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Total Number of Subscribers: 1626 |
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Date: 24th April 2010 |
Compiled by: M Sathya Kumar |
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INTRODUCTION A company is an
association of several persons. Decisions are made according to the view of
the majority. Various matters have to be discussed and decided upon. These
discussions take place at the various meetings, which take place between members
and between the directors. Needless to say, the importance of meetings cannot
be under-emphasized in case of companies. The Companies Act 1956
contains several provisions regarding meetings. The management of the company
is necessarily left to the discretion of the directors. However, the ultimate
control of the actions of the board of directors is vested in the members or
the shareholders of the company, and from time to time they must meet to
ratify, or express their disapproval of the director’s past conduct and
to consider their future plans. The members express their will at general
meetings by passing resolutions. MEETINGS Shortly after a
public company is formed, a statutory meeting is held. This is the first
general meeting of the company. Then each year an annual general meeting
(AGM) is summoned to consider the routine matters relating to the report of
the directors, appointment of directors and auditors, accounts and
declaration of dividends. In addition, occasion may arise when it is
necessary to consult the members on some urgent and unusual matter, which
justifies the summoning the extraordinary general meeting. These meeting are
called general meetings of the company as these are meeting of all members of
the company. STATUTORY MEETING Every company
limited by shares and every company limited by guarantee and having a share
capital will within a period of not less than one month or more than six
months from the date at which the company is entitled to commence business,
hold a general meeting. This is the first meeting of the shareholder of the
public company and held once in a lifetime of a company. STATUTORY REPORT The board of
directors shall, at least 21 days before the day on which the meeting is to be
held, forward a report called statutory report to every member of the
company. CONTENTS OF THE
STATUTORY REPORT The statutory report
will contain information relating to total shares allotted, cash received,
abstract of recipe and payment, directors and auditors, particular of any
contract which is to be submitted to the meeting for its approval or
modification, underwriting contracts, arrear on calls, commission and
brokerage, etc. The Companies Act 1956, s.165 A copy of the report
is to be sent to the registrar for registration forthwith after copies
thereof has been sent to the members of the company. OBJECT OF THE
MEETING AND THE REPORT The object of the
statutory meeting and forwarding statutory report to the member is to put the
members of the company in the possession of all important facts relating to
the company, what shares have been taken up, what money received, what
contracts entered into and what sums spent on the preliminary expenses etc.
and to provide the members an opportunity of the meeting and discussing the
management, methods and prospects of the company also to approve the
modification of the terms of contract named in the prospectus. A private
company and a company limited by guarantee and not having a share capital
need not hold a statutory meeting. ANNUAL GENERAL
MEETING AGM must be held by
every type of company, public or private, limited by shares or by guarantee,
with or without share capital or unlimited company, once a year. Every
company must in each year hold an AGM. Not more than 15 months must elapse
between two AGMs. However, a company may hold its first AGM within 18 months
from the date of its incorporation. In such a case, it need not hold any AGM
the year of its incorporation as well as in the following year only. The
Companies Act , 1956, ss. 166 and 167 3 Park vs. Lawten, (1911) K.B 588. In
the case there is any difficulty in holding any AGM (except the first annual
meeting), the registrar may, for any special reasons shown, grant an extension
of time for holding the meeting by a period not exceeding three months
provided the application for the
purpose is made before the due date of the AGM 4. However, generally delay in
the completion of the audit of the annual accounts of the company is not treated
as ‘special reason’ for granting extension of time for holding
its AGM. Generally, in such circumstances, an AGM is convened and held at the
proper time. All matters other than the accounts are discussed. All other
resolutions are passed and the meeting is adjourned to a later date for
discussing the final accounts of the company. However, the adjourned meeting
must be held before the last day of holding the AGM. As regard to the AGM, no
distinction is made between a public company and private company. NOTICE OF ANNUAL
GENERAL MEETINGS A notice of at
least 21 days6 before the meeting must be given to members unless consent is
accorded to a shorter notice by members, holding not less than 95 Per cent of
voting rights in the company. The notice must state that the meeting is an
AGM. The time, date and place of the meeting must be mentioned in the notice.
The notice of the meeting must be accompanied by a copy of the annual
accounts of the company, director’s report on the position of the
company for the year and auditor’s report on the accounts. Companies
having share capital must also state in the notice that a member is entitled
to attend and vote at the meeting and is also entitled to 4 Dalmia Cement (Bharat)
Company Limited vs. Registrar of companies, AIR (1954) Mad. 267 5 Registrar
of companies vs. Cabral and Company Private Limited (1988) 63 Comp Cases 126
6 The Companies Act, 1956, s. 171 appoint proxies in his absence. A proxy
need not be a member of that company. A proxy form must be enclosed with the
notice. The proxy forms are required to be submitted to the company at least
48 hours before the meeting. CONDUCT OF ANNUAL
GENERAL MEETINGS The AGM must be held
on a working day during business hours 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. The Central Government may,
however, exempt any class of companies from the above provisions. If any day
is declared by the Central Government to be a public holiday after the issue
of the notice convening such meeting, such a day will be treated as a working
day. A company may, by
appropriate provisions in its articles, fix the time for its AGM and may also
by a resolution passed in one AGM fix the time for its subsequent AGMs.
Companies licensed under the Companies Act, 1956, s. 25, are exempted from
the above provisions provided that the time, date and place of each AGM are
decided upon beforehand by the board of directors having regard to the
directions, if any, given in this regard by the company in general meeting.
In case of default in holding an AGM, the following are the consequences: (1) any member of
the company may apply to the company law board (CLB)7. The CLB may call, or
direct the calling of the meeting, and give such ancillary or consequential
directions as it may consider 7 The Companies Act, 1956, s. 167 expedient in
relation to the calling, holding and conducting of the meeting. The CLB may
direct that one member present in person or by proxy will be deemed to
constitute the meeting. A meeting held in pursuance of this order will be
deemed to be an annual general meeting of the company. An application by a
member of the company for this purpose must be made to the concerned regional
bench of the CLB by way of petition in form no. 1 in annexure II to
the CLB regulations with a fee of rupees fifty accompanied by an affidavit
verifying the petition, and bank draft for payment of application fee; and (2) fine which may
extend to Rs. 5,000 on the company and every officer of the company who is in
default may be levied and for continuing default, a further fine of Rs. 250
per day during which the default continues may be levied. BUSINESS TO BE
TRANSACTED AT ANNUAL GENERAL MEETING At every AGM the
following matters must be discussed and decided. Since such matters are
discussed at every AGM, they are known as ordinary business. All other
matters and business to be discussed at the AGM are special business. The
following matters constitute ordinary business at an AGM: (1) consideration of
annual accounts, director’s report and the auditor’s report; (2) declaration of
dividend; (3) appointment of
directors in the place of those retiring; and (4) appointment of
and the fixing of the remuneration of the statutory auditors. In case any other
business (special business) has to be discussed and decided upon, an
explanatory statement of the special business must also accompany the notice
calling the meeting. The notice must also give the nature and extent of the
interest of the directors or manager in the special business, as also the
extent of the shareholding interest in the company of every such person. In
case approval of any document has to be done by the members at the meeting,
the notice must also state that the document
would be available for inspection at the registered office of the company during the
specified dates and timings. IMPORTANCE OF
ANNUAL GENERAL MEETING It is only the AGM
of the company that the shareholders may exercise any control over the
affairs of the company. They may confront their directors, their elected
representatives at least once a year. They also get an opportunity to discuss
the affairs and review of the working of the company. They may also take
necessary steps for the protection of their interest. They may for instance
refuse to re-elect a director whose action and policy they disapprove. They
may also take up any other business relating to the affairs of the company
for discussion. Annual accounts are also presented for consideration of the
shareholders and dividends are declared at the AGM. EXTRAORDINARY
GENERAL MEETING A statutory meeting and
an AGM of a company are called ordinary meeting. Any meeting other than
these meeting are called an extraordinary meeting. It is called for The Companies
Act, 1956, s. 169 transacting some urgent or special business, which cannot
be postponed till the next AGM. It may be convened by (1) the board of
directors on its own or on the requisition of the member; or (2) the
requisitionists themselves on the failure of the board of directors to call
for the meeting. EXTRAORDINARY
GENERAL MEETING CONVENED BY THE BOARD OF DIRECTORS The board of
directors may call an extraordinary meeting on it’s own. The board of
directors may call an extraordinary general meeting (EGM) whenever some
special business is to be transacted, which in the opinion of the board of
director, which may not be postponed till the next AGM. Some of the examples
of the business are (1) issue of right
shares; and (2) increase in the
remuneration of the managing directors, whole time directors etc. ON REQUISITION OF
THE MEMBERS The members of a
company have the right to require the calling of an EGM by the directors. The
board of directors of a company must call an EGM if required to do so by the
following number of members: (1) members of the
company holding at the date of making the demand for an EGM not less than
one-tenth of such of the voting rights in regard to the matter to be
discussed at the meeting; or (2) if the company
has no share capital, the members representing not less than one-tenth of the
total voting rights at that date in regard to the said matter. The requisition must
state the objects of the meetings and must be signed by the requisitioning
members. The requisition must be deposited at the company’s registered
office. When the requisition is deposited at the registered office of
the company, the directors must within 21 days, move to call a meeting and
the meeting must be actually be held within 45 days from the date of the
lodgment of the requisition. If the directors fail to call and hold the
meeting as aforesaid, the requisitions or any
of them meeting the requirements at (a) or (b) above, as the case may be, may
themselves proceed to call meeting within three months from the date of the
requisition, and claim the necessary expenses from the company. The company
may make good this sum from the directors in default. At such an EGM, any
business, which is not covered by the agenda mentioned in the notice of the
meeting cannot be voted upon. EXTRAORDINARY
MEETING CONVENED BY THE REQUISITIONISTS Every shareholder of
company has a right to requisition an EGM. He is not bound to disclose the
reason for the resolution to be proposed at the meeting. Life Insurance
Corpn. Of POWER OF COMPANY
LAW BOARD TO ORDER CALLING OF XTRAORDINARY GENERAL MEETING If for any reason,
it is impracticable to call a meeting of a company, other than an AGM, or to
hold or conduct the meeting of the company, the CLB may, either on its own
motion, or on the application of any director of the company, or of any
member of the company, who would be entitled to vote at the meeting, order a
meeting to be called and conducted as the CLB thinks fit, and may also give
such other ancillary and consequential directions as it thinks fit expedient.
A meeting so called and conducted will be deemed to be a meeting of the
company duly called and conducted. REQUISITES OF
VALID MEETINGS The following conditions
must be satisfied for a meeting to be called a valid meeting: (1) it must be
properly convened. The persons calling the meeting must be authorised to do
so; (2) proper and
adequate notice must have been given to all those entitled to attend; (3) the meeting must
be legally constituted. There must be a chairperson. The rules of quorum
must be maintained and the provisions of the Companies Act, 1956 and the
articles must be complied with; and (4) the business at the meeting must be
validly transacted. The meeting must be conducted in accordance with the
regulations governing the meetings. NOTICE OF GENERAL
MEETING A meeting cannot be
held unless a proper notice has been given to all persons entitled to attend
the meeting at the proper time, containing the necessary information. A
notice convening a general meeting must be given at least 21 clear days prior
to the date of meeting. However, an AGM may be called and held with a shorter
notice, if it is consented to by all the members entitled to vote at the
meeting. In respect of any other meeting, it may be called and held with a
shorter notice, if at least members holding 95 percent of the total voting
power of the company consent to a shorter notice. QUORUM FOR MEETING Quorum refers to the
minimum number of members who must be present at a meeting in order to
constitute a valid meeting. A meeting without the minimum quorum is invalid
and decisions taken at such a meeting are not binding. The articles of a
company may provide for a quorum without which a meeting will be construed to
be invalid. Unless the articles of a company provide for larger quorum, 5
members personally present (not by proxy) in the case of a public company and
2 members personally present (not by proxy) in the case of a private company
will be the quorum for a general
meeting of a company. It has been held by courts that unless the articles
otherwise provide, a quorum need to be present only when the meeting
commenced, and it was immaterial that there was no quorum at the time when
the vote was taken. Further, unless the articles otherwise provide, if within
half an hour from the time appointed . The Companies Act, 1956, s. 174 for
holding a meeting of the company, a quorum is not present in the person, the
meeting: (1) if called upon
the requisition of members, will stand dissolved; (2) in any other
case, it will stand adjourned to the same day in the next week, at the same
time and place, or to such other day and time as the board of directors may
determine. If at the adjourned meeting also, the quorum is not present within
half an hour from the time appointed for holding the meeting, the members
present will a quorum. In case the CLB
calls or directs the calling of a meeting of the company, when default is
made in holding an AGM, the Central Government may give directions regarding
the quorum including a direction that even one member of the company present
in person, or by proxy will be deemed to constitute a meeting. Similarly the
CLB may, direct a meeting of the company (other than an AGM) to be called and
held where for any reason it is impracticable to call a meeting and direct
that even one member present in person or by proxy will be deemed to
constitute a meeting. VOTING AND DEMAND
FOR POLL Generally, initially
matters are decided at a general meeting by a show of hands unless a poll is
demanded11. If the majority of the hands raise their hands in favour of a
particular resolution, then unless a poll is demanded, it is taken as passed.
Voting by a show of hands operates on the principle of ‘one member-one
vote’. However, The Companies Act, 1956, s. 177 since the
fundamental voting principle in a company is ‘one share-one vote’,
if a poll is demanded, voting takes place by a poll12. Before or on
declaration of the result of the voting on any resolution on a show of hands,
the chairman may order suo motu (of his own motion) that a poll be
taken. However, if the members are dissatisfied with the result of voting by
the show of hands they may demand a poll13, when a demand for poll is
made, he must order the poll be taken. The chairman may order a poll when a
resolution proposed by the board is lost on the show of hands or if he is of
the opinion that the decision taken on the show of hands is likely to be
reversed by poll. When a poll is taken, the decision arrived by poll is final
and the decision on the show of hands has no effect. A poll is allowed only
if the prescribed number of members demands a poll. The chairman must order a
poll if it is demanded: (1) in the case of a
public company having a share capital, by any member or members present in
person or by proxy and holding shares in the company- (i) which confer a
power to vote on the resolution not being less than one-tenth of the total
voting power in respect of the resolution; or (ii) on which an
aggregate sum of not less than fifty thousand rupees has been paid up. (2) in the case of a
private company having a share capital, by one member having the right to
vote on the resolution and present in person or by proxy if not more than
seven such members are personally present,
and by two such members present in person or by proxy, if more than seven
such members are personally present. (3) in the case of
any other, by any member or members present in person or by proxy and having
not less than one-tenth of the total voting power in respect of the
resolution. MOTION Motion means a
proposal to be discussed at a meeting by the members. A resolution may be
passed accepting the motion, with or without modifications or a motion may be
entirely rejected. A motion, on being passed as a resolution, becomes a
decision. A motion must be in writing and signed by the mover and put to the
vote of the meeting by the chairman. Only those motions which are mentioned
in the agenda to the meeting may be discussed at the meeting. However,
motions incidental or ancillary to the matter under discussion may be moved
and passed. Generally, a motion is proposed
by one member and seconded by another member. RESOLUTION
REQUIRING SPECIAL NOTICE There are certain
matters specified in the Companies Act, 1956 which may be discussed at a
general meeting only if a special notice is given regarding the proposal to discuss
these matters at a meeting. A special notice enables the members to be
prepared on the matter to be discussed and gives them time to indicate their
views on the resolution. In case special notice of resolution is required by
the Companies Act, 1956 or by the articles of a company, the intention to
propose such a resolution must be notified to
the company at least 14 days before the meeting. The company must within
seven days before the meeting give the notice of the proposed resolution to
its members. Notice of the resolution is required to be given in the same way
in which notice of a meeting is given, or if that is not practicable, the
company may give notice by advertisement in a newspaper having an appropriate
circulation or in any other manner allowed by the articles, not less than
seven days before the meeting.
The following matters requiring special notice before they are discussed before the meeting: (1) to appoint at an
AGM appointing an auditor a person other than a retiring auditor; (2) to resolve at an
AGM that a retiring auditor will not be reappointed; (3) to remove a
director before the expiry of his period of office; and (4) to appoint
another director in place of removed director. Where the articles
of a company provide for the giving of a special notice for a resolution, in
respect of any specified matter or matters. Please note that a resolution
requiring special notice may be passed either as an ordinary resolution
(simple majority) or as a special resolution (75 Per cent majority). REGISTRATION OF
RESOLUTIONS AND AGREEMENTS A copy of each of
the following resolutions along with the explanatory statement in case of a
special business and agreements must, within 30 days after the passing or
making thereof, be printed or typewritten and duly certified under the
signature of an officer of the company and filed with the registrar of
companies who will record the same: (1) all special
resolutions; (2) all resolutions
which have been unanimously agreed to by all the members but which, if not so
agreed, would not have been effective unless passed as special resolutions; (3) all resolutions
of the board of directors of a company or agreement executed by a company,
relating to the appointment, re-appointment or renewal of the appointment, or
variation of the terms of appointment, of a managing director; (4) all resolutions
or agreements which have been agreed to by all members of any class of
members but which, if not so agreed, would not have been effective unless
passed by a particular majority or in a particular manner and all resolutions
or agreements which effectively bind all members of any class of shareholders
though not agreed to by all of those members. (5) all resolutions
passed by a company conferring power upon its directors to sell or dispose of
the whole or any part of the company’s undertaking; or to borrow money
beyond the limit of the paid-up share capital and free reserves of the
company; or to contribute to charities beyond Rs 50,000 or 5 per cent of the
average net profits; (6) all resolutions
approving the appointment of sole selling agents of the company; (7) all copies of
the terms and conditions of appointment of a sole selling agent or sole
buying or purchasing agent; and (8) resolutions for voluntary
winding up of a company. MINUTES OF
PROCEEDINGS OF MEETINGS Every company must
keep minutes containing details of all proceedings at the general meetings.
The pages of the minute books must be consecutively numbered and the minutes
must be recorded therein within 30 days of the meeting. They have to be
written directly on the numbered pages. Pasting or attaching of papers is not
allowed. Each page of every such minutes books must be initialed or signed
and last page of the record of proceedings of each meeting in such books must
be dated and signed by: (1) in the case of
the meeting of the board of directors or committee thereof, by the chairman
of that meeting or that of the succeeding meeting; and (2) in the case of a
general meeting, by the chairman of the same meeting within the aforesaid 30
days or in the event of the death or inability of that chairman within the
period, by a director duly authorised by the board of directors for the
purpose. The CLB, however,
may not object if minutes are maintained in loose-leaf form provided all
other procedural requirements are complied with and all possible safeguards
against manipulation or interpolation of the minutes are ensured. The loose
leaves must be bound at reasonable intervals. Entering the minutes in a bound
minute book by a chemical process, which does not amount to attachment to any
book by pasting or otherwise is permissible provided on the mechanical
impression of the minutes, the original signatures of the chairman are given
on each page. All appointments of
officers made at any of the meetings must be included in the minutes of the
meeting. In the case of a meeting of the board of directors or its committee,
the minutes must also state the names of directors present at the meeting and
the names of directors, if any, dissenting from, or not concurring with a
resolution passed at the meeting. Where minutes of the proceedings of any
meeting have been kept properly, they are, unless the contrary is proved,
presumed to be correct, and are valid evidence that the meeting was duly
called and held, and all proceedings thereat have actually taken place, and
in particular, all appointments of directors or liquidators made at the
meeting will be deemed to be valid. The minute books of the proceedings of
general meetings must be kept the registered office of the company. Any
member has a right to inspect, free of cost during business hours at the
registered office of the company, the minutes books containing the
proceedings of the general meetings of the company. CONCLUSION A company is an
artificial person in the eye of law but individual natural person takes up
its entire works. The directors of the company may easily get the benefit of
working for the management of the company. The concept of holding general
meeting is to keep a check on the management, which must not work detriment
to the interest of the shareholders as well as the members of the company. A
general meeting discloses all the important aspects and maintains a clear
balance between the directors, shareholders and members of the company. The
importance of the meeting cannot be overlooked in case of companies. It
regulates the conduct of the company so as to benefit the entire individual
involved to form a company. Article
by Vibha Sahay |
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