This article is written by Nishka Kamath, a graduate of Nalanda Law College, University of Mumbai. In this article, the author has discussed the types of meetings in company law in great detail. Further, the article also gives an overview of the significance of conducting company law meetings with pointers including the definitions, importance, general provisions, etc. Furthermore, for a better understanding of the provisions of different company meetings, an attempt is made to give a brief description of some of the crucial company law meeting judgements.
It has been published by Rachit Garg.
Table of Contents
Have you ever wondered how many types of meetings are held in a company? Or under which Act are such meetings conducted? Or why exactly are company meetings conducted? This article is an attempt to answer all such questions.
Numerous meetings are convened in a company, which are generally divided into members’ meetings, directors’ meetings, and other meetings. These meetings are carried on to attain different goals, and each meeting has its own distinct set of rules and regulations. These rules have to be abided by the company, and meetings have to be conducted in accordance with such set meetings. These meetings play a major role in the decision-making process of the company.
Let us have a look at the types of company meetings along with their salient features, importance, objectives, and landmark judgements, inter alia.
A company meeting means two or more individuals coming together to carry out a legitimate business or to take decisions on the same, like any other group of people flocking together for a particular purpose. Now, in order to carry out the business of the company properly, it becomes necessary for the directors and shareholders of companies to meet as often as necessary and to take unanimous decisions based on their viewpoints and discussions. Simply put, it is crucial for companies to hold meetings for the effective functioning of the company. These meetings hold great importance in the decision-making process.
Moreover, shareholders, who are the owners of the company, have the right to have proper discussions on the affairs of the company and to further exercise their rights in matters relating to the ongoing activities and future of the company. Conducting meetings provides this chance to the shareholders and also gives them an opportunity to keep a check on the activities of the board of directors, as the directors are obligated to adhere to the decisions taken in the meetings of shareholders. Also, the management of the company is vested in the hands of shareholders; hence, it is important that they meet on a regular basis to take unanimous decisions and function effectively as a team.
Now let us have a look at some of the important aspects of company meetings.
There is no definition of the term “meeting” per se in the Companies Act, 2013; in plain language, a company can be defined as two or more individuals coming together, gathering, or assembling either by prior notice or unanimous decision for discussing and carrying out some legitimate activities related to business. A company meeting can be said to be a concurrence or meeting of a quorum of members to carry out ordinary or special business and take decisions on important matters of the company.
Before we read about the types of company meetings, let’s take a look at why exactly company meetings are conducted.
Company meetings play a crucial role in controlling the management functions of a company.
In a company, the directors are accountable to the shareholders. Directors have been entrusted with the duty to run the business and manage the day-to-day affairs of the company. By holding meetings, the affairs of the company are controlled.
Through meetings, the past policies and experiences of a company can be discussed, and new future policies can be fixed. As stated above, directors are answerable to shareholders, so via such meetings, the shareholders can learn about the affairs of the company. The rights of shareholders include:
In the case of Sharp v. Dawes (1971), a meeting is defined as “an assembly of people for a lawful purpose” or “the coming together of at least two persons for any lawful purpose.”
Further, according to P.K. Ghosh, “any gathering, assembly, or coming together of two or more persons for the transaction of some lawful business of common concern is called meeting.”
Moreover, according to K. Kishore, “a concurrence or coming together of at least a quorum of members by previous notice or mutual agreement for transaction business for a common interest is a meeting.”
From the above definitions, we can infer the following:
In a meeting, there must be two or more individuals. The number of members attending the meeting may be small, large, or extremely large, depending on the type of meeting. In the case of a committee meeting, the total count of members may be small, whereas in the case of an annual general meeting of any public company, the total number may be large, and in the case of public meetings, the total count may be very huge.
There must be a specific place for the meeting. In the case of official meetings, the meeting must be conducted in the office. Further, in the case of big meetings that entail a huge involvement of members, like the annual general meeting of a public company, the meeting can be held in a public hall. Also, public meetings can be held in public halls, on open grounds, or even on roads, if required.
While conducting a meeting, it is necessary to decide on a date and time. In the case of official meetings, the date chosen to conduct the meeting is often a working day, and the time is within office hours; however, there can be restrictions in matters related to the date and time under the Companies Act.
There has to be some discussion while conducting the meeting, meaning the individuals in the meeting must put forth their viewpoints and opinions on the agenda of the meeting.
Usually, in company meetings, the topics or subject matter of the meeting are already notified to the participants, so they can come prepared with their viewpoints on the same.
The decisions for the agenda are generally taken in the meeting itself, as getting to a conclusion is the main objective of conducting the meeting. The decisions occurring in the meeting are binding on the members of the company, irrespective of whether they were able to attend the meeting or not, were present or not, or even if they agree with or oppose the inference thus reached.
