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COMPANYMEETINGS
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A company is an association of several
persons for some common object(s).
Therefore, various issues have to be
discussed and decided according to the
view of the majority. These deliberationstake place at various meetings which
occur between members (shareholders)
and between the directors.
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Learning Objectives
Kinds of Company Meetings; Board Meetings,Meetings of Members
General Meetings: Statutory, Annual General Meetings andExtraordinary General meetings
Class Meetings Other Meetings:Meeting of debenture holders, Meeting of
creditors
Requisites of a Valid Meeting
Proxy; Quorum
Chairman and his Duties
Voting and Demand for Poll
Agenda; Motion; Resolutions; Minutes
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KINDS OF COMPANY MEETINGS
Company meetings can broadly be categorizedinto the following types:
I Board Meetings
II Meetings of Members(1) General Meetings:(a) Statutory meeting,(b) Annual general meetings, and(c) Extraordinary general meetings.
(2) Class Meetings
III Other Meetings(1)Meeting of debenture holders(2) Meeting of creditors
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Board Meetings
Board meetings refer to meetings of directors. The directorsare supposed to act collectively as a single entity, called theboard, hence the term boardmeetings. Rules relating to boardmeetings can be summarized as under:
Periodicity of the Board meetings. Every companyprivate orpublicshall hold at least one meeting of the Board in threemonths or four meetings in a year. However, a Section 25company has the privilege to convene a meeting of the Board
or Governing Body at least once in six months or twice a year.[Section 285]
Interval between two Board Meetings. The expression everythree months in Section 285 means three months takentogether or every quarter of the year. Provisions of Section 285
are fulfilled say if the Board of directors meets on the first ofJanuary, or 31st March, or any day in between. Similarly, it isopen to the Board to meet on any day during the next threemonths say from April to June, and then at least once in thenext quarter say from July to September and so on.
Cont..
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Board Meetings
Day of holding meeting. Though an original Board
meeting should normally be held during business hoursand only on a working day, it may validly be held on apublic holiday too.
Time of holding Board meetings. Board meetings canbe held during business hours or outside businesshours. There is no restriction on that matter under theCompanies Act.
Place for holding a Board Meeting. Board meetingscan be held at any place, be it the companys registered
office or head office, or any other premises within oroutside the city, town, village, or state in which theregistered office of the company is situated. A Boardmeeting may also be held abroad if the situation sowarrants.
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Meetings of Members
These are the meetings where shareholders of acompany meet to discuss various matters andtake decisions by means of passing resolutions.Members meetings may further be classified asgeneral meetings and class meetings.
General MeetingsGeneral meetings can further be discussed underthe following three heads:
Statutory Meeting
Annual General Meetings and
Extraordinary General Meetings
Contd.
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Meetings of Members
Statutory Meeting
This is the first meeting of the shareholders of apublic co. and is held once in the life span of thecompany. A public co. limited by shares, or acompany limited by guarantee and having sharecapital is required to hold a statutory meeting.Such a meeting must be held between one andsix months from the date on which the companybecomes entitled to commence business i.e., it
obtains the certificate of commencement ofbusiness. A private limited co. is, however,exempt from holding a statutory meeting.[Section 165] Contd..
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. Statutory Meeting
Purpose of Statutory Meeting. The purpose of the meeting
is to enable members to know all the important matterspertaining to the formation of the company and its initiallife history. The matters discussed include inter alia, whichshares have been taken up, what money has been received,what contracts have been entered into, and what sums
have been spent on preliminary expenses, etc. However, noresolution in respect of which no notice has been given inaccordance with the provisions of the Act can be passed atthe statutory meeting. In such a meeting, only the followingmatters can be discussed:
Floatation of shares / debentures by the company
Modification to contracts mentioned in the prospectus
Contd.
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. Statutory Meeting
Notice of Statutory Meeting . A clear writtennotice at least 21 days before the meeting
must be given to all the members of the
company unless consent is accorded to a
shorter notice by members, holding not less
than 95 per cent of paid-up capital i.e., voting
rights in the company. The notice must clearly
state that the meeting is the statutorymeeting of the company.
Contd.
