“I have to look out for the shareholder’s interests, and I’m the largest shareholder”[1] – Carl Icahn.
Carl Icahn, an American philanthropist, and businessman aptly uphold the interest of the shareholders through his quote, where his interests as a director correctly align with the part of the shareholders, thus gives him enough reason to uphold and prioritize the same. Holding up the interest of the shareholders regarding the benefit of a Company could be a significant step towards preventing mismanagement and could equally be a triggering point for an increase in productivity. The best possible way to hold up the shareholder’s interest is first to dig out and understand the underlying issues that affect their interest by conducting successive and effective meetings in accordance to the quorum so mentioned in the Companies Act, 2013, to work for their best part.
Definition of Meeting:
A meeting may be defined as the gathering, assembly, or the coming together of two or more persons for the transaction of any lawful business.[2]The term meeting clearly explains that the accumulation of two or more persons results in a meeting. Therefore, a single person cannot constitute a meeting even though he holds proxies of several other persons.[3] However, the company law provides an exception to such provisions, where one person alone could also constitute a valid meeting.
Section 97 and Section 98 of the Companies Act, 2013 states that when the Tribunal calls an appointment, and one member of the company is present in person or by proxy, such meeting shall be held as a valid one. In Re L. Opera Photographic Ltd., the court held that the presence of a member holding 51% of the share could attend the meeting, which shall be retained as valid and he shall have a single voting right with which he can remove the others from the directorship.[4]
Importance of Meetings:
A company, as we know, is a distinct legal entity, carries out all its affairs through the Board of Directors. The Board of Directors carries out their tasks within the purview of their powers so restricted by the Articles of Association (AOA) of the Company. Albeit the directors exercise certain powers and duties beyond the AOA only with the consent of the other members of the Company by passing a resolution in a general meeting. The shareholders of the Company often rectify the mistakes so committed by the board in the meetings, who are, in a way, the owners of the Company.
The meetings provide an opportunity for the shareholders to place their verdict on the decisions and steps taken by the board of directors, which could primarily affect their interest. Meetings enable the shareholders to know the ongoing proceedings of the Company and focus on some crucial issues like the prospects of the Company as also prospects of their investment.[5] There are various types of meetings held in a Company. Specific criteria are required to be fulfilled under the Companies Act, 2013 to
Kinds of Meetings:
Convening and conducting meetings are a crucial part of the business of a Company. However, the shareholders do not directly participate in the meetings or other affairs of the Company being remotely located, which is a similar issue in case of a partnership firm. Hence, the Board of Directors must furnish every particular of the meeting to the shareholders so that they could, if not actively, then passively participate in the meetings and discuss matters concerning the management and methods of conducting business affecting their interest. The meetings of the members of a Company could be divided into two categories:
1. General Meetings:
The term general meeting has not been defined in The Companies Act 2013. However, it could be described as any meeting, where the members of a Company, having a right to vote could attend. Any resolution passed in the general meetings is binding on all the members of the Company and even on the Company itself. All the members could attend and vote unless their voting rights are taken away by specific alterations in AOA and Memorandum of Associations (MOA). The General Meeting of a Company are of two kinds:
i. Annual General Meeting (AGM):
Section 96 of the Companies Act, 2013describes the annual general meeting. Every Company, whether private or public mandatorily requires to hold an annual general meeting of its members annually to transact its course of ordinary business. Such a meeting is known as the Annual General Meeting. Section 96(1) of the Companies Act 2013 requires that every Company other than One Person Company must, in each year must hold an annual general meeting and specify it as annual general meeting in the notices. The first annual general meeting must be held within 18 months from the date of the company incorporation. The interval between two annual general meetings if and when exceeds 18 months might constitute a default and result in a penalty.[6]
However, if the first annual general meeting is held within nine months from the date of closing of the first financial year of the Company and in any other cases within six months from the date of closing of the financial year, it shall not be necessary for the Company to hold an annual general meeting in the year of its incorporation.