The decisions are taken either through votes or in the form of resolutions. Also, there are distinct ways of voting. Usually, decisions are not taken at public meetings, and if they are, they are not binding in any manner whatsoever.
Meetings can be of different types, namely:
The types of company meetings, which can be private or public, are discussed in depth below.
Meetings hold great value in our daily social lives. This is a democratic process that is quite essential in the decision making of any organisation, be it a company, a club, or even an association. Further, group discussions play a major role in:
The object and methods of conducting different types of meetings are different. Each of them is discussed in detail in the upcoming passages.
Further, the following are some noteworthy pointers on the importance of holding company meetings:
A company meeting generally consists of the following:
The first and foremost requirement of a meeting is to have participants. In the case of a private meeting, only the individuals having the authority to attend the meeting, like the members of the organisation, the committee, the sub-committee and the people who have received an invitation, can participate. At times, in the event of the non-availability of such a person, he has the right to send his representative or proxy on their behalf. Whereas, in the case of public meetings, the general public has the authority to attend them.
For a valid company meeting, there has to be a chairman at every meeting who has the authority and duty to carry on the meeting effectively.
The secretary of the organisation, committee, sub-committee etc., is entrusted with several duties right from the beginning to the very end of the meeting. He plays a crucial role in carrying out such meetings.
Apart from those who have the authority to attend the meeting, there are some people who are invited, for instance, the press reporters.
Another major component of the meeting involves material elements. The material elements include:
In order for a meeting to be regarded as valid, it must be called by a proper authority, like the board of directors. In a valid board meeting, the decision to convene a general meeting and issue notice in this regard must be taken by passing a resolution.
For a meeting to be conducted properly, a proper notice must be issued by the proper authority. It means that such a notice must be drafted properly according to the provisions laid down under the Companies Act, 2013. Also, such a notice must be duly served on all the members who are entitled to attend and vote at the meeting. Moreover, the valid notice of the company must specifically mention the place, the day, the time, and the statement of the business to be transacted at the meeting.
A quorum is defined as the minimum number of members that are required to be present as mentioned under the provisions of a particular meeting. Any business transaction carried out at a meeting without a quorum shall be deemed to be invalid. The main object of having a quorum is to avoid taking decisions by a small minority of members that may not be accepted by the vast majority. Every company meeting has its own number of quorum, the same has been discussed under separate headings in the upcoming passages.
The agenda can be described as the list of businesses to be transacted while conducting any meeting. An agenda is important for carrying out a business meeting in a systematic manner and in a proper, predetermined order. An agenda, along with a notice of the meeting, is usually sent to all the members who are entitled to attend a meeting. The discussion in the meeting has to be conducted in the same manner as stated in the agenda, and changes can be made in the order only with the proper consent of the members at the meeting.
The minutes of the meetings contain a just and accurate summary of the proceedings of the meeting. Minutes of the meetings have to be prepared and signed within 30 days of the conclusion of the meeting. Further, the minutes books must be kept at the registered office of the company or any place where the board of directors has given their approval.
The term ‘proxy’ can be used to refer to a person who is chosen by a shareholder of a company to represent him at a general meeting of the company. Further, it also refers to the process through which such an individual is named and permitted to attend the meeting.
Business transactions in company meetings are carried out in the form of resolutions. There are two kinds of resolutions, namely:
Company meetings are majorly divided into three categories, and the three categories are further divided into subcategories, which are again divided into some categories. Let us have a look at the categories.
Before we dive deep into the nitty-gritty of each of the categories, here is a pictorial representation of the types of company meetings for your better understanding-
Now that we have seen the pictorial representation of company meetings, let us have a look at each of the meetings in a more detailed manner.
The first main type of meeting is a meeting of shareholders or members of the company. It is further divided into two categories, namely:
The first category is further divided into three subcategories, each of which is discussed in detail below.
The general meeting is subdivided into three categories. Let us have a look at the nitty-gritty of each of them.
Please note: Before the enactment of the Companies Act, 2013, the requirements laid down for statutory meetings and reports under Section 165 were legit. However, after its enactment, the same has been dropped.
The following is just for the readers’ information.
A statutory meeting is a type of general meeting that must be held by every company limited by shares and every company limited by guarantee with a share capital within not less than a month and not more than six months from the date it was incorporated. Private companies are exempt from conducting a statutory meeting. In this meeting, a report known as the ‘statutory report’ is discussed by the directors of the company.