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. Statutory Meeting
Statutory Report . The Board of directors must prepare and
send to every member a report called the StatutoryReportalong with the notice. But if all the members entitled to
attend and vote at the meeting agree, the report could be
forwarded later also. The report should be certified as correct
by at least two directors, one of whom must be the managing
director, where there is one. It must also be certified as
correct by the auditors of the company with respect to the
shares allotted by the company, the cash received in respect
of such shares, and the receipts and payments of the
company. A certified copy of the report must be sent to theROC for registration immediately after copies have been sent
to the members of the company.
Contd
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. Statutory Meeting
Contents of Statutory Report . The statutory report is prepared by the
directors to help members acquaint themselves with the assets and
properties of the company and to discuss the success of floatation.
According to Section 165 (3) of the Companies Act, the statutory report
must furnish the following particulars:
1. The total number of shares allotted, distinguishing those fully or partly
paid-up, otherwise than in cash, the extent to which partly paid shares arepaid-up, and in both cases the consideration for which they were allotted.
2. The total amount of cash received by the company in respect of all shares
allotted, distinguishing as aforesaid.
3. An abstract of the receipts and payments up to a date within seven days of
the date of the report and the balance of cash and bank accounts in hand,
and a description of preliminary expenses.
4. Any commission or discount paid or to be paid on the issue or sale of
shares or debentures must be separately shown in the aforesaid abstract.
Contd.
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. Statutory Meeting
5. The names, addresses, and occupations of directors, auditors, managerand secretary, if any, of the company and the changes which have takenplace in the names, addresses and occupations of the above since thedate of incorporation.
6. Particulars of any contracts to be submitted to the meeting for approvaland modifications done or proposed.
7. If the company has entered into any underwriting contracts, the extent, ifany, to which they have not been carried out and the reasons for thefailure.
8. The arrears, if any, due on calls from every director, and from the manager.
9. The particulars of any commission or brokerage paid or to be paid, inconnection with the issue or sale of shares or debentures to any directoror to the manager.
10. The auditors have to certify that all information regarding calls andallotment of shares are correct.
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Annual General Meeting
An annual general meeting (AGM) must be held by every companypublic
or private, limited by shares or by guarantee, with or without share capitalor unlimited companyonce a year. AGM is an important platform by
which the general body of shareholders finds an opening to exercise their
power of control. Every company must hold an AGM each year.
Rules Relating to Annual General Meeting. Following are the rules
regarding annual general meetings:i. A company may hold its first AGM within 18 months from the date of its
incorporation. However, not more than 15 months must elapse between
two AGMs.
ii. In case there is any difficulty in holding any AGM (except the first one),
the ROC may, for any special reasons shown, grant an extension of timefor holding the meeting by a period not exceeding three months
provided the application for the purpose is made before the due date of
the annual general meeting. Contd.
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.Annual General Meeting
iii. A notice of at least 21 days before the meeting must be given to themembers unless consent is accorded to a shorter notice by members,holding not less than 95 per cent of voting rights in the company. Thenotice must state that the meeting is an annual general meeting. Thetime, date and place of the meeting must be mentioned in the notice.
iv. The notice of the meeting must be accompanied with a copy of theannual accounts of the company, directors report on the position of thecompany for the year, and auditors report on the accounts. Companies
having share capital should also state in the notice that a member isentitled to attend and vote at the meeting and is also entitled toappoint proxies in his/her absence. A proxy need not be a member ofthat company. A proxy form should be enclosed with the notice.
v. The AGM must be held on a working day during business hours at theregistered 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 companiesfrom the above provisions. If any day is declared by the Centralgovernment to be a public holiday after the issue of the noticeconvening such meeting, such a day will be treated as a working day.
Contd.
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.Annual General Meeting
Business transacted at Annual General Meeting. At every AGM, thefollowing matters must be discussed and decided. Since such matters arediscussed at every AGM, they are known as ordinary business. All othermatters and business to be discussed at the AGM are special business.
The following matters constitute ordinary business at an AGM :-
1. Consideration of final accounts, directors report and the auditors report
2. Declaration of dividend
3. Appointment of directors in the place of those retiring
4. Appointment of and the fixing the remuneration of the statutoryauditors.
5. In case any other business (special business) has to be discussed and
decided upon, an explanatory statement of the special business mustalso accompany the notice calling the meeting. The notice should alsogive the nature and extent of the interest of the directors or manager inthe special business, as also the extent of the shareholding interest inthe company of every such person. Contd.