The Registrar of Companies has the authority to extend the time of holding the annual general meeting. Although not the first AGM. The Registrar shall extend the time by a period not exceeding three months. Such an extension could allow a Company to hold an AGM beyond the calendar year. Otherwise, such extension is not provided.[7] The Central Government has no power to extend the AGM of the Company.
Section 96(2) of the Companies Act, 2013 states that the meeting should be held during the business hours, i.e., between 6 AM to 9 PM on a day which is not a National Holiday and it should be held at the registered office of the Company or at any place where the registered office is situated.[8]
However, the Central Government exempts a Company from the provision of Section 96(2). The Company is not bound to hold any general meeting till the first AGM. The AGM must be held within six months from the preparation of the balance sheet of the Company. A resolution may also be passed at a general meeting for the selection of time of the subsequent general meetings. There is a relaxation for the private companies which states that the venue of the general meeting for a private company may not be situated within the jurisdiction of the place where the registered office of the Company is located.
ii. Extraordinary General Meeting (EGM):
Section 100 of the Companies Act, 2013 enumerates the provisions concerning the extraordinary general meetings. All the general meetings of a Company other than the AGM and the statutory meetings are called the extraordinary general meetings.[9] The EGM is called either by the Board of Directors voluntarily on the ground of any urgent transaction, or it is called on the requisition of a specified number of members. Holders of at least one-tenth paid-up share capital should sign the requisition. But if a company does not have any share capital, the requisition must be signed by the members having one-tenth of the total voting power.[10]
The Company Law Board could also call the EGM. The meeting can be called by giving not less than 21 days’ notice in writing by the requisitionists, and the meeting must be held within 45 days from the date of requisition. However, the meeting could be held by providing an even shorter notice if consent is obtained from the members holding not less than 95 of such part of the paid-up share capital and in case of Companies with no share capital, support of members holding not less than 95% of the voting power.[11]The requisitionists are required to set out the matter for consideration for which the meeting has been called. The same shall be signed by the requisitionists and deposited at the registered office of the Company. No other issues could be discussed in the meeting except for the specified matter for which the EGM has been called off.
However, if the directors fail to hold the EGM within 45days from the date of the requisition, the requisitionists could call off the meeting and claim necessary reimbursement of the meeting expenses from the Company. The Company shall indemnify the requisitionists from the remuneration of the directors in default.[12]It is required for the requisitionists to hold the meeting not later than three months from the date of submission of the requisition at the registered office of the Company.[13]
Under Section 186 of the Companies Act, the Company Law Board may order a meeting to be called off, either voluntarily or by any application of the director of the Company to the Company Law Board. A petition has to be filed under Section 186 for the Company Law Board to call for a meeting.
2. Class Meetings:
Class meetings are held exclusively to pass resolutions that are binding only on the members of a class of shares. The member of that definite class alone could attend and vote at the meeting. The class meetings are held basically to obtain the consent of the concerned class members concerning the alteration of the rights of the class to which they belong as per the provisions of the MOA and AOA. Assents are also taken concerning any compromises or arrangements which could primarily affect the interest of the class members. As required by Section 48 of the Companies Act 2013, if a company desires to cancel the arrears of dividends on cumulative preference shares, it is necessary to call a meeting of such shareholders and pass a resolution.
However, the holders of not less than three-fourth of the issued shares of a particular class, to cancel the resolution, must communicate their dissent to the Tribunal within 21 days after the date on which the consent was given or resolution was passed.
3. Statutory Meetings:
A statutory meeting is held right after the incorporation of the Company. Every public company that is limited by shares or by guarantee must have a statutory meeting just after the Company is incorporated. A statutory meeting should be held between a minimum period of 1 month and a maximum period of 6 months after the business of the Company commences.
However, a meeting held before a period of one month cannot be considered as a statutory meeting. Private and government companies are not bound to hold any statutory meetings.