The following companies do not have any obligation to conduct a statutory meeting:
The board of directors of a company is duty-bond to forward a notice of the meeting to all the shareholders or members of the company. This has to be done at least 21 days prior to holding the meeting, and an explicit mention of ‘statutory meeting’ of the company has to be made in the notice. If the board of directors does not name it the ‘statutory meeting’, it will be a breach of the provision.
Now that a mention of the statutory report was made above, you might wonder, what exactly is it? Let’s find out.
The board of directors is obliged to forward a report known as the ‘statutory report’ at least 21 days before the date of the statutory meeting. A copy of the report has to be forwarded to the registrar for registration. This report has to be drafted by the board of directors of the company and certified and amended by at least two of them.
Under Section 165(3) of the Companies Act, 1956, a prior mention of the contents of a statutory report has been made; it says the report must contain:
Now that we know about the statutory report and its particulars, you might wonder what the proper procedure is for conducting a statutory meeting. The answer is in the below pointers.
The board of directors has to send a statutory report to every member of the company, as mentioned above. The members who attend this meeting may carry out discussions on matters relating to the formation of the company or matters that are incorporated in the statutory report. Below are some of the points one must note:
The following are the repercussions of not complying with the provisions on conducting a statutory meeting:
Before we study the annual general meeting (AGM) and extraordinary general meeting (EGM), let us have a look at the key differences between them in a tabular format. This is done for a better understanding of the topics.
| Basis | Annual general meeting (AGM) | Extraordinary general meeting (EGM) |
| What is it? | An annual general meeting, commonly known as an AGM, is a regular meeting held annually. | An extraordinary general meeting (EGM), is a meeting other than an AGM. |
| Applicability | AGMs are applicable to all the companies. | Similarly, EGMs are applicable to all companies. |
| Time of holding the meeting | An AGM has to be held within six months of the close of the financial year. | An EGM can be held at any time. |
| Purpose | An AGM is held to serve the following purposes: Electing the directors of the company,Passing of annual accounts, Declaring the dividends, and Appointing auditors. | Whereas, an EGM is to be held for any matter for which a proper notice is given. |
| Who may call such a meeting? | The board of directors has the authority to call such a meeting. | The board of directors, along with requisitionists, have the authority to call such a meeting. |
| Repercussions of default in conducting such a meeting | The tribunal may call and impose a fine in case a company defaults in holding an AGM in a requisite manner. | Similarly, the tribunal may call and impose a fine in case a company errs in holding an EGM in the prescribed manner. |
The annual general meeting is defined under Section 96 of the Companies Act, 2013. As the name suggests, an annual general meeting is one of the general meetings held once a year. As per Section 96 of the Companies Act, 2013, all companies have to hold an AGM within the stipulated time. An AGM provides a chance for the members of the company to review the workings of the company and express their opinions on the management and workings of the company.
Under corporate law, an annual general meeting is regarded as one of the most important institutions for protecting the members of the company. It is at this meeting— even though it is held only once in a fiscal year- that the members of the company get the opportunity to question the management on matters relating to the following:
It is only at this meeting that the members of the company have the chance not to re-elect those directors in whom they have lost faith or confidence. Further, as auditors also retire at this meeting, members of the company have another opportunity to think about the re-election of these auditors.
Last but not least, it is at the AGM that members disclose the amount of dividend payable by the company. While talking about dividends, it may be noted that the board of directors makes recommendations on the amount of dividend, whereas the members at the AGM declare the dividend. Further, the dividend cannot surpass the recommended amount by the board of directors.
If any of these rules are not complied with, the same will be said to be an offence under the Companies Act, 2013. It has been discussed in the upcoming passages.
The company has to send a clear 21 days’ notice to its members to conduct the annual general meeting. The notice must mention the day, date, and location of the meeting, along with the hour at which it is decided to be held. The notice should explicitly mention the business to be conducted at the AGM. A company is obligated to send the AGM notice to the following:
The notice can be sent either by speed or registered mail or even through electronic means like email.
Usually, an annual general meeting can be conducted at any time, provided it is during business hours (between 9 am and 6 pm) and the day of the meeting is not a national holiday. Now, talking about the location of the meeting, it can be held either at any pre-decided place within the area of the jurisdiction of the registered office or at the registered office itself.
Below are some of the noteworthy pointers in context to the date, time, and place of holding an annual general meeting:
Further, as per Section 101 of the 2013 Act, if any member files an application in case a company errs in holding an annual general meeting, the time frame for notice to call for the meeting can be reduced to less than 21 days (21 days is the time frame to send a notice to call for an annual general meeting) with the agreement of members who are entitled to vote.
