Introduction
Meetings have been an integral part of a company contributing towards the transparency and accountability in the procedures undertaken by a Company. Upholding the rights of the shareholders and other investors has always been one of the primary objectives of a Company; meetings in a Company have facilitated the pathway to attain these mandated objectives. Reviewing the policies, goals and workings of a Company is possible only through a valid meeting. Meetings in a Company include discussing or settling any business transactions, resolving any disputes or reaching a final decision relating to the appointment, retirement, re-appointment and re-election of directors or auditors. A unanimous decision of the members of a Company could fairly be communicated only through a successful valid meeting. In accordance with the demand and the nature of the business and other transactions undertaken by a Company, meetings are of diverse types which shall be discussed in length herein the on-going paragraphs.
Types of Meetings
Necessarily if we dive into the broad classification of the types of meetings in a company, they are of the following types, i.e., General Meetings, Class Meetings and Meetings of the Board of Directors.
1. General Meetings
Members of a Company who own the right to vote are entitled to attend the General Meetings. There is no such prescribed definition of the term General Meeting under the Companies Act, 2013. However, the procedure itself defines a lot about the binding nature of any resolution passed in the General Meetings upon the members as well as on the Company itself. Attendance of the members in the general meetings can only be curbed in the event of limitation of the voting rights of any class of members or in accordance with the MOA (Memorandum of Association) or in case the terms of issue of a class of shares of any members are limited. General Meetings can be further divided into Annual General Meetings and Extraordinary General Meetings.[1]
i. Annual General Meeting (AGM)
It is imperative for every Company whether public or private, other than the One Person Company, to hold at least one Annual General Meeting each year considering the benefit and the interest of its shareholders. The first AGM shall be conducted within nine months from the date of closing of the first financial year subsequent to which no other AGMs are required for the entire year of incorporation. However, the interval between two AGMs shall not exceed more than 15 months. The provisions relating to AGM have been provided under Section 96 of the Companies Act, 2013. AGMs are conducted for transacting the ordinary regular business of a Company. AGMs shall be held in addition to any other meetings in a Company for the year and the prior notice that shall be served should state clearly that the meeting is an AGM. The meeting must be conducted during the usual business hours on a day which is not a public holiday and at the registered office of the Company.
The annual general meeting could be called as a protective shield for the shareholders in a Company. The interest of the shareholders is the paramount concern when we consider a prospective destiny of a Company. AGM in a year provides the shareholders an opportunity to review the workings of a Company and consider the re-election of the Directors and the auditors. It is mandatory for the Directors in this meeting to present the annual accounts of the Company for the shareholders to consider the same. Dividends are stated in the meeting. It is open for the shareholders to put up any questions relating to the accounts and business affairs of the Company that can directly or indirectly affect the interest they hold in the Company. The nature of the business to be transacted in an AGM has been guided by the AOA (Articles of Association) which is known as ordinary business. However, any other business affairs other than ordinary business if and when put up in an AGM are considered as the special business.
ii. Extraordinary General Meeting (EGM)
Any other meetings other than the AGM and the statutory meetings can be considered as the Extraordinary General Meetings. They are conducted by the Board of Directors to transact any special or urgent matter which cannot be kept on a stay until the next AGM and also via the requisition of a specified number of members. If the EGM has been called via the requisition of a specified number of members, the requisition must consist of the signature of at least the holders of the one-tenth share capital of a Company that owns the voting rights. However, if the Company lacks share capital, it shall be signed by members holding one-tenth voting rights.
Subsequent to the deposit of the requisition at the registered office of the Company, the Directors must convene the EGM within 21 days and it is required to be conducted within 45 days from the date of requisition. In the event the Directors fail to convene the meeting within 45 days from the date of requisition, the requisitionists have the absolute right to proceed to convene the meeting on their own accord. It is to be noted that under Section 100 if the Directors fail to convene an EGM in accordance with the requisition, it shall not be a punishable offence, unlike the AGM which when not conducted either by the members on their own accord or in accordance to the orders of the Tribunal shall be an offence punishable with fine. Under Section 99 of the Act, the requisitionists are empowered to utilise their alternative means to conduct an EGM in the event of the failure of the Directors and cannot approach the Tribunal under Section 98 to seek an order to call the EGM unless they have availed their right provided under Section 99. Unlike an AGM, an EGM doesn’t need to be held at the registered office of a Company. Any resolutions passed in an EGM held at any other place other than its registered office shall be treated as equally valid.[2]
2. Class Meetings
Apart from the General Meetings, there are certain meetings which are conducted in the matters prescribed under AOA that are subject to consideration of a definite class of shareholders since those matters concern the exclusive interest of that particular class and therefore the decision of such class members shall be considered as the paramount in the meetings. Such meetings are known as the Class Meetings. For example, when there is a proposal to alter, vary, modify or bring about a significant change in the rights and interests of the preference shareholders, it is mandatory to conduct a class meeting comprising the preference shareholders of a Company only to consider their decision to that context. Class Meetings are generally meetings of the creditors and meetings of the debenture holders which have been discussed in detail in the on-going paragraphs.
