal Ballot (Section 110)

• The Central Government may declare certain business items to be dealt with through postal ballot, excluding ordinary business items.
• A resolution passed by the required majority through postal ballot is considered passed at a duly convened general meeting.

Ordinary and Special Resolution (Section 114)

• Decisions in a company are made by passing resolutions, which can be ordinary, special, or requiring special notice, depending on the nature of the decision.
• An ordinary resolution is passed when the votes in favor exceed the votes against. Members can vote in person or through proxy, and the chairman has a casting vote in case of a tie.
• A special resolution is passed when the notice specifies it as such, requiring votes in favor to be three times those against. Members can vote in person or through proxy.

Resolutions Requiring Special Notice

According to Section 115 of the Companies Act, 2013, certain resolutions need special notice. This notice must be brought by members holding:

• At least 1% of the total voting power for companies without share capital.
• Shares with an aggregate paid-up value not exceeding 5 lakh rupees for companies with share capital.

Rule 23 provides details on the timing and method for sending such special notices.

Minutes of the Meeting

• Companies must maintain records of every meeting's proceedings, known as minutes of the meeting.
• These minutes should be prepared according to the provisions of the Companies Act and Secretarial Standards.
• Minutes should be recorded succinctly, including details like new appointments.
• If prepared on loose sheets, minutes must be signed by the Chairman within 30 days of the meeting.
• The minute book for different types of meetings (e.g., general meetings, creditors' meetings) should be kept separately.
• Minutes have evidentiary value for the proceedings mentioned therein.