As per Section 96 of the Companies Act, 2013, a general meeting must be held annually, as the name suggests. It is mandatory that all companies hold such meetings at regular intervals. When the annual general meeting is held for the first time after the company’s incorporation, it has to be held within a period of nine months from the date of the closing of the financial year of the company, and in other cases, within six months from the date of the closing of the financial year. Further, as per Section 96 of the Companies Act, 2013, a company has no obligation to hold any general meetings until it holds its first annual general meeting. Such a relaxation is provided so that the company can set up its final reports for a longer duration. Another provision that is provided under Section 166(1) is that, with proper authorization from the registrar, the company can postpone the date of the annual general meeting. The registrar has the authority to postpone the date for a further three months at the most, however, such a relaxation does not apply in the case of the company’s first annual general meeting. Further, a company may not hold an annual general meeting in a year provided the registrar has consented to it, however, the justification for such an extension should be reasonable and genuine.
According to Section 96 of the Companies Act, the gap between two annual general meetings must not exceed fifteen months. Further, Section 210 of the Act states that a company must provide a report on the accounts of all the profits and losses of the company, and if the company does not have any profits, an income and expenditure report must be submitted.
Furthermore, the following pointers are crucial to note in cases of gaps between two annual general meetings:
Also, after conducting the first annual general meeting, the next AGM must be held within 6 months from the end of the financial year. If, due to any unforeseeable circumstance, the company fails to hold the meeting, the tribunal may grant an extension of 3 months.
The quorum in the case of a public company shall consist of the following:
In the case of a private company, only two members who are present will constitute the quorum.
Any member of the company who has the authority to vote at a meeting will be entitled to appoint a proxy, i.e., another person to attend and vote instead of himself. The appointment of a proxy shall be in Form No. MGT.11. Further, an individual cannot act as a proxy on behalf of members exceeding a total of 50 and holding in aggregate not more than 10% of total capital with the authority to vote.
After conducting the annual general meeting, a report in the form of MGT-15 within a period of 30 days has to be filed. Further, under Section 121, the report will include how the meeting was convened, held, and conducted as per the provisions of the 2013 Act. If the company errs in doing so, a penalty of ₹1 lakh shall be imposed. Further, on every officer who has erred in following the procedure of the meeting, a penalty of ₹25,000 minimum shall be imposed, and in case the issue persists, a penalty of ₹500 for every day after the failure persists can be imposed, and the same shall be for a maximum of ₹1 lakh.
If a company errs in holding an annual general meeting in accordance with Section 99 of the Companies Act, 1956, the act shall be considered a serious offence in the eyes of the law. Every member of the company who is at fault shall be deemed to be a defaulter.
Further, a fine extendable to ₹100,000 may be levied on the defaulters. Moreover, as per Section 99 of the Companies Act, if the defaulters persist with the same mistakes, and if the provisions under Sections 96 and 97 are not complied with, a fine of ₹5000 will be imposed on the defaulter until the problem continues.
The National Company Law Tribunal, commonly known as NCLT, has the authority to call or direct a meeting under Section 97 of the Companies Act, 2013, in case an application is filed by a member in matters relating to the failure to conduct the meeting.
In a company, there are certain matters that are so crucial to be discussed that they need to be addressed immediately to the members, which is where an extraordinary general meeting comes into play. Such meetings are discussed under Section 100 of the Companies Act, 2013. An extraordinary general meeting is any general meeting apart from the statutory meeting, an annual general meeting, or any adjournment meeting. Such a meeting is held to discuss special business, especially those businesses that do not fall under the ordinary business that is discussed at annual general meetings. Such meetings are usually called for matters that are urgent and for those that cannot be discussed at annual general meetings. Extraordinary general meetings are usually called by the following:
While dealing with the above heading, one might wonder when and by whom an extraordinary general meeting can be called. Let’s find out.
An extraordinary general meeting can be called in the following circumstances:
In cases when the board of directors has some urgent matters to discuss and such matters cannot be postponed until the next general meeting, the board of directors may hold an extraordinary general meeting if need be. The same is discussed under Section 100 (1) of the 2013 Act.
The board of directors may call an extraordinary general meeting on the requisition of the following number of members:
Members who own 1/10th of the paid-up share capital of the company on the date of receipt of the requisition on the date of exercising the voting rights.
Members who own 1/10th of the paid-up share capital of the company on the date of receipt of the requisition on the date of exercising the voting rights.
Under Section 100(4) of the Company Act, 2013, if a board does not, within 21 days from the date of receipt of a valid requisition in relation to any matters thereto, take any steps to call a meeting to consider the matter not later than forty-five days from the date of receiving such a requisition, then the meeting may be called upon and conducted by the requisitionists themselves within a time span of three months from the date of the requisition.