i. Meetings of the Creditors
These meetings cannot be typically called company meetings as they are called by the creditors of a Company; when a Company is required to seek approval of the creditors in matters of any particular arrangement, reconstruction, amalgamation or winding up or to enter into any compromise with a particular class of creditors of a Company wherein the inherent rights or interest of the creditors shall substantially be affected, the meetings with such class of creditors are conducted.
ii. Meeting of Debenture-holders
A Company may call a meeting with the debenture-holders wherein there is an amendment of the conditions of the security in the debenture trust deed or a substantial variation in the rights and interest of the debenture-holders. An amendment or change in the rate of interest of the existing debentures or in the matter of the issuance of new debentures, the approval and consent of the debenture-holders are sought through the meeting of debenture-holders. The guidelines and regulations relating to the procedure of convening a meeting of the debenture-holders are often provided in the respective debenture trust deeds.
3. Meetings of the Board of Directors
Board meetings should be held at least once every 3 months and in a year at least 4 meetings are expected. The Board of Directors are comprised of all the directors of a Company collectively. The provisions related to the meetings of the Board of Directors are provided under Section 173 of the Companies Act 2013. The notice of the Board meeting has to be served to every director of the Company who is residing in India and shall be in writing. However, the notice need not convey the specific agenda of the meeting. In accordance with Section 179(3) of the Companies Act 2013, the resolutions passed at the Board meetings empower the Board of Directors with the following:
- To issue debentures and other securities whether in India or outside and also to authorise the buy-back of securities.
- To borrow money and to invest the funds of the Company as well as to make calls towards the shareholders relating to the money that is unpaid on their part of shares.
- To give effect to the amalgamation, merger and reconstruction of a Company and to diversify its business.
- To approve and grant financial statements, loans, securities in respect of such loans and also the Board’s reports.[3]
Power of Tribunal to Convene a Meeting
As per the provisions provided under Section 98 of the Companies Act 2013, other than an AGM, when the holding of a meeting becomes impracticable for a Company; the Company in such an event has the right to apply to the Tribunal to step into the matter and convene a meeting. The tribunal in turn either on its own accord or on the application of a director or member of a Company orders a meeting which then has to be conducted in accordance with the procedure laid down by the Tribunal. The term “impracticable” here has to be provided a considerable analysis which shall be interpreted in the sense bestowed while construing the provision of Section 98; which shall necessarily mean the impossibility in convening a useful meeting peacefully. In the case of Indian Spg Mills Ltd. v. Lt. General Madan[4], in a Company, a person devoid of the qualification shares of a Director was appointed as the Chairman maliciously and a few handcount directors had transferred their shares to him in order to portray that the requirements were met. A group of shareholders alleged such an appointment was invalid and brought about a suit against such a malicious appointment. In such an agitated scenario it was impracticable to hold a company meeting and the Tribunal had to intervene in accordance with the provision mentioned under Section 98 of the Act.
Conclusion
A Company being an artificial juristic person cannot function on its own and can only express its consent through a resolution passed in properly conducted valid meetings by its members and Directors. For a meeting to be valid has to qualify certain conditions which includes calling the meeting by an appropriate authority; and serving a prior notice to all the members of a Company stating the venue, date and contents of the meeting which shall include the mention of whether a special or a general business transaction to be held in the meeting; explanatory statements in the event of special business transactions; presence of quorum has to be ensured which shall mean the attendance of minimum number of members in the meeting.
However, this list is general and not conclusive. Having said that, it is necessary to mention that each and every meeting in a Company and its requirements to constitute a valid meeting shall differ substantially in accordance with the nature of the business and depending upon the desired outcome of the meeting. Henceforth, it is immaterial to form a straightjacket checklist of the features required for a valid meeting. Nevertheless, the essence of a successful valid meeting could definitely have an everlasting positive and prospective impact in attaining the objectives of a Company as also in safeguarding the rights and interests of its shareholders and other institutional investors.
[1] Sikkim Bank Ltd. v. RS Chowdhury, (2000) 102 Comp Cas 187 (Cal).
[2]Ball v. Metal Industries Ltd., 1957 SLT 124 (Scotland).
[3] Companies Act, 2013.
[4] AIR 1953 Cal 355: 56 CWN 398.
