A company can be defined as a legal establishment encompassing a group of individuals engaged in operating a business. Management of a company requires efforts undertaken by a lot of individuals who discuss and deliberate upon issues before a decision is taken. The decisions are often taken in meetings which is a formal dialogue between administration of the company (generally the directors and in some cases members too) who discuss the affairs and business of the company. The article deals with the meetings that are held in companies and procedure followed thereof.
Meetings under company law
There are certain kinds of meetings that take place in a company which are discussed as follows:
Annual general meeting(AGM)-
According to section 96[i] of the companies Act 2013, every company public and private company is required to hold one general meeting in a year supervised by its directors to evaluate the progress of the company and plan future course of action which is known as annual general meeting.
- Notification[ii] – The meeting has to be pre notified which has to be generally not less than 21 days before the scheduled day. In some cases the meeting can be called on a short notice
- Time and place of meeting – It has to be scheduled in the course of business hours of the company on a working day and cannot be on a national holiday. Generally, it has to be the registered office of the company where the meeting has to take place. It could also be some other place in the city where the main office is registered.
- Due date of the meeting – The meetings are stipulated to be held within nine months from closing of first financial year of the company and six months from the closing in subsequent years. Time elapse between two meetings cannot be more than 15 months. The section also provides that it is on the discretion of the registrar to extend the time of AGM (not more than 3months).
- Tribunal calling the meeting – In case of failure to hold meeting in required time under section 96, the Act provides power to the Tribunal[iii] (which is a quasi-judicial body made to adjudicate disputes arising out of company law) on submission by any member might call or provide directions for calling the meeting[iv].
- Punishment for default – section 99[v] of the companies Act 2013 provides that whosoever is liable for defaulting would be penalised with a fine extending up to one lakh depending on the circumstances.
- Delaying the meeting – There may arise sometime situations where the directors of the company are not able to hold the annual general meeting though the time has elapsed. No liability on part of directors arises in such cases as laid down by learned judge in one of the cases[vi]: “…I am satisfied that the delay in holding the annual general meeting…was due to unavoidable reasons and that neither the company nor any of its directors…are individually responsible for the delay which was due to circumstances entirely beyond their control.”
- Validity after delay – Although legal world has been divided on the validity of an AGM called after defaulting but it is generally considered valid in the eyes of law after the defaulting members pay a fine [vii]
- First Annual General Meeting – After its formation companies hold a meeting either immediately or within six months. It is called first AGM or “statutory meeting”[viii]. It was a compulsory provision until 2013 amendment of company law. Now it is on discretion of the company to hold this meeting.
Extraordinary general meeting (EOGM) –
Section 100 of companies Act lays down the guidelines for the board to call a general meeting extraordinary in nature to deliberate upon some matter requiring immediate attention.
- Calling the meeting[ix]– The board of directors has been vested with powers to call extraordinary general meeting (they cannot call AGM). Also the Act provides calling the meeting on requisition made by members holding not less than 1/10 of shares on day of voting or holding not less than 1/10 of total voting power. Also national company tribunals can call EOGMs.
- Time – The meeting is called between two AGMs to discuss matter requiring serious attention.
- Nature of business–The matters discussed in the meeting are special[x] in nature other than mere discussion on dividends, auditors etc. The matter of urgent importance for instance can be unforeseen costs incurred or change in association of the company. The matters are the ones which are not discussed in statutory or general meetings.
- Notice of meeting– There has to be an explanation provided with the notice of the meeting giving details about the objectives of the meeting. In case of only forwarding a requisition, the company is not bound to provide an explanation[xi].
- Requisitioning the meeting– The requisitionists can call the meeting within 3 months of issuing a requisition notice if the board fails to do so within 45 days (though they have the duty to call it within 21 days). The requisitionists are permitted to go to tribunals if they have been denied the permission to hold EOGM required that they apply for it first themselves.[xii]
Board meetings-
Section 173 of Companies’ act 2013[xiii] provide for meeting of board of directors where they exercise their powers and functions. This is to ensure that board of directors supervise the company efficiently.
- First board meeting – The first meeting should be held within 30 days of the incorporation of the company. The board of directors use their expertise and knowledge and discuss strategies to run the company.
- Time and due date – In a year not less than 4 meetings are to be held and not more than 4 months should pass between two meetings. In other words, every board meeting has to be held within 3 months to complete the required provision.
- Presence of directors – The directors are not required to physically present in every meeting, they can be present through other video or audio means. But there may be certain matters which cannot be discussed through video conferencing or audio visual means and in such cases central government may prohibit the use of the same. Also a director can only remain absent if granted permission by the chairman.
- Notice- Every director has to be pre notified about the meeting at his registered address and notice should be given in not less than 7 days. Moreover the decisions of the meetings are to be notified to directors who were absent from it. If the person responsible for notifying defaults from his duty, he is liable to be penalised. Compliance with the law is ascertained when directors are notified. [xiv]
- Quorum[xv]– A definite number of members or directors have to be present in the meeting according to section 174. The board meeting is to comprise of 1/3 of total members or two directors (whatever is feasible).
- Other meetings – There are certain other kinds of meetings that take place in a company. There are no well-defined sections for such meetings but have been part of company law through various judicial cases and interpretation.