The Board of Directors is required to forward a statutory report to every member of the Company within 21 days before the meeting. The attending members could discuss the topics concerning the formation of the Company and the statutory report. However, no resolution is passed in a statutory meeting. The main objective of such meeting is to make the members familiar with the matters regarding the promotion and the formation of the Company.
The stakeholders receive particulars relating to the shares taken up, money received, contracts entered into and the preliminary expenses so incurred. This meeting provides an opportunity for the shareholders to discuss business ideas and methods as also the prospects of the Company. An adjourned meeting is conducted if the statutory meeting fails to meet a conclusion.
Section 433 of the Companies Act, 1956 states that a Company might meet the winding-up phase if it fails to submit a statutory report or fails to conduct a statutory meeting within a specified period. The court might order the Company to submit the statutory report and conduct a meeting by imposing a fine on the default persons, instead of winding up the Company.
Section 165(8) of the Companies Act, 1956 states that a statutory meeting could be adjourned from time to time. Only the unfinished business at the original meeting could be carried out in the adjourned meeting. The only difference is that in adjourned meetings, any resolutions weather was taken up before or after the last meeting could be passed. In contrast, such benefit is not applicable in case of a statutory meeting.
Section 165 of the Companies Act, 1956 concerning the provision of the statutory meetings and report, has been omitted in the Companies Act, 2013.
Requirements of a Valid Meeting:
A valid meeting must comply with three requirements:
1. Properly Constituted: Proper person must chair the meeting. The rules as to quorum must be observed as also the provisions of the articles and Acts must have adequately complied.
2. Properly Conducted: It means that the business at the meeting must be transacted appropriately, which shall comply with the Acts, articles and the general law.
3. Properly Convened: It means that proper notice of the meeting must be furnished by the authority, i.e., the Board of Directors to every person who is entitled to attend the meeting.[14]
4. Proper Authority: The appropriate authority for calling the meeting is the Board of Directors. However, if in the default of the directors, if the members of the Tribunal have requisitioned the meetings of shareholders, they shall be the proper authority and the meeting called by them will be valid.[15]
Conclusion
Meetings such as AGM, EGM, and class meetings play an essential role in protecting the rights and interests of the shareholders of a company. The majority control and fate of a company incline towards the shareholders. Thus, it is vital for the proper and successful conduct of these meetings to review the business of the Company as also its future objectives. Successful meetings of shareholders significantly afford such an opportunity to review. It is through these meetings where the shareholders exercise their right of re-electing and electing the directors of a company.
[1]https://www.quotetab.com/quotes/by-carl-icahn.
[2]Dr. N.V. Paranjape: The New Company Law (6th Ed.) p. 338.
[3] Per Lord Coleridge in Sharp v. Dawes, (1876) 2 QBD 26.
[4] 1989 BCLC 763 (Ch.D)
[5] Palmer: Company Law (20th Ed.) p. 455.
[6] Smedley v. Registrar of Companies, (1919) 1 KB 97.
[7] Dalmia Cement (India) Ltd. V. ROC, AIR 1954 Mad 276.
[8] A.K. Zacharca v. Magestic Kuries & Loans (P) Ltd., (1987) 62 Comp. Cas.865 (Ker).
[9] Clause 47 of Table A.
[10] Section 100 (2) of The Companies Act, 2013.
[11]Ball v. Metal Industries Ltd., 1957 SLT 124 (Scotland).
[12] Rathnavelusami v. MRS Manickavelu, AIR 1951 Mad 542.
[13] LIC v. Escorts Ltd., (1986) 1 SCC 264.
[14] Peter Buchman Ltd. & Macharg v. Mc Vey, (1955) AC 516.
[15]In Re Hay Craft Gold Reduction & Mining Co., (1900) 2 Ch.230.
This Article is Written by Amrapali Mukherjee, LL.M Student of The Queen Mary University of London.