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.Annual General Meeting
Consequences of not holding annual general meeting. Default in holding an
AGM may result in the following consequences:
1. Any member of the company may apply to the NCLT which may in turn
call, or direct the calling of the meeting, and give such ancillary or
consequential directions as it may consider expedient in relation to the calling,
holding and conducting of the meeting. The NCLT may also direct that onemember present in person or by proxy shall 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.
2. A 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 furtherfine of Rs 250 per day for the duration of the default may be levied.
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Extraordinary General Meeting
Regulation 47 of 'Table A' provides: All general meetings other thanannual general meetings shall be called extraordinary general meetings.Thus, every general meeting other than the statutory meeting and theannual general meeting or any adjournment thereof, is an extraordinarygeneral meeting (EGM). Such a meeting is usually called by the Board ofdirectors in emergencies for taking up some urgent business that cannot
stay to be decided till the next AGM.Every business transacted at such a meeting is a special business. Anexplanatory statement of the special business must also accompany thenotice calling the meeting. The notice should also give the nature andextent 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 themembers at the meeting, the notice must also state that the documentwould be available for inspection at the Registered Office of the companyduring the specified dates and timings. Contd.
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..Extraordinary General Meeting
Who can call an extraordinary general meeting? An Extraordinary general
meeting may be called by any four of the following.
1. The Board of directors The Articles of a company may contain provisions for
convening an extraordinary general meeting. For example, it may provide that the
Board may, whenever it deems fit, call an extraordinary general meeting or it may
provide that if at any time directors capable of acting who are sufficient in
number to form a quorum are not in India, any director or any two members of
the company may call an extraordinary generalmeeting.
2. The Board on requisitions The members of a company have the right to seek
calling of an EGM by the directors. The Board of directors must call an
extraordinary general meeting if required to do so by the following number of
members:
On the date of making the demand for an EGM, the strength of members shouldbe at least one-tenths of such of the voting rights in regard to the matter sought to
be discussed at the meeting ; or
If the company has no share capital, the members representing not less than one-
tenths of the total voting rights on that date in regard to the said matter. Contd.
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..Extraordinary General Meeting
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 and the directors should within 21 days, move to call a meetingand the meeting should actually be held within 45 days from the date of
submission of the requisition.
3. By the Requisitionists. If the directors fail to call and hold the meeting as
aforesaid, the requisitionists or any of them fulfilling the requirements stated
above, as the case may be, may themselves proceed to call the EGM within 3
months from the date of the requisition, and claim the necessary expenses from
the company. The company can make good this sum from the directors-in-default.
4. By the National Company Law Tribunal. If for any reason, it is impracticable to
call a meeting of a company, other than an annual general meeting, or to hold or
conduct the meeting of the company, the NCLT may, either i) on its own motion, or
ii) on the application of any director of the company, or of any member of thecompany, who would be entitled to vote at the meeting, order a meeting to be
called and conducted as the Tribunal deems fit, and may also give such other
ancillary and consequential directions as it thinks fit expedient. A meeting so called
and conducted shall be deemed to be a meeting of the company duly called and
conducted.
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Class Meetings
Class meetings are meetings which are held by the holders of aparticular class of shares (i.e., where the share capital of a companyis divided into different classes of shares), e.g., preferenceshareholders. Such meetings are normally called when it isproposed to alter, vary or affect the rights of that particular class ofshareholders. At such meetings, these members discuss the prosand cons of the proposal and vote accordingly Class meetings areheld to pass resolutions, which will bind only the members of theshareholders class concerned, and therefore only members of thatclass can attend and vote. Unless the articles of the company or acontract binding on the persons concerned otherwise provides, allprovisions pertaining to calling of a general meeting and its conductdo apply to class meetings in the same way as they apply withrespect to general meetings of the members. However, allresolutions in a class meeting are required to be passed as specialresolutions.
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Other Meetings
Meeting of Debenture Holders. A company issuing debentures through its
articles may provide for the holding of meetings of the debenture
holders. At such meetings, generally matters pertaining to the variation in
terms of security provided by the company against the debentures or to
alteration of their rights are discussed. All matters connected with the
holding, conduct and proceedings of the meetings of the debenture
holders are normally specified in the Debenture Trust Deed. The decisionsat the meeting made by the prescribed majority are valid and lawful and
binding upon the minority.