- Creditor’s meetings- Under section 230[xvi] of the Act, companies can make arrangements with creditors. Such arrangements are often discussed in meeting between the directors, board and creditors. It is known as meeting of creditors. In some cases the judiciary may also play an important role in calling meeting of the creditors[xvii].
- Meeting of debenture holders- Companies are entitled to issues debentures[xviii] and to implement the same it calls meeting of debenture holders. It is between the board of directors and debenture holders to discuss the rights and responsibilities related to debentures.
- Audit committee meetings – Section 177 of companies Act provides that companies can have audit committee comprising of directors of companies similar to the main company. These auditors have their own meeting to deliberate upon various issues in meetings of audit committee.
Procedure of meetings
All the meetings held in companies have to follow certain well defined rules and procedure for their efficacious functioning. There may be certain variations but general procedure is same. There are some steps that have to be mandatorily followed:
- Issuance of notification– The board of directors and all the concerned members have to be informed beforehand about the meeting to ensure their presence. It can be a long term or short notice depending on the situation.
- Contents of notice– The notice has to specify place, date , time, description about the matter of importance to be discussed and some brief about business. It has to be duly signed by the convener with the date of issuance.
- Quorum[xix] – The person responsible for notifying the meeting has to ensure that the meeting has been pre notified to appropriate quorum which has to be present in the meeting as specified in the Act. The quorum has to be maintained throughout the meeting. [xx]
- Chairman[xxi] – Every meeting has to be compulsorily presided by a chairperson. Generally, the chairman of the Board of Directors is the Chairman of the meeting.[xxii] He is responsible to initiate the discussion of motions in the meeting and conclude the same. It’s his responsibility to ensure smooth functioning of the meeting. The chairman can also be selected by voting through hands.
- Resolutions– These are the decisions taken in every meeting. When these are put to consideration and voting there are certain procedures and rules to be followed. These are provided in various sections[xxiii].
- Voting – There might be matters on which there is no general consensus and voting has to be done. After detailed discussion, the chairperson may call the matters (if undecided) for voting. There have been specified requirements for voting in different meetings in the companies Act, 2013[xxiv]. The process of voting is supervised by the chairman.
- Adjournment and Minutes – After careful consideration and discussion, the meeting is concluded which is called as adjournment and subsequently dissolution where members disperse. These deliberations have to be documented in an official document of the company providing gist of every meeting which are called minutes of meeting. Every important detail of the meeting has to be included as said in companies’ act 2013. [xxv]
- Report[xxvi] – companies are required to prepare report of the meeting as in case of AGM detailing the conduct of the meeting. The copy of the same has to be filed with the registrar.
Conclusion
A company is an enormous institution where every matter has to be decided by the members of the company using careful consideration and prudence. The companies Act thereof specifies various provisions for meetings to be held so that decisions are taken place after vigilant deliberation. These provisions ensure smooth functioning of the companies and facilitate their effective working.
Frequently Asked Questions
What is the least number of board meetings that companies are required to hold in a year?
Every company is required to hold not less than 4 board meetings and every meeting has to be within 120 days.
Who are the people who can call for an EGM?
Extraordinary General meetings can be called by 4 types of people:
- Board of directors
- Shareholders
- Requisitionists
- Related stakeholders.
Is it compulsory to hold statutory meeting?
It is not compulsory to hold first annual general meeting anymore as there is no such provision in companies Act, 2013.
Does the chairman of the meetings be pre assigned?
No, he could be appointed in starting of the meeting through voting by the members.
Edited by Shikhar Shrivastava
Approved & Published – Sakshi Raje
Reference
[i]Section 96(1) of Companies Act, 2013
[ii] Section 101 of Companies Act, 2013
[iii] Section 408 of Companies Act, 2013
[iv] Section 98(1)of Companies Act, 2013
[v] Section 99of Companies Act, 2013
[vi]S. L. Kapur v. Registrar of Companies [1964], 1 Comp. L.J. 21
[vii]Ruby General Hospital Ltd. &OrsvsSajalDutta[2016] a.p.o.t. no. 319 of 2008 aco no. 64 of 2008
[viii]Companies Act, 1956
[ix] Section 100of Companies Act, 2013
[x] Section 102of Companies Act, 2013
[xi]Vijay M. Porval v. PentokeyOrganly (Inalia) Ltd., (1996) 87 Com Cases 331 (CLB-NR)
[xii]B Mohandas v. AKMN cylinders P(ltd)[1998], 93 CompCas 532 CLB
[xiii] Section 173of Companies Act, 2013
[xiv]A. Chettiar v. Kaleeswarar Mills Ltd[1956], AIR 1957 Mad 309
[xv] Section 174of Companies Act, 2013
[xvi] Section 230 , of Companies Act, 2013
[xvii]Nayacakalou v Minister of Education [2017] NZHC 792
[xviii] Section 71of Companies Act, 2013
[xix] Section 103 of Companies Act, 2013
[xx] Diganth Raj Sehgal, “Meetings under Company Law”, ipleaders
[xxi] Section 104 of Companies Act, 2013
[xxii]General meeting- kinds of company meeting, Legal serviceIndia
[xxiii] Section 114-117 of Companies Act, 2013.
[xxiv] Section 105-110 of Companies Act, 2013.
[xxv] Section 118 of Companies Act, 2013
[xxvi] Section 122 of Companies Act, 2013
