Unit - 4
Company Meetings
Shareholders of a company are the owners of the company owning equity shares issued by the company. A person or corporation can become a shareholder of a company in three ways:
By subscribing to the memorandum of the company during incorporation
By investing in return for new shares in the company
By obtaining shares from an existing shareholder by purchase, by gift or by will.
Powers and privileges of shareholders:
- Appoint officers:
It is the responsibility of the shareholders to appoint corporation officers to help in the running of the business. Shareholders elect directors during annual general meetings; these directors constitute a board that is charged with the responsibility for the overall management of the company. The shareholders also appoint external auditors who examine the corporation’s books of accounts and deliver audited statements at the end of each financial year. The following directors can also be appointed in a board meeting in accordance with the articles of association:
- Additional director, to hold office till the date of the company's next annual general meeting.
- Alternate director, to act as an alternate for a director during his absence from India for a period of three months or more.
- Nominee director nominated by any institution under any law in force at the time or any agreement.
- Director appointed in the case of a casual vacancy in the office of any director appointed in a general meeting in a company. Such appointment needs shareholder approval in the next general meeting.
2. Remove a director:
Generally, a shareholders' ordinary resolution is required for the appointment and removal of directors under the Companies Act 2013. Shareholders also can bring legal action against director by the rules laid down in the Companies Act 2013. They are:
Any act done by the director in any manner which is prejudicial against the affairs of the company.
Any act done which is beyond the law or against the constitution.
Fraud.
When the assets of the company are being transferred at an undervalued rate.
When there is a diversion of funds of the company.
Any act done in a mala fide manner.
3. Voting rights:
Shareholders also have the right to attend and vote at the annual general body meeting. Every company registered in India should comply with the provisions of the Companies Act 2013. It is mandatory for every Indian company to hold an annual general meeting once in every year. They take part in the deliberations of the General Shareholders´ Meeting and to vote as part of the corresponding decision-making processes, including the appointment of the internal institutions and individuals who, in accordance with the Law and the Corporate Statutes, they are entitled to elect and, if necessary, to have effective mechanisms at hand to be represented before said Meetings.
4. Right to call for general meetings:
Shareholders have the right to call a general meeting. They have a right to direct the director of a company to call extraordinary general meeting. They also can approach the Company Law Board for the conduction of general body meeting, if it is not done according to the statutory requirements.
5. Right to proxy representation:
A shareholder also has a right to appoint proxy on his behalf when he is unable to attend the meeting. Though the proxy is not allowed to be included in the quorum of the meeting in case of voting, it is allowed by following a procedure mentioned in the Companies Act 2013.
6. Challenging resolutions:
A single shareholder holding a minimum of 10% of the company's paid-up share capital can challenge a resolution adopted by a general meeting on the grounds of oppression or mismanagement. Such a challenge can be brought about by filing a petition before the National Company Law Tribunal.
7. Information:
The management of a corporation ensures that proper books of accounts and records are maintained so that shareholders can inspect them to get an exact photo of the situation of the business. Shareholders have a right to be presented with audited financial statements and other documents disclosed in articles 446 and 447 of the Code of Commerce, within the fifteen (15) working days prior to the meetings of the General Shareholders´ Meeting, where the end-of-year financial statements are discussed.
8. To receive dividends:
Shareholders have a right to receive dividends as a part of the Company´s profits in a proportion equivalent to the number of shares that the holder owns, in accordance with the provisions set forth by Law and under the Corporate Statutes. Equity shares do not guarantee a fixed return and, in a liquidation scenario, equity shareholders are entitled to a return after all statutory and other pay outs are made. Preference shareholders are given a preference with respect to payment of dividend and repayment in case of liquidation of the company.
9. Transfer of shares:
Shareholders have a right to transfer or dispose of his shares, in accordance with legal provisions and the corporate statutes, as well as to know the methods for stock registration and the identity of the Company’s main shareholders, in accordance with the law.
10. Winding up of the company:
Before the company is wound up the company has to inform all the shareholders about the same and also all the credit has to be given to all the shareholders.