Meetings of Creditors. Sometimes, a company, as a running concern, has
to make certain arrangements with its creditors. Hence, meetings of
creditors may be called for this purpose. Similarly, in case of winding up ofa company, a meeting of creditors and contributories is held to ascertain
the total amount due by the company and also to appoint a liquidator to
wind up the affairs of the company.
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REQUISITES OF A VALID MEETING
The following conditions must be satisfied for a meeting to becalled a valid meeting:
1. It must be duly convened. The persons calling the meeting mustbe authorized to do so. The proper authority in this regard is theBoard of directors, members, or the National Company Law
Tribunal.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 properauthority in the chair. The rules of quorum must be maintainedand the relevant provisions of the Act and the articles of
association must be duly complied with.4. The business at the meeting must be validly transacted. The
meeting must be conducted in accordance with the regulationsgoverning the meetings.
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PROXY
A member may appoint another person to attend and vote at a meeting
on his behalf. Such other person is known as Proxy. The term is alsoapplied to the instrument by which the appointment to act on his behalf is
made by the member. In case of a company having a share capital and in
the case of any other company, if the articles so authorise, any member of
a company entitled to attend and vote at a meeting of the company shall
be entitled to appoint another person (whether a member or not) as hisproxy to attend and vote instead of himself. [Section 176]
The member appointing a proxy must deposit with the company a proxy
form at the time of the meeting or prior to it giving details of the proxy
appointed. However, any provision in the articles which requires a period
longer than forty-eight hours before the meeting for depositing with thecompany any proxy form appointing a proxy, shall have the effect as if a
period of 48 hours had been specified in such provision.
A proxy is not entitled to vote except on a poll. Therefore, a proxy cannot
vote on show of hands. The proxy is automatically revoked by the death or
insolvency of the member.
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QUORUM
The term 'quorum' means the specified minimum number of qualified persons
whose presence is necessary for transacting legally binding business at a meeting.
A meeting without the quorum is invalid and decisions taken at such a meeting arenot binding. the quorum for the Board meeting shall be one-third of its total
strength, or two directors whichever is higher, while the quorum for any General
meeting shall be five members personally present in case of public company, and
two members personally present in the case of private company unless the articles
of a company provide otherwise. [Section 174]
It has been held by the courts that unless the articles otherwise provide, a quorum
needs 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 provide otherwise, if within half an hour from the time appointed for
holding a meeting of the company, a quorum is not present in the person, the
meeting :-
if called upon the requisition of members, shall stand dissolved;
in any other case, it shall 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 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 shall
constitute a quorum.
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ROLE OF CHAIRPERSON IN CONDUCTING A MEETING
The chairperson is there to preside over a meeting.
Generally, the chairperson of the Board of directors alsohappens to be the chairperson of the meeting. Unless thearticles otherwise provide, the members present in personat the meeting elect one of themselves to be thechairperson thereof on a show of the hands. If there is nochairperson, or s/he is not present within 15 minutes afterthe appointed time of the meeting or is unwilling to act aschairperson of the meeting, the directors present may electone among themselves to chair the meeting. If, however nodirector is willing to act as the chairperson or if no directoris present within 15 minutes after the appointed time of themeeting, the members present should choose one amongthemselves to chair the meeting. If, after the election of a
chairperson on a show of hands, poll is demanded andtaken and a different person is elected as chairperson, thenthat person will head the meeting from that point.
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Duties of the Chairman
Without a chairperson, a meeting is incomplete. The chairperson is the
regulator of the meeting. The duties of the chair include the following:1. The chairperson must ensure that the meeting is properly convened and
constituted i.e., the proper notice has been given, and that the requiredquorum is present, etc.
2. S/He must ensure that the relevant provisions of the Act and the Articles ofAssociation are observed.
3. S/He must ensure that business is taken in the order set out in the agenda,and no business which is not mentioned in the agenda is taken up unlessagreed to by the members.
4. S/He must impartially regulate the proceedings of the meeting and maintaindiscipline at the meeting.
5. The chairperson has the power to adjourn the meeting in case of indisciplineat the meeting. S/He must exercise his/her powers of adjournment of the
meeting, should s/he in good faith feel that such a step is necessary.6. S/He must exercise his/her power to order a poll correctly and must order it
to be taken when demanded properly.
7. S/He must exercise his/her casting vote bona fide in the interest of thecompany.
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