This article is written by Shweta Singh. The article attempts to provide exhaustive information regarding the Annual General Meeting. The article highlights key aspects such as the importance of the annual general meeting holds in today’s corporate world, the legal requirements pertaining to conducting the meeting as outlined in the Indian Company Law, and the procedural aspects related to it.

It has been published by Rachit Garg.

Introduction

In the corporate world, every crucial decision regarding the course of a business, ranging from obtaining a loan from the bank or approving financial reports is decided and approved during the meetings of the company. For such purposes, a company conducts several types of meetings like Board Meetings, Class Meetings, Annual General Meetings, Extraordinary General Meetings, etc., with each meeting having a different purpose and agenda. Amongst these meetings, the Annual General Meeting holds the utmost importance as it provides a stage for every shareholder of the company, the Board of Directors, and other stakeholders to participate and discuss important matters. Typically, the meeting addresses a wide range of key topics fundamental to the company’s operations and performance, including the presentation and discussion of financial reports, strategic plans for the future, appointments of company officials (directors, key managerial personnel, managers, etc.), and any other pertinent business matters. It also enables the member to vote on important matters and analyse the overall governance and strategic direction of the company. Thus, the annual general meeting is crucial in corporate affairs as it facilitates transparency and accountability together with engaging shareholders to participate in the organisational functions. Due to its importance in the business world, certain guidelines have been provided under the Indian laws to ensure that the meeting is conducted in accordance with the rules and guidelines provided under those laws. The Companies Act of 2013, (hereinafter referred to as “Act of 2013”) regulates the conducting of the annual general meeting by the company. It mandates every company to conduct a meeting every year in compliance with the statutory requirements provided under the Act of 2013. 

This article elaborates on the various provisions contained in the Act of 2013 that deals with the conducting of Annual General Meeting and the procedures that are required to be followed for conducting a valid meeting.

What is an Annual General Meeting (AGM) 

It has been mandated by the Act of 2013 that every company operating its business in India is required to conduct at least one meeting comprising of all the shareholders every year and such meeting shall be known as the Annual General Meeting (hereinafter referred to as “a meeting” or “general meeting”). The meeting is the assembly of all the shareholders of the company, the Board of Directors, and other stakeholders to discuss important matters regarding the company’s future operations. It provides a forum for the company to communicate crucial information, so that the stakeholders can participate actively in the decision-making process. Under the Act of 2013, specific provisions from Section 96 to Section 112 govern the conduct and proceedings of the meeting. It outlines the requirements and obligations imposed on companies to convene and manage the meeting in accordance with legal standards and regulations. The provision regarding the meeting is contained under Section 96 of the Act of 2013. 

Importance of holding an Annual General Meeting (AGM)

It is important for every company to conduct the meeting every year as it assists in safeguarding the interest of the shareholders of the company. Through participation in the meeting, the shareholders of the company get the opportunity to participate and discuss important matters affecting their interest in the company. The conducting of the meeting is important in order to ensure the interest and welfare of the shareholders of the company, providing them with the platform to come together and assess the performance of the company. Such participation by the members is exercised by way of scrutinising and electing directors, appraisal of retiring auditors, and deciding on their re-appointment. Moreover, the meeting also provides the shareholders with a platform for deciding upon crucial matters of the company like declaration of dividends. In the meeting, the directors of the company are required to present the annual accounts, which are subjected to the scrutiny of the shareholders who are empowered to make any inquiries concerning the company’s finances and operations. The meeting typically follows the agenda outlined in the company’s articles, covering routine matters known as ordinary business, while also allowing for the discussion of special business, and addressing any additional issues pertinent to the company’s interests and operations.

Time frame for conducting an Annual General Meeting (AGM)

The comprehensive analysis of Section 96 (1) and the proviso provided under this Section, entails that there are 3 fundamental conditions regarding the conducting of the general meeting by the company. 

• Firstly, it is mandatory for the company to conduct the general meeting every year, ensuring a recurrent forum for shareholder engagement and oversight. 
• Secondly, it is further provided that there should not be a gap of more than 15 months between successive meetings, ensuring regularity and continuity in shareholder interactions. 
• Thirdly, the meeting shall be held within a period of six months from the date of the closing of the financial year. In the case of a newly incorporated company, the meeting is required to be held within a period of nine months from the closing of the financial year. However, if the meeting is held by the newly incorporated company as provided above, in such case it is not required to hold the meeting in the year of its incorporation. This provision grants flexibility to newly established companies, allowing them adequate time to stabilize their operations before fulfilling the statutory requirement for holding a meeting.

