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COMPANY MEETINGS

Table of Contents

QUESTION BANK

Q.1 Explain various kinds of meeting and requisites of valid meeting.

Q.2 What are the various meetings of company? Discuss importance of Annual General Meeting.

Q.3 Explain “Extra Ordinary” general meeting.

Q.4 What are the statutes rules regarding the meetings of company?

5 “Annual General Meeting is an important institution for the protection of the shareholders of a company”. Evaluate.

SHORT NOTES

1) Extra-ordinary general meeting

2) Special resolution

3) General resolution

I] INTRODUCTION:-

The term meeting means discussion rather than deliberations of any topic or subject by the participation of several persons. Being an artificial person, a company acts through shareholders and directors. Shareholders, in general meetings, pass resolutions, and directors implement them. However, the directors, in their meetings, may also pass resolutions on the matters they authorised for the better functioning of the company. In other words, the shareholders act as general policy makers and directors as implementing machinery. These policies and the ways of implementing them are decided in meetings. Therefore, meetings of shareholders and directors are very important for the proper functioning of the company. In addition, meetings for creditors and debenture holders must be conducted when their interest is at stake. The present company law recognises various types of meetings and certain requisites.

II] KINDS OF MEETINGS:-

The members of the company express their wishes at the meeting. Meetings may be divided into the following kinds-

A) Shareholders Meetings:-

Meetings of shareholders are of the following kinds, viz.

1) Annual General Meeting[1] (S. 96):-

(1) Every company (except one man company) shall each year hold an Annual General Meeting specified as such in the notice, convening it, and not more than fifteen months shall elapse between one annual General Meeting and the next. Thus, the company is bound to call at least one annual general meeting once every fifteen months.

(2) The first annual general meeting shall be held within nine months from the closing of the company’s first financial year and, in any other case (regular annual general meeting), within six months from the date of closing of the financial year.

(3) If a company holds its first annual general meeting as aforesaid, it shall not be necessary for the company to hold any other annual general meeting in the year. This means that the present Company Act does not require the company to hold a statutory meeting as it did in the previous Companies Act of 1956.

(4) The Registrar may, for any special reason, extend the time within which any annual general meeting (other than the first annual general meeting) shall be held by a period not exceeding three months.

(5) Every annual general meeting shall be called during business hours, that is, between 9 a.m. and 6 p.m. on any day that is not a National Holliday and shall be held either at the registered office of the company or at some other place within the city, town or village in which the registered office of the company is situated. However, the Central Government may exempt any company from holding meetings within business hours or registered office as discussed above, subject to such conditions as it may impose.

a) Power of Tribunal[2] to call an annual general meeting of members (S. 97):-

Suppose any default is made in holding the annual general meeting of a company as discussed above. In that case, the Tribunal may, on the application of any member of the company, call or direct the calling of an annual general meeting of the company and give such ancillary or consequential directions as the Tribunal thinks expedient.

b) Punishment for default in complying with Meetings of the Company (S. 99):-

Suppose a default is made in holding an annual general meeting or in complying with Tribunals’ directions. In that case, the company and every officer of the company who is in default shall be punishable with a fine up to one lakh rupees and, in the case of continuing default, with a further fine that may extend to five thousand rupees for every day during which such default continues.

c) Importance of annual general meeting and the business to be transacted in it:-

The annual general meeting is the statutory protection of the shareholders. The manager should hold it whether he wants it or not. The annual general meeting is an opportunity for the shareholders to participate in matters that affect the company’s destiny. It also provides an opportunity for shareholders to move their own resolution. The businesses to be transacted in the meetings are as under-

(1) To consider balance-sheet, profit and loss account and auditor’s report.

(2) To consider the annual report prepared by the board of directors, with respect to–

(a) a state of the company’s affairs.

(b) the amount, if any, which it proposes to carry to any reserves in the balance- sheet.

(3) To declare dividends.

(4) The appointment of directors in place of those who are retiring.

(5) The appointment and fixing of the remuneration of the auditor.

It is emphasised that the business of the annual general meeting need not be restricted to the ordinary five matters specified above. Directors have a clear statutory duty to call a meeting.

2) Extraordinary General Meeting (S. 100):-

The annual general meeting is known as the “ordinary meeting”, and a meeting other than the annual general meeting of the members is known as the ‘extraordinary general meeting’.

The Board of Directors, whenever it deems fit (suo-motu) or on requisition (demand) of its members, call an extraordinary general meeting of the company (shareholders).

a) Who shall requisition?

(a) In case of a company having a share capital, -such several members who hold (on the date of the receipt of the requisition) not less than one-tenth of such of the paid-up share capital of the company as on that date carries the right of voting.

(b) In case of a company not having a share capital, such several members who have (on the date of receipt of the requisition) not less than one-tenth of the total voting power of all the members having on the said date a right of vote.

b) Matters for consideration in the meeting:-

The requisition made above shall set out the matters for consideration regarding which meeting is to be called. It shall be signed by the requisitionists and sent to the company’s registered office.

c) Meeting by Requisitionists[3] themselves:-

Suppose the Board of Directors does not, within twenty-one days from receipt of a valid requisition, proceed to call a meeting for the consideration of that matter on a day not later than forty-five days from the receipt of such requisition. In that case, the meeting may be called and held by the requisitionists within three months from the date of the requisition.

Such a meeting shall be called and held in the same manner in which the meeting is called and held by the Board (of Directors).

The company shall reimburse any reasonable expenses incurred by the requisitionists in calling a meeting, and the sum so paid shall be deducted from any fee or other remuneration payable to such of the directors who were in default in calling the meeting.

In Life Insurance Corp. Ltd. V/s Escorts Ltd[4]

Held that -Every company shareholder has the right (subject to statutorily prescribed procedural and numeral requirements) to call an extraordinary general meeting per the provisions of the Companies Act.

The issue of notice for calling an extraordinary general meeting is a statutory right of a holder of shares.

d) Power of Tribunal to call Extra-ordinary General Meeting (S. 98):-

If, for any reason, it is impracticable to call an extraordinary general meeting, the tribunal, on an application or suo motu, may call one other than the annual general meeting. An extraordinary meeting called by the tribunal’s order shall be deemed a meeting for all purposes.

3) Requisites of valid meeting:-

Following are the requisites that are essential for a meeting to be valid.

(a) Notice (S[5]. 101):-

Proper notice of the meeting should be given to all members, the legal representatives of deceased members, the assignee of insolvent members, the company auditor, and every director of the company.

Deliberate omission to give notice to a single member may invalidate the meeting, although accidental omission is not fatal or serious.

The notice should be given twenty-one days before the date of the meeting. Twenty-one days are computed from the date of receipt of notice by the member.

A general meeting may be called after giving a shorter notice if consent is given in writing or by electronic mode by not less than ninety-five per cent of members entitled to vote at such meeting.

b) Contents of notice:-

Every notice of the meeting shall specify the place, date, and time of the meeting and contain a statement of business to be transacted.

c) Statement to be annexed to the notice (S. 102):-

An explanatory statement will be annexed to the notice regarding the business proposed to be transacted in the meeting. Businesses to be transacted in the meeting are classified into-

(i) General Business:-

At the annual general meeting, the business of considering accounts and the director’s report, declaring dividends, and appointing directors and auditors is called general business.

(ii) Special business:-

Any other business at an annual general meeting and all at an extraordinary general meeting are considered special.

d) Quorum for a meeting (S. 103):-

Quorum means a minimum number of members that should be present at the meeting. Unless the activities of the company provide for a larger number,

In the case of a Public Company-

(i) five members personally present if the number of members as of the date of the meeting is not more than one thousand;

(ii) fifteen members personally present if the number of members as of the date of the meeting is more than one thousand but up to five thousand;

(iii) Thirty members will be personally present if the number of members as of the date of the meeting exceeds five thousand.

In the case of a private company, two members personally present shall be the quorum for a meeting of the company.

Suppose the quorum is not present within half an hour of the time appointed to hold a company meeting. In that case, the meeting shall be adjourned to the same day in the next week at the same time and place or to such other date and such other time and place as the Board may determine, or the meeting, if called by requisitionists under S. 100, shall be cancelled.

e) Chairman of the meeting (S. 104):-

The chairman of the meeting may be appointed in accordance with the provisions of the Company’s Articles. If the articles do not provide otherwise, the members personally present at the meeting shall elect one of themselves to be the chairman of the meeting by show of hands.

If a poll is demanded on the election of the Chairman, it shall be taken forthwith in accordance with the provisions of this Act. The chairman elected on a show of hands shall continue to be the Chairman of the meeting until some other person is elected as Chairman as a result of the poll, and such other person shall be chairman for the rest of the meeting.

f) Proxies[6] (S. 105):-

A company member is entitled to appoint another person as a proxy to attend and vote at the meeting on his behalf, but the proxy does not have the right to speak at such meeting and is not entitled to vote except on a poll.

If a company does not have share capital, unless the company’s articles provide it, a proxy can only vote on the poll and not by show of hands.

The Central Government may prescribe a class or classes of companies whose members shall not be entitled to appoint another person as a proxy; the person appointed a proxy shall act on behalf of such member or number of members not exceeding fifty and such number of shares as may be prescribed.

B) Directors Meetings:-

The company’s management is vested in the Board of Directors collectively, and the directors, as a general rule, shall act at the Board’s meeting.

1) Number of meetings (S. 173):-

Every company shall hold the first meeting of the Board of Directors within thirty days of the date of its incorporation and thereafter hold a minimum of four meetings of the Board of Directors every year in such a manner that not more than one hundred and twenty days shall intervene between two consecutive meetings of the Board. However, by notification, the Central Government may exempt or modify the above conditions relating to any class or description of companies.

Directors may participate in a board meeting in person or through videoconferencing or other audiovisual means.

However, a One-Person Company (having more than one director), a small company, and a dormant company shall be deemed to have complied with the provisions of this section if at least one meeting of the Board of Directors has been conducted in each half of a calendar year. The gap between the two meetings is not less than ninety days.

2) Notice of Meeting and mode of its service (S. 173 (3)):-

A meeting of the Board shall be called by giving not less than seven days notice in writing to every director at his address registered with the company, and such notice shall be sent by hand delivery, by post or by electronic means.

A meeting of the Board may be called at shorter notice to transact urgent business, provided that at least one independent director, if any, is present at the meeting.

Further, provided that in case of the absence of an independent director from such a meeting, the decisions taken at such meeting shall be circulated to all the directors and shall be final only upon ratification by at least one independent director (if any).

3) Quorum[7] for a meeting of the Board (S. 174):-

The quorum for a company’s Board of Directors meeting shall be one-third of its total strength or two directors, whichever is higher. The directors’ participation by videoconferencing or other audiovisual means shall also be counted for the purpose of quorum.

Where a meeting of the Board could not be held for want of quorum, then, unless the articles of company otherwise provide, the meeting shall automatically stand adjourned to the same day at the same time and place in the next week, or if that day is a national holiday, till the next succeeding day which is not a national holiday, at the same time and place.

In Needle Industries (India) Ltd. V/s Needle Industries Newly (India) Holdings Ltd[8]

ApexCourt explained that a quorum for a meeting of the Board of Directors means a quorum of directors who are competent to transact and vote on the business before the board.

4) Chairman of the meeting (S. 104):-

The provisions for the appointment of a chairman of the Board of the meetings are not provided separately from the appointment of the chairman discussed under S. 104 above.

C) Creditors Meeting (S. 230):-

A creditors meeting is called in the following circumstances-

The tribunal may, on an application of the company or of any creditor or member of the company (in case of a company being wound up), or the liquidator may call the meeting by order to be held and conducted in such a manner as the tribunal directs. However, the meeting of creditors may be convened for the following purposes-

(1) To enter into an arrangement or compromise between the company and its creditors (or any class of them) or between a company and its members (or any class of them).

(2) To seek approval of creditors for amalgamation or reconstruction of the company[9].

D) Debenture Holders Meeting[10]:-

A company issuing debentures may provide for holding a debenture holder meeting. In the Debenture Holders meeting, the following matters are considered viz.

(a) Any variation in the conditions of security, or

(b) Any alteration in their rights, or

(d) Issuing of new debentures.

The Debenture Trust Deed normally specifies all the matters concerning the holding, conduct, and proceedings of the meeting of the debenture holders. The present Companies Act and its rules empower the Debenture Trustee to hold a meeting of the Debenture Holders in the above circumstances.

The provisions relating to meetings in S. 101 to 104 and S. 106 to 107 also apply to Debenture Holders meetings.

NOTE

1) RESOLUTIONS[11].

The company’s fundamental changes and decisions are made by resolutions passed by its members at their annual meeting.

According to Palmer, “any proposal put to the general meeting is not truly a resolution until it has been passed by it.”

The Companies Act recognises two types of resolutions, namely-

(i) Ordinary Resolution / General Resolution[12] (S. 114):-

A resolution passed by a simple majority is called an ordinary resolution. A resolution is regarded as an ordinary resolution when the votes in favour of it at a general company meeting exceed the votes cast against the resolution. The present Companies Act 2013 requires that a notice to this effect should be given to pass the ordinary resolution. The resolution is required to be passed by the votes cast, (i) by show of hands, (ii) electronically, (iii) on a poll, or (iv) through postal ballot, by voter personally or through proxy. In case of equal voting, the chairman of the meeting may give the casting vote[13]. Usually, ordinary resolutions are passed for the following purposes, viz.

(a) to declare dividends.

(b) to pass the annual accounts.

(d) to decide remuneration.

(e) to pass the auditor’s report.

(f) To pass any other matter for which no special resolution is required.

(ii) Special Resolution[14] (S. 115):-

A resolution is said to be special, which requires the support of three-fourths (three times more) of the majority of voters present and entitled to vote at a meeting. A resolution shall be special when-

(a) The intention to propose the resolution as a special resolution has been duly specified in the notice calling the general meeting or other intimation given to the members of the resolution and

(b) the notice required under this Act has been duly given and

Generally, a special resolution is required for

(i) Alteration in the object clause of the companies’ memorandum.

(ii) Change the place of the companies’ registered offices from one state to another.

(iii) Changing the company’s name.

(iv) Altering the articles of association of the company.

(v) Proposal to pay the interest out of capital.

(vi) Proposing the reduction of the company’s share capital.

(vii) Creating reserve liability.

(viii) Keeping registers and returns at a place other than the company’s registered office.

(ix) Making application to the Central Government to appoint investigators to investigate into affairs of the company.

(x) Making a petition for winding- up by the court.

(xi) Voluntary winding up of the company.

(xii) Further issue of share to non-members.

(xiii) Appointment of company auditors.

2) Minutes[15] (S. 118):-

(a) The meetings, manner and requirements of keeping minutes:-

Every company shall cause minutes of the proceedings-

of every general meeting of any class of shareholders or creditors, and
of every resolution passed by postal ballot and

(iii) of every meeting of its Board of Directors or every committee of the Board,

(iv) to be prepared and signed in such manner as may be prescribed, and

(v) kept within thirty days of the conclusion of every such meeting concerned or passing of a resolution by postal ballot

(vi) in books kept for that purpose with their pages consecutively numbered.

The minutes of each meeting shall contain a fair and correct summary of the proceedings thereat. Similarly, all appointments made at any of the aforementioned meetings shall be included in the meeting minutes.

Every company shall observe secretarial standards during general and board meetings.

(b) Minutes of the Board meeting:-

In case of a meeting of the Board of Directors or a committee of the Board, the minutes shall also contain-

the names of the directors present at the meeting, and
in the case of each resolution passed at the meeting, the names of the directors, if any, dissenting from or not concurring with the resolution.

(c) Matter not to be included in minutes:-

The matter which, in the opinion of the Chairman, is defamatory of any person, irrelevant or immaterial to the proceeding, or detrimental to the interest of the company may not be included in the minutes.

The Chairman’s discretion is absolute to the inclusion or non-inclusion of any matter in the minutes.

(d) Evidentiary value of the minutes:-

The minutes kept in accordance with the provisions of this section shall be evidence of the proceedings recorded therein. Moreover, until the contrary is proved, the meeting shall be deemed to have been duly called and held, and all proceedings are presumed to have duly taken place. The resolutions passed and appointments made are presumed valid.

(e) Penalty for default:-

If any default is made with the provisions of this section in respect of the conduct of any meeting, the company shall be liable to a penalty of twenty-five thousand rupees, and every officer of the company who is in default shall be liable to a penalty of five thousand rupees.

Moreover, suppose any person is found guilty of tampering with the minutes of the meeting proceedings. In that case, he shall be punishable with imprisonment up to two years and with a fine of not less than twenty-five thousand rupees, which may extend to one lakh rupees.

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[1] वार्षिक सर्वसाधारण सभा [वार्षिक आम बैठक]

[2] S. 2 (90) defines the term “Tribunal” means the National Company Law Tribunal constituted under S. 408.

[3] मागणी करणारांनी बोलाववयाची सभा [मांगकर्ताओं द्वारा बैठक]

[4] (AIR 1986 S.C.1370)

[5] ‘S’ denotes ‘Section’ and ‘Ss’ denotes ‘Sections’.

[6] मतदानासाठी प्रतिनिधी [मतदान के लिए प्रतिनिधि]

[7] किमान अपस्थिती [कार्यसाधक संख्या]

[8] (A.I.R. 1981, S.C.1298)

[9] S. 306 is omitted by the amendment in 2016.

[10] कर्जेराखेधारकांची सभा [ऋणपत्र धारकों की बैठक]

[11] ठराव [प्रस्ताव]

[12] सर्वसाधारण प्रस्ताव [साधारण प्रस्ताव / सामान्य प्रस्ताव]

[13] निर्णायक मत

[14] विशिष्ठ प्रस्ताव [विशेष संकल्प]

[15] बैठक का कार्यवृत्त