Further, it is important to note the following pointers for a better understanding of the topic:
The notice must specify the date, day, time, and place of holding the meeting, and must be held in the same city as the registered office and on a working day.
The notice has to be duly signed by all the requisitionists or on behalf of those requisitionists who have permission to sign in place of the requisitionists, provided the permission is in writing. This can also be done via an electronic request attached to a scanned copy to give such permission.
There is no need for any explanatory statement under Section 102 to be attached with the notice of an extraordinary general meeting that is convened by the requisitionists and the requisitionists.
The notice of the meeting has to be served on all those members whose names are on the list of registered members of the company. It should be served within three days of the requisitionists depositing a valid request for conducting an EGM in the company.
The notice of the meeting can be sent through speed mail, registered mail, or even electronic means like emails. If there is an issue with serving the notice or if some member does not receive the notice for any reason, the meeting shall not be invalidated by any member.
According to Section 98 of the Companies Act, 2013, if it is not possible to conduct a meeting in the company, the tribunal may either suo moto or through an application submitted by any director or member of the company who has the authority to vote at the meeting-
Such instructions may also incorporate any command that a member of the company present in person or via proxy shall be deemed to compose a meeting. The meeting held pursuant to such orders shall be referred to as a meeting of the company that is duly called, held, and conducted.
An extraordinary general meeting can be held at the registered office or any other location in the city where such a registered office is located.
The notice of an extraordinary general meeting must be served in writing or through an electronic mode in at least 21 days of conducting such a meeting.
In cases where an extraordinary general meeting is not conducted properly, a fine of ₹10,000 within a prescribed time can be levied on the defaulters. Moreover, in case the issue persists, a fine of ₹1000 per day shall be levied. Additionally, the maximum fines in cases of erring in conducting an EGM successfully are:
Company meetings come under two broad categories, namely:
We have already talked about the different types of general meetings above, let’s now discuss what these class meetings are!
Class meetings, as the name suggests, are meetings conducted for shareholders of the company that hold a particular class of shares. Such a meeting is conducted to pass a resolution that is binding only on members of the concerned class. Also, only members belonging to that particular class of shares have the right to attend and vote at the meeting. Usually, the voting rules are applicable to class meetings as they govern voting at general meetings.
Such class meetings can be conducted whenever there is a need to alter or change the rights or privileges of that class as stated in the articles of association. In order to execute such changes, it is crucial that these amendments be approved in a separate meeting of the shareholders and supported by passing a special resolution. Under Section 48 of the Companies Act, 2013, which talks about variations in shareholders’ rights, class meetings of the holders of the different classes of shares must be conducted in case there are any variations. Similarly, under Section 232, which discusses mergers and amalgamations of companies, where a scheme of arrangement is proposed, there is a requirement that meetings of several classes of shareholders and creditors be conducted.
As per Section 173 of the Companies Act, 2013, a company has to hold the meeting of board of directors in the following manner:
Please note: With the issuance of Secretarial Standard 1 (SS-1), a circular by ICSI, a clarification was given that the board shall conduct a meeting at least once every six months with a maximum gap of one hundred and twenty days between two consecutive board meetings. Further, the SS also specified that it will be sufficient if a company holds one meeting in every renaming calendar quarter in the year of its incorporation in addition to the first meeting, which is to be held within thirty days from the date of incorporation.
Board meetings are held for the following purposes:
As per Section 173(3) of the Companies Act, 2013-
The word “agenda” can be described as things to be done. In the case of company meetings, it can be said to be a statement of the business that must be transacted at a meeting, along with the order in which the business must be dealt with. Even though there is no explicit mention or provision in the Companies Act, 2013, for the secretary to send an agenda or include the same in the notice of the board meeting, it is necessary by convention for the agenda to be mentioned with the notice served to conduct the meeting. When an agenda is attached to the notice, the director is aware of the proposed business and the objects of conducting the meeting, thus, he can come duly prepared for the discussion to be held in the meeting.
As we know, every company needs to have a proper quorum to conduct a valid company meeting. Now, the quorum for a board meeting under Section 174 of the Act is one third of the total strength or two directors, whichever is higher. It must be noted that, any director participating through video conferencing or any other audiovisual means must also be considered to determine the quorum.
Further, if the number of directors is reduced or there is any removal of a director or directors, the directors who continue may act on behalf of the missing number of directors to fill the missing gap for the quorum or for summoning a general meeting of the company; however, they shall not act for any other purpose. Moreover, in cases where the number of directors interested surpasses or is equal to two-thirds of the total strength of the board of directors, the number of directors who are not interested and are there to attend the meeting, the number not being below two, shall be the quorum at such times.
It is pertinent to note that the quorum has to be present not only at the time of commencement of the meeting but also at the time of transacting business with the company.
The board of directors has the authority to form committees and delegate powers to such committees; however, it is crucial that such a committee only consist of directors and no other members. Further, it is mandatory for such committees to be authorised by the articles of association of the company and be in lieu of the provisions set out in the Companies Act. The meetings of all these committees are held in the same manner as board meetings.
In large companies, the following routine matters are looked after by the sub-committees of the board of directors:
A company is entitled to issue debentures, and to further implement the same, a meeting for debenture holders can be called. This meeting is between the board of directors and the debenture holders. These meetings are usually called to discuss the rights and responsibilities of debenture holders.
Meetings of debenture holders are conducted in accordance with the provisions laid down in the debenture trust deed. The rules and regulations mentioned in the trust deed are related to the following:
Debenture holder meetings are generally conducted from time to time to discuss matters where the interest of debenture holders is involved, like at the time of:
Meetings of creditors is a term used to describe a meeting setup by the company to conduct a meeting of the company’s creditors. Under the Company Act, 2013, companies are not only entrusted with the power to negotiate with creditors but also set up a procedure to do so. Such meetings are always arranged in matters where a creditor decides to voluntarily wind up.
Moreover, Section 108 of the Companies Act, 2013, discusses the holding of meetings of creditors. It also states that meetings be held in accordance with the provisions laid down under the following sections of the said Act:
In the creditors meeting, the creditors can decide to either approve, amend, or reject the repayment plan. Further, the resolution professional must make sure that any sort of changes or modifications suggested by the creditors of the company are approved by the directors of the company before carrying out that particular change. Furthermore, the resolution professional also has the authority to adjourn the meeting of the creditors for a period of not more than seven days at a time.
If a company is voluntarily winding up, a meeting of creditors must be called to propose a resolution for voluntary winding up. Such a meeting has to be called either on the day of taking such a decision or the subsequent day, and a general meeting must be conducted to propose the resolution.
The notice to creditors must either be sent by post along with the notices regarding the general meeting of the company for winding up. Additionally, with the notice to the creditors, the company also has to advertise at least once in the official gazette and once in two newspapers that are circulated in the district where the company’s registered office or principal place of business is situated.
While discussing the procedure for consulting the meeting of the creditors, the following pointers are noteworthy:
While conducting a meeting, the board of directors must submit a statement on the position of the company’s affairs along with a list of the company’s creditors and the estimated amount of their claims. The director who is entrusted with the duty to conduct the meeting of creditors or who is in charge of the same must attend the meeting and hold it at the same time.
Based on the decision that occurred at the meeting of creditors, the company shall decide its next course of action. The decision could be one of the following:
When a notice of resolution is passed in the meeting of creditors, the same must be filed with the registrar within 10 days of passing such a resolution. If the company does not adhere to the set provisions of company law under the Companies Act, 2013, a penalty with a fine that will not be less than fifty thousand rupees and extendable up to two lakh rupees shall be imposed. Further, the director of the company who errs in following the procedure, will also be penalised with an imprisonment for a term extendable to six months or with a fine not less than fifty thousand rupees and extendable up to two lakh rupees.
A meeting cannot be commenced unless the creditors of the company, known as quorum attend the meeting. The requisite quorum is as follows:
In the case of creditors, at least one creditor entitled to vote must be in the quorum.
Creditor and contributor meetings are usually conducted when the company has gone into liquidation to calculate the total amount due by the company to its creditors. The main motive of holding such meetings is to seek the approval of the contributors to the scheme of compromise or rearrangement to save the company from economic difficulties.
At times, even a court can pass an order to conduct such a meeting. It should be noted that the term “contributory” encompasses every individual who is accountable for making contributions to the assets of the company at the time of winding up.
In the case of a meeting of contributors, at least one creditor is entitled to vote, or all the contributors if their number does not exceed two.
If the business carried on in a company is valid and legally binding, it is necessary that the meeting called to conduct such business also be held in a valid manner. To understand the same, there are some pointers one must understand to consider a meeting valid. The following are the requisites for conducting a valid company meeting:
Every company has its own importance. Let’s quickly take a look at each of the company law meetings’ relevance.
An AGM is conducted to transact the ordinary business of the company. Ordinary business includes the following:
An EGM is conducted to discuss special businesses, usually those that do not fall under the category of ordinary businesses, which are discussed at AGMs. These meetings are generally called only in cases of urgent matters or for those matters that are not discussed at AGMs.
Class meetings are conducted for shareholders belonging to a particular class. These meetings are held to gain approval via a special resolution of all such members belonging to the particular class to seek their approval on important matters or amends in any field related to their interests.
A board of directors is held for several purposes, namely, for making calls on shares, issuing shares and debentures, forfeiting the shares, for discussing the difficulties of the company, etc.
A committee of directors meeting can be held for issues relating to the allotment or transfer of any share or asset of the company, or even for any issues relating to the finances of the company.
Debenture holders meetings are conducted to decide upon matters relating to the reconstruction, reorganisation, amalgamation, or winding up of the company.
Creditors meetings are usually conducted for the creditors to either approve, change, or deny the repayment plans of a company when it decides to wind up voluntarily.
Similar to the aforementioned meeting, a contributors meeting is conducted for the calculation of the total amount due by the company to repay creditors or contributors when the company has gone into liquidation.
As discussed under each heading (wherever relevant), in case a company errs in conducting a meeting, a penalty in the form of fine, is imposed by the tribunal. The penalty is either imposed on the company or its members, or both. The penalty keeps recurring up to a certain amount in case of continuation of the blunder.
There are several cases where the matters relating to company law meetings were approached in the court of law. Below is an amalgamation of a few of them. A point must be noted that an attempt is made to segregate each case law on the basis of the type of company meeting or relevant provisions. Each judicial pronouncement has been added under separate subheadings then.
In this case, the Kerala High Court opined that there is no provision in the law which states that holding the first AGM of the company can go beyond the set time period, i.e., nine months from the forest financial year of the company.
In this case, the Calcutta High Court held that any meeting or business conducted at a location other than the one mentioned in the notice of the meeting will be declared to be prima facie void. If such an issue arises, a notice declaring the change of location has to be served to each and every member having the authority to attend the meeting.
In the case of M/S. Harinagar Sugar Mills Ltd. v. Shyam Sundar Jhunjhunwala (1961), the Hon’ble Supreme Court held that if a managing director of a company had repeatedly called upon other directors of the company to hold an AGM, but the efforts are in vain, the managing director could not be considered to be an “officer in default”.
In Re. Brahmanbaria Loan Co. Ltd. (1934), the Calcutta High Court held that it is no defence for a company to plead that it was not able to conduct an annual general meeting just because a criminal case was filed against the secretary of the company and important books of the company had been exhibited in the court for carrying out the proceedings.
In this case, the Court had a lenient view when a company that had only two members who were brothers, had to approach the Court for justice. Here, one of the brothers was seriously ill, and hence the company erred in conducting the meeting. The Court stated that the non-performance of holding the AGM was not a deliberate, willful defect, and hence no charges were filed against them.
The Hon’ble Supreme Court in the case of Life Insurance Corporation v. Escorts Ltd. & Ors. (1985) stated that every individual holding shares of a company has the right to call/requisition an extraordinary general meeting subject to the provisions of the Act. Further, the Court said that once the requisition is made in compliance with the provisions of the Act, the shareholder cannot be restricted from calling any such meeting. Simply put, the Apex Court stated that an institutional shareholder like that of LIC, too, has the same right to requisition an EGM as any other shareholder.
Moreover, the Supreme Court in this case made another interesting observation. It said, if an EGM is filed for the purpose of removing some of the existing directors of the company, one cannot say that the requisition is invalid just because the reason for their removal was not mentioned.
In Ball v. Metal Industries Ltd. (1957), the Court of Session in Scotland said that the requisition to hold an EGM must set out the matters for calling such a meeting, that is, apart from the agenda for the meeting, no other discussion can be carried out in these meetings. For instance, if an EGM is being conducted for the appointment of three new directors, the chairman cannot add a new item for the removal of one of the existing directors of the company to the agenda.
In the case of B. Sivaraman v. Egmore Benefit Society Ltd. (1992), the Madras High Court held that an extra annual general meeting cannot be requisitioned for a declaration that the directors appointed at the last meetings were not justifiably elected and that the requisitionists should be appointed on their behalf.
In the case of Anantha R. Hedge v. Capt. T.S. Gopala Krishna (1996), the Karnataka High Court opined that just because a director refused to conduct an extraordinary general meeting when requisitioned, it would not amount to an offence under the 2013 Act.
In the case of B. Mohandas v. A. K. M. N. Cylinders Pvt. Ltd. (1998), the Company Law Board opined that the requisitionists cannot approach the tribunal directly, i.e., when the requisitionists have not made an attempt to call the meeting themselves as stated under the law, they cannot approach the tribunal for an order directing the EGM.
In this case, the High Court of Punjab-Haryana held that when a company has no duly constituted board of directors, it is not feasible to hold a meeting.
In the case of Indian Spinning Mills Ltd. v. His Excellency (1953), an individual who did not possess a qualifying share was assigned to be the chairman of the company. Later, some directors transferred their shares to him to fulfil the requisite necessities of the articles of the company. However, a group of members objected to this action and filed a suit, claiming such an action to be invalid. Here, the Calcutta High Court held that when such a situation arises, it is quite impractical to conduct a meeting.
In the case of Re. Ruttonjee and Company Ltd. v. Unknown (1968), the Calcutta High Court cautioned the Tribunal, stating that it should interfere only if it is fully convinced that the application made is filed with bona fide intentions in the larger interest of the company.
The High Court issued a note of caution against the misuse of application under the Act and stated that, “the power should be used sparingly and with caution so that the court does not become either a share-holder or a director of the company trying to participate in the internecine squabbles of the company.”
In the case of Sanjiv Kothari v. Vasant Kumar Chordia (2004), an observation was made that in case a meeting is convened by the managing director on requisition by the director on the same date to have a discussion on the same matter that was highlighted by the director, the director has to attend the meeting and should not have any other arrangement for attending a meeting on the same date at some other place.
In Dankha Devi Agarwal v. Tara Properties Private Limited (2006), the Hon’ble Supreme Court concluded that if a decision is reached without due notice of such a meeting for the removal or induction of any individual, such an act would constitute oppression and mismanagement. It further stated that at least two directors or one-third of the total strength, whichever is higher, will constitute a quorum for a board meeting. Also, directors who are attending the meeting in person or through any audio-visual means would be counted for the purposes of quorum.
In this case, the Queen’s Bench Division of Ireland held that an accidental omission to give notice to, or the non-receipt of, such notice by any individual who is entitled to receive it does not invalidate the proceedings of the meeting; however, if such a notice is deliberately commissioned to be served, it will definitely result in invalidation.
In this case, there was a provisional agreement for the sale of an undertaking by one company to that of the other. So, the company sent out a notice stating that the object of the meeting was to adopt an agreement for the sale of one of the company’s undertakings to another; however, it failed to reveal the fact that substantial amounts were payable to the directors of the undertaking that was to be sold to compensate for the loss of office. Here, the court held that the notice was invalid as it was not adequate and did not disclose all the facts upon which the members would be exercising their right to vote.
In this famous English case, the court observed that when the members had been served a notice that was not in accordance with the set standards but were still present at the meeting, the notice could be made good. Further, the meeting can also be considered valid irrespective of whether the notice served in the first place was apt or not.
In this case, the Vice-Chancellor of the Chancery Division of England and Wales held that a notice of a meeting served via fax is a valid notice.
In the case of Sharp v. Dawes (1876), a company with several members called a meeting for the purpose of making a call on the members. However, only one member, who was holding a proxy, was present at the venue of the meeting. He proceeded to take the chair and pass the necessary resolution for making the aforementioned call on the members. Furthermore, he even proposed a vote of thanks. When this issue arrived in court, the Court declared such a meeting to be invalid. In the words of Lord Coleridge, “the word ‘meeting’ prima facie means a coming together of two or more than two persons“.
In this case, it was stated that if an individual is informally invited to act as a chairman of a meeting but no formal resolution is passed in this regard, the members of the company attending the meeting have the right to raise an objection contending that there was no valid appointment of a chairman.
In a company, business transactions are carried out at meetings in the form of resolutions. Members are entitled to discuss the contents of a resolution before it is considered to be put up for voting. Further, amendments that are pertinent to the proposed resolution may be proposed in the meeting and voted upon. In case the amendment is passed, the amended resolution will be considered for voting. In this case, the Bombay High Court held that if the chairman wrongfully rules out an amendment to a resolution, the next proceedings conducted to discuss the same resolution will be deemed as invalid.
Under the Companies Act, 2013, it is important that companies conduct requisite meetings throughout the year as and when necessary. These meetings play a major role in shaping the company, as major decisions relating to the company and its future are taken in such meetings.
There are three main categories of meetings in company law, and each meeting has its own significance. Also, these meetings are further divided into subcategories. For a recap, let us again take a look at the categories.
Further, for every meeting to be valid, it is integral that it must be duly convened, properly constituted and effectively conducted under the requisite provisions of the Companies Act and the rules framed thereunder.
An annual general meeting can be held at any place that is within the jurisdiction of the city, town or village in which the registered office is situated. Further, a government company also has the authority to hold an AGM at any place approved by the Central Government.
To answer the second question, yes, a company can hold an AGM outside India, however, a prior permission from the Central Government is required to carry out such an activity.
All companies except one person company, commonly known as OPC, are obliged to hold an AGM at the end of each financial year. Further, a company has the duty to hold an AGM within a period of six months from the end of the financial year.
The five P’s for holding a meeting effectively are:
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