Board refers to board of directors of a company. Minimum / Maximum Number of Directors in a Company- Under Section 149 are discussed below
-Section 149 of the Companies Act, 2013 requires that every company shall have a minimum number of 3 directors in the case of a public company, 2 directors in the case of a private company, and 1 director in the case of a One Person Company.
-A company can appoint a maximum of 15 fifteen directors. A company may appoint more than fifteen directors after passing a special resolution in general meeting and approval of Central Government is not required.
-The maximum number of directorships, including any alternate directorship a person can hold, is 20.
-It has come with a rider that the number of directorships in public companies/ private companies that are either holding or subsidiary company of a public company shall be limited to 10.
-At least 1 director who has stayed in India for a total period of not less than 182 days in the previous calendar year shall be appointed by every company.
-At least one-woman director shall be appointed in every listed company within one year from the commencement of the Act.
-Every other public company having paid up share capital of ₹ 100 crores or more or turnover of ₹ 300 crores or more as on the last date of audited financial statements, shall appoint least one-woman director within one year from the implementation of the Act.
-All the listed public company would have at least 1/3 of the total number of directors as independent directors (fraction is to be rounded off to one).
Powers of Board (section 179)
(1) The Board of Directors of a company shall be entitled to exercise all such powers, and to do all such acts and things, as the company is authorised to exercise and do:
Provided that in exercising such power or doing such act or thing, the Board shall be subject to the provisions contained in that behalf in this Act, or in the memorandum or articles, or in any regulations not inconsistent therewith and duly made thereunder, including regulations made by the company in general meeting:
Provided further that the Board shall not exercise any power or do any act or thing which is directed or required, whether under this Act or by the memorandum or articles of the company or otherwise, to be exercised or done by the company in general meeting.
(2) No regulation made by the company in general meeting shall invalidate any prior act of the Board which would have been valid if that regulation had not been made.
(3) The Board of Directors of a company shall exercise the following powers on behalf of the company by means of resolutions passed at meetings of the Board, namely:
(a) To make calls on shareholders in respect of money unpaid on their shares;
(b) To authorise buy-back of securities under section 68;
(c) To issue securities, including debentures, whether in or outside India;
(d) To borrow monies;
(e) To invest the funds of the company;
(f) To grant loans or give guarantee or provide security in respect of loans;]
(g) To approve financial statement and the Board’s report;
(h) To diversify the business of the company;
(i) To approve amalgamation, merger or reconstruction;
(j) To take over a company or acquire a controlling or substantial stake in another company;
(k) Any other matter which may be prescribed:
Provided that the Board may, by a resolution passed at a meeting, delegate to any committee of directors, the managing director, the manager or any other principal officer of the company or in the case of a branch office of the company, the principal officer of the branch office, the powers specified in clauses (d) to (f) on such conditions as it may specify:
Provided further that the acceptance by a banking company in the ordinary course of its business of deposits of money from the public repayable on demand or otherwise and withdraw able by cheque, draft, order or otherwise, or the placing of monies on deposit by a banking company with another banking company on such conditions as the Board may prescribe, shall not be deemed to be a borrowing of monies or, as the case may be, a making of loans by a banking company within the meaning of this section.
Key Takeaways
- Shareholders of a company are the owners of the company owning equity shares issued by the company.
Different types of meeting under the companies act 2013 are discussed below-
1. Shareholders Meeting:
a. Annual General Meeting – This is defined u/s 96 of Company act 2013, wherein every company, whether public or private, except One Person Company, is required to convene first AGM within 9 months from the end of first Financial Year to decide the overall progress of the company as well as to plan future courses of action.
Place: Such meeting is called at Registered Office of the Company or any other such place in the city where such Reg. Office is situated.
Time Hours: Between 9.00 am – 6:00 pm., and not on any public holiday as so declared by Central or State Government.
Quorum: In case of Public Company–
5 if members are less than 1000
15 if between 1000-5000
30 if more than 5000 members
In case of Private Company, then only 2 that are present will be the quorum.
Time Gap: Gap between two meetings not more than 15 months, and after conducting first AGM, the subsequent AGMs need to be conducted within 6 months from the end of Financial Year, and if there any urgent circumstances or emergency situations arises, when company wasn’t able to conduct the AGM, then the Tribunal may grant the extension of 3 months, but said extension not available in first AGM, and therefore first AGM must be conducted within 9 months from end of F.Y.
b. Extraordinary General Meeting: Certain matters are so much important that they require an immediate attention of the members, and that’s where the Board has been granted to call for such EGM u/s 100 of CA’13.
It can be called through the following ways:
By Board, on suo-moto basis, and the same can be held at any parts of the country.
By requisition of eligible members, wherein the company if having Share Capital, then members holding at least 1/10th of such Share Capital, and if not having Share Capital, then members holding at least 10% of the total voting powers in that company can request to call for such meeting. Such notice has to be well written and specify the nature of business, and duly signed by all the members or any one authorized person acting on behalf of all. And Board needs to call meeting within 21 days of getting such request or maximum of 45 days, by giving such notice to such members prior to 3 days of conducting such meeting.
By Requisionist (provided if Board fails to do so), if Board failing to conduct meeting within 45 days, then the members can call for meeting within 3 months of from the original request made to Board at first instance, and here the members have all the rights to have their name on the main list of members and Board can’t deny this, and also need to accept such changes that might have occurred between 21st to 45th day of date of notice provided to Board at first instance.
c. Class Meeting: Such meeting is convened by a particular class of shareholders only and only if they think that their rights are being altered or if they want to vary their attached rights, as mentioned u/s 48 of CA’13, and u/s 232 also, if under Mergers and Amalgamation scheme, meetings of particular shareholders and creditors can be convened if their rights/privileges are being varied to their interests in such company.
2. Directors Meeting:
a. Board of Directors Meeting: As per Sec. 173 of Company act, 2013, every company needs to convene first board meeting within 30 days of its incorporation, and then minimum four meetings in each calendar year, with time gap of not more than 120 days (at present it is 180 days because of COVID-19) between two board meetings
In case of OPC, Dormant Company, Small Company, Sec. 8 Company or any private company (Start-Up), then required to hold two board meetings in each half of calendar year with time gap of at least 90 days.
In case of Specified IFSC Private & Public Company, then to hold first board meeting within 60 days of incorporation and then hold one meeting in each half of calendar year.
Meeting can be attended by directors either in person, or through audio-visual mode or through video conferencing, subject to the nature of meeting being discussed and after complying with necessary formalities as specified in Sec.173 r/w such rules.
Here notice of at least 7 days is necessary to be given to directors at their registered address with company and also to be provided through e-means, if not possible hand delivery or post-delivery, and there is one exception wherein a shorter notice can be called off for transacting a very urgent matter provided one independent director is present at such meeting.
Quorum: 1/3rd of total directors or two directors, whichever is higher
In case of OPC, 1/4th of total strength or 8 members, whichever is higher
Matters that can’t be dealt here: E.g., Approving Prospectus/ Boards Report/ Annual Financial Statements, scheme of Merger, Amalgamation, Demerger, etc.
3. Other Meetings:
Creditors Meeting (Sec. 230) / Debenture Holders Meeting with the Board of Directors
Audit Committee Meeting (Sec. 177)
Nomination and Remuneration Committee Meeting (Sec. 178)
Key Takeaways
- Every company, whether public or private, except one person company, is required to convene first AGM within 9 months from the end of first financial year to decide the overall progress of the company as well as to plan future courses of action
Every Company shall conduct its first board meeting within 30 days of the incorporation, thereafter a minimum of 4 Board Meetings shall be held every year with a gap between two consecutive meetings of not more than 120 days. Relaxation in this regard has been given to One Person Company (with more than one Director), Small company and Dormant company for whom the provision of this section shall be deemed to have complied with if at least one meeting of the Board of Directors has been conducted in each half of a calendar year and the gap between the two meetings is not less than 90 days.
Procedure for Convening and Conduct of General Meetings:
The business at a meeting is said to have been “validly transacted” if the members of the organisation or body concerned, whether or not they were present, are bound by the decision made there at. They cannot be so bound unless the meeting is validly held. The essentials of a valid meeting are that the meeting should be:
(a) Properly convened: i.e., a proper notice must be sent by the proper authority to every person entitled to attend.
(b) Properly constituted, i.e., the proper person must be in the chair, the rules as to quorum must be observed, and the regulations governing the meeting must be complied with.
(c) Properly conducted, i.e., the chairman must conduct the proceeding in accordance with the law relating to general meetings as per the Companies Act (Sections 101 to 109 of the Companies Act, 2013), the Company’s own Articles of Association or, in respect of any specific matter, by the common law relating to meetings
Who can convene meeting?
Any Director of a company may, at any time, summon a Meeting of the Board, and the Company Secretary or where there is no Company Secretary, any person authorised by the Board in this behalf, on the requisition of a Director, shall convene a Meeting of the Board, in consultation with the Chairman or in his absence, the Managing Director or in his absence, the Whole-time Director, where there is any, unless otherwise provided in the Articles.
Key Takeaways
- Every company shall conduct its first board meeting within 30 days of the incorporation, thereafter a minimum of 4 board meetings shall be held every year with a gap between two consecutive meetings of not more than 120 days.
A meeting is valid provided all the requisites of a valid meeting are present. Broadly, the requisites are divided into three groups:
(1) A meeting must be properly convened or called,
(2) The meeting must be properly constituted and
(3) A meeting shall be properly conducted.
(A) A Meeting must be Properly Convened or Called:
A meeting is said to be properly convened or called when the following conditions are fulfilled:
(1) A notice containing all the details required, has been sent to every person entitled to attend the meeting.
The details are:
(a) The date, time and place of the meeting;
(b) The agenda or the items to be discussed at the meeting in a serial order;
(c) Date of the notice;
(d) Signature of a competent person calling the meeting;
(d) Additional information, if any (for example, explanatory notes to a special business required in a notice of annual general meeting of a company);
(e) Any enclosure required to be sent (for example, a copy of final accounts together with the notice of annual general meeting).
(2) The Notice is sent With in Proper Time:
There are specific rules with regard to that proper time. For example, a notice for any members’ meeting of a company must be sent at least twenty-one days before the meeting.
(3) The notice is sent to the recorded address of the person entitled to receive the notice. The notice may be sent by ordinary post. Under exceptional cases notice can be given over the telephone. The notice may be sent by a messenger.
(B) A Meeting must be Properly Constituted:
A meeting shall be properly constituted or the gathering is valid and competent to take decisions if the following conditions are fulfilled:
(1) The quorum or the required minimum number of persons must be present in person. The quorum shall preferably be continuously present.
(2) There must be a Chairman who is duly elected at the meeting or already elected. He must be a person competent to be the Chairman.
(C) A Meeting shall be Properly Conducted:
(1) The rules and regulations for conducting the meeting are followed. Those rules may be statutory, of the organisation, customary or conventional or a combination of them.
(2) Notes shall be continuously and correctly taken (by the secretary) so that proceedings or minutes can be prepared for evidence.
Notice of Board Meeting
The notice of Board Meeting refers to a document that is sent to all directors of the company. This document informs the members about the venue, date, time, and agenda of the meeting. All types of companies are required to give notice at least 7 days before the actual day of the meeting.
Agenda of board meeting
Agenda means things to be done in the meeting. It is a predetermined program of the business to be transacted in the meeting. It is a systematic record of the items of business in their proper order of importance.
Key Takeaways
- The notice of board meeting refers to a document that is sent to all directors of the company. This document informs the members about the venue, date, time, and agenda of the meeting.
References:
- Gowar, LCB, Principles of Modern Company Law, Stevens & sons, Londan.
- Hanningan, Brenda, Company Law, Oxford University Press, U.K
- MC Kuchhal Corporate Laws, Shri Mahaveer Book Depot. (Publishers)
- J.P. Sharma, An Easy Approach to Corporate Laws, Anne Books Pvt. Ltd., New Delhi
- Ramaiya, A Guide to Companies Act, LexisNexis, Wadhwa and Buttersworth
- Kannal, S. AND V.S. Sworirajan, Company Law Procedure, Taxman Allied Services(P) Ltd., New Delhi
- Singh, Harpal. Indian Company Law, Galgotia Publishing, New Delhi
- Companies Act and Corporate Laws, Bharat Law House Pvt. Ltd, New Delhi