For instance, if the company is incorporated on 1st January 2015, then as provided in Section 2 (41), the first financial year shall conclude on 31st March 2016. Hence, as per the requirement provided above for the newly incorporated company, the meeting must be convened on or before 31st December 2016 and such a meeting shall be considered as a collective meeting for both the years 2015 and 2016. However, if the company gets incorporated on the date 31st of December 2014, its financial year shall close on 31st of March, 2015, and thus the company shall have to convene the meeting on or before 31st of December 2015. Such a meeting pertains solely to the year 2015, marking the commencement of the company’s compliance with the statutory obligation to hold annual general meetings.

Exemptions

According to the provisions contained in Section 96(1), every company is required to conduct a meeting every year, except for the one-person company as defined under Section 2(62) of the Act of 2013. It is not mandatory for the one-person company to hold the general meeting. The manner in which the company can pass a resolution regarding ordinary and special business (Section 114) as discussed or decided by in the meeting is provided under Section 122 of the Act of 2013. 

Extension of time 

The third proviso to Section 96(1) of the Act of 2013 vests the Registrar with the authority to   extend the time for conducting the meeting. It permits the company to request an extension  of time from the registrar for holding the meeting. If allowed by the Registrar, the company is exempted from holding the meeting at the stipulated time frame as provided above. However, there are certain restrictions to such extension of time by the Registrar. The Registrar can grant an extension for holding the meeting, but it cannot exceed 3 months from the specified timeframe.

Such an authority of the Registrar is discretionary in nature. It is to be noted that such an extension is not applicable in the case of the company holding its first meeting after incorporation.

Time and place of an Annual General Meeting (AGM)

The time and place where the meeting will be held is of utmost importance in order to provide the members with the convenience of attending the meeting. The Act of 2013 provides a guideline to decide upon the time and place of the meeting of the companies. Section 96(2) stipulates that the meeting must be conducted during business hours, i.e., 9:00 am to 6:00 pm. This section further mandates that the meeting should take place at a location with which the company has registered itself. The meeting can take place at another location as well, but such a location has to be in the same city, locality, district, or village where the registered office is located.

There are certain exceptions to this rule in case a company is an unlisted company. The proviso to Subsection 2 of Section 96 allows the unlisted company to hold its meeting at any other place as it deems necessary, however, it can only be done if the prior written or electronic consent has been obtained from all the members. This exception allows the unlisted company the flexibility to convene meetings at venues beyond their registered office or its vicinity, as long as all members agree in advance. It is further provided under the second proviso to the above-mentioned Section that the Central Government has the authority to exempt any company from fulfilling the requirement prescribed under this Section subject to such conditions as considered necessary. The exception to this requirement is also applicable in the case of Section 8 Companies. The Section 8 companies can held its meeting at any time, date, and place provided it has been decided beforehand by the Board of Directors and is in accordance with any directions given by the company in its general meeting.

Calling of an Annual General Meeting (AGM) by the tribunal

When the company fails to conduct the general meeting for a particular year as mandated by the provision of Section 96, the National Company Law Tribunal (NCLT) has the authority to call the meeting, even if any of the provisions of the Act of 2013 or the Articles of the company state otherwise. The provisions regarding calling the meeting by the Tribunal are provided under Section 97 of the Act of 2013. According to the provisions of this Section, when the company defaults in conducting the meeting, any member of the company can approach and ask the Tribunal to schedule a meeting. Upon receiving the request, the Tribunal after analysing the request shall call and direct the conducting of the meeting along with some additional and necessary directions. Such a direction may also include a rule regarding constituting the quorum with only one member, who  is present in the meeting either physically or by proxy. In the case of Priyanka Overseas Pvt. Ltd. And Ors. vs. Pasupati Fabrics Ltd (2007) it was observed by the Company Law Board (Board) that active involvement of shareholders in the general meetings is one of the essential statutory rights that shareholders have. Consequently, according to Section 167 of the 1956 Act, if a company refuses to convene a general meeting, any member of the company could apply to this Board with a prayer to call or direct the calling of a general meeting. 

Section 97 (2) further provides that the meeting called by the Tribunal shall be deemed to be the official annual general meeting of the company provided all the directions as outlined by the Tribunal are met.

For example, company A has failed to conduct its meeting within the time frame prescribed under Section 96. A shareholder, named Mr. X, can file a request with the Tribunal to call the meeting as provided under Section 97, and thus exercising this right he files an application with the NCLT. Thereafter, NCLT reviews the application and if considered necessary directs the company to conduct the meeting. Additionally, the Tribunal by acknowledging the challenge of reaching a quorum, decides that the presence of Mr. X alone, whether in person or by proxy, will fulfil the quorum requirement for this meeting. Consequently,  the meeting proceeds with Mr. X’s presence, meeting the criteria set by the Companies Act, as per the Tribunal’s directive under Section 97.

Consequences for not holding an Annual General Meeting (AGM) within the time frame

Companies that fail to hold their annual general meetings within the specified period, as mandated by Section 96 of the Act, 2013, are in violation of the law and are subject to penalties under Section 99 of the Act of 2013. Section 99 also provides that if the company defaults in complying with the direction of the Tribunal that has ordered to conduct the meeting, such a default is also liable to be fined under this Section. The penalty under this Section is on a continuity basis until compliance is achieved, meaning that fines may continue to accrue until the company holds the required meeting within the prescribed time frame. In the case of Mathew vs. Nadukkara Agro Processing Co. Ltd. (2001), it was observed by the Kerala High Court that the failure to conduct the meeting is a continuing default, and hence what must be done in such a circumstance is to direct the conducting of the meeting at the earliest. By applying this principle, the court in this case directed the company to convene the meeting within one month from the date of the order.

When the company defaults in complying with the stipulated time frame for conducting the meeting, the company together with every officer, who is responsible for such a default shall be responsible for paying the penalty which may extend to one lakh rupees. If the default is not rectified within the time as directed by the appropriate authority, then an additional fine shall be imposed which may extend to five thousand rupees for every day till the default persists. The MCA through its adjudication order in the matter of Ringming Hotels And Restaurants Private Limited under Section 118 r|w Section 454(3) of the Companies Act, 2013 observed that the firm did not file for its Annual Return and Financial Statement together with the Directors Report for the first fiscal year, which was 2018-19. As a result of this, there is no record of Board Meetings or Annual General Meetings which is statutorily required by Section 118 of the Companies Act, 2013. Therefore, a penalty was imposed on the company and its officers for the amount of Rs. 25,000/- and 5000/- respectively.

In the case of Re. El Sombrero Ltd. (1958) 3 All ER 1, it was clearly held by the Chancery Court that the meeting must be convened, regardless of whether the annual accounts to be subjected to review during the meeting are prepared or not. Directors have a legal obligation to call the meeting, even if the accounts, which are just one of the meeting’s agenda items, are not yet finalised.

Provisions related to Annual General Meetings (AGM)

The provision regarding the meeting is contained in Section 96 of the Act of 2013. In addition to this, the procedure for conducting the meeting and legal requirements that need to be fulfilled in order to validly conduct the meeting is provided from Section 101 to Section 121 of the Act of 2013. The rules regarding conducting the meeting are also provided in Rules 18 to 23 of the Companies (Management and Administration) Rules, 2014. These rules provide for the procedure to hold the meeting, quorum, members’ rights, and minutes of  meeting. The companies are also required to comply with the rules contained in the Secretarial Standard on General Meetings, which act as a guide for conducting the meeting in accordance with the provisions contained in the Act of 2013.

Applicability of secretarial standard on general meetings

The “Secretarial Standard on General Meetings” (SS-2), developed by the Secretarial Standards Board (SSB) of the Institute of Company Secretaries of India (ICSI) and endorsed by the Central Government, is mandatory under Sub-Section (10) of Section 118 of the Act of 2013. Effective from July 1, 2015, SS-2 applies to all general meetings for which notices are issued on or after this date. It lays down a comprehensive framework for the organisation to conduct general meetings and related matters. This guidance note aims to elucidate the provisions outlined in SS-2, offering explanations, procedures, and practical insights to aid stakeholders in ensuring compliance. 

The fundamental law with respect to conducting the meeting is contained under the Act of 2013. SS-2 aims to provide uniformity and established guidelines which are the foundation and core of the corporations’ general meetings, thereby ensuring and promoting adherence to the implementation of set principles found within the Act of 2013. Complying with SS-2 leads to the establishment of robust procedures and systems that guarantee the company’s needs and responses to stakeholders. Among the most serious problems related to non-compliance, particularly in smaller -and private- companies, are misconduct and poor record keeping as a result of which litigation may result. The very first goal of SS-2 is to tackle these problems effectively by letting these guidelines cater for all the general meetings that need successful execution as well as documentation.

SS-2 highlights responsibilities performed by the Company Secretary, including overseeing the effective decision-making process and maintaining the integrity of meetings. The duties of the Company Secretary can be temporarily performed by members of the Board of Directors or by a member of the management on an ad hoc basis, provided that they have been granted the necessary authority by the Company. Furthermore, SS-2 does not seek to replace existing laws but rather supplements them to enhance corporate governance. Hence, it is also necessary that alongside compliance with SS-2, companies must also adhere to other applicable laws, rules, and regulations. 

In instances where there are divergences between the SS-2 guidelines and the relevant applicable laws, the more severe laws, that impose stricter requirements or penalties must be adhered to so as to maintain compliance with higher standards. In a nutshell, the SS-2 is a core component that facilitates transparency, accountability, and fulfilment of legal requirements at the general meetings thereby forming part of the institutional framework for companies, which serves the purpose of building trust among stakeholders.

Procedural requirements of holding an Annual General Meeting (AGM)

The procedure regarding the meeting is contained from Section 101 to Section 121 of the Act of 2013, together with SS-2. It is mandatory for the company to conduct the meeting in accordance with the provisions contained under these sections to constitute the meeting and its proceedings validly.

The meeting should be called by the proper authority

The first essential requirement, as per Para 1.1 of SS-2, for conducting an Annual General Meeting by the company is that the meeting should be called by a competent authority. The authority to call a general meeting rests with the Boards of Directors of the company collectively or with individual members such as a Director, Company Secretary, Manager, or any other officer of the company. However, these individuals do not have the power to independently convene the meeting. They can do so only if they are specifically authorised by the Board of Directors to call the general meeting. Such a requirement ensures that there exists a collective decision and authorisation for conducting the meeting preventing the unilateral exercise of this significant corporate power by a single individual.

Need for a properly constituted board to call a meeting

As mentioned above, the first requirement for conducting the meeting is that it should be called by the Board of Directors of the company, but if the Board is not properly constituted and the meeting is called by them, will it render the general meeting invalid? 

According to the SS-2, the Board shall be deemed to be incomplete if the minimum number of Directors required by the Act of 2013 or the articles of the company have not been appointed. Consequently, if a meeting is convened by the Board that is not properly constituted in accordance with the legal requirements, then both the meeting and any resolutions passed in such meeting shall be considered invalid.

Notice for a meeting

The other most important requirement for conducting the general meeting validly is to ensure that the notice of the meeting is provided to all members of the company. The provision regarding the sending of the notice is contained under Section 101 of the 2013 Act. Section 101 expressly states that the requirement of sending notice extends to every single member involved in the company. 

It was therefore held in the case of Gajanan Narayan Patil vs. Dattatraya Waman (1990) that a purposeful omission to give notice to even a single member of the company has the effect of invalidating the entire meeting. However, as per Section 101 (4) if the omission is unintentional or a member does not receive the notice such failure shall not render the proceeding of the whole meeting invalid.

This principle emanates from the theory that the major corporate decisions are taken by the members of the company collectively. By providing notice to every member, the company makes sure that everyone has the opportunity to be informed and participate in the decision-making process.

Form of notice

According to Section 101(1), the notice to be given to the members should be in writing and must be sent 21 days before the convening of the meeting. However, a meeting can be called by giving a shorter notice, as provided under the proviso to Section 101(1). However, such an exception to the general rule of 21 days can only be availed if consent is given by all the members entitled to be present in the meeting. The consent for shorter notice may be given before the meeting or in some cases on the day of the meeting through Form no. 22 A as prescribed in the Companies (Central Government‘s) General Rules and Forms, 1956.

Computation of 21 days for giving notice

The term ‘not less than twenty-one days’ as provided under Section 101(1) is considered as complete 21 days, in the interpretation of which both the posting and the date of the actual meeting are excluded while calculating the notice period. In computing the notice period any holidays that come during such a period are included. Moreover, if the notice for the meeting is sent by post, an additional 48 hours are included in the calculation of the notice period. The case of NVR Nagappa Chettiar vs. Madras Race Club (1948) can be taken as an illustration for computing the 21 days of the notice period. The Madras High Court in this case stated that the notice that was posted on the 16th of October for the meeting to be convened on the 7th of November falls short of 1 day in the computation of 21 days. The court clarified that while computing a period of 21 days the day when the notice was posted and the day of the meeting has to be excluded. The gap of 21 days between the date of posting and the day of the meeting should be clear and complete. 

Persons entitled to receive the notice

As mentioned above the service of notice of the meeting on every member of the company is mandatory. Section 101(3) specifically outlines all those individuals who are entitled to receive the notice of the general meeting. This particular section provides that a notice is required to be sent to each and every member of the company, directors as well as to the auditors of the company. If the member is deceased, then the notice is required to be sent to the legal representative of the member and if an individual is insolvent, then his assignees shall become entitled to receive a notice. Moreover, the auditors as well as every director of the company shall be given notice of the general meeting. 

In the case of a private company, that is not a subsidiary of a public company, the Articles of such company may specify additional individuals upon whom the notice is required to be served.

It is pertinent to note here that though it is mandatory to serve notice on every member of the company, the entitlement to receive meeting notices is not universal among all members, as Articles often dictate specific conditions. Such an exception can be made in the case of preference shareholders. They can be excluded from receiving notices and voting at the general meeting. However, there are certain circumstances under which it becomes obligatory for the company to issue notice to preference shareholders. When preference shareholders’ dividends are in arrears for a specified period Section 47(2) mandates the company to send them notice, as they retain the right to attend and vote in such situations.

Section 101(4) of the 2013 Act provides that any omission or non-receipt of notice to any member does not in itself render the proceedings of the meeting invalid. However, if the notice is not served due to some deliberate intention then that may be considered as a ground for invalidating the meeting. 

In the case of Musselwhite vs. C.H. Musselwhite & Sons Ltd. (1962) Ch 964,the Chancery Court opined that if the notice is mistakenly not served to a member based on the incorrect belief that they are not a shareholder, this would not be considered an accidental omission. Further, in the case of Maharaja Export vs. Apparels Exports Promotion Council (1985) the Delhi High Court defines the accidental omission as a non-deliberate and unintentional oversight, emphasising that the omission must not only be unplanned but also not purposeful. Such a legal framework emphasises that corporate affairs are run in a fair, transparent, and in accordance with the acceptable principles of corporate governance.

Contents of the notice

It is mandatory as per the provisions contained in Section 101(2) that the notice should contain information regarding the date, time, and location of the meeting. In addition to this, the notice must also contain a detailed statement regarding the specific business going to be transacted in the meeting.

Day, date, and time of the meeting

The day at which the meeting is going to take place along with the exact time of the meeting serves as important information for the members to ensure their presence in the meeting. Thus, it is important that every notice provided by the company to its members must clearly state the day, date, time, and venue of the meeting. Consequently, an omission made in this regard renders the meeting invalid. For instance, if the notice contains incorrect information regarding the day of the meeting resulting in a mismatch between the day of the week and the provided date and month, such a notice shall be considered as bad in law.

It is further provided that every meeting shall be convened during business hours, i.e., between 9 a.m. to 6 p.m. on any day excluding a National Holiday. As per section 96(2) of the 2013 Act a general meeting can be scheduled on any day, including public holidays or Sundays, however, it cannot be held on a day that is a National Holiday.

Another requirement for the notice to be valid is that it must contain a precise time for the commencement of the meeting, for instance, 11:00 a.m. As held in the case of Rao Bahadur MRSRathnavelusami vs. MRS Manickavelu Chettiar (1950) the failure to mention the meeting’s hours renders the notice and any resolutions passed during the meeting invalid.

It is important to note that the time mentioned in the notice signifies the starting time of the meeting. As clarified by the Ministry of Corporate Affairs (MCA) [Letter of the then Department of Company Affairs, No.8/16(1)/61-PR dated 9-5-1961]. The ‘time’ specifically refers to the hour of commencement of the meeting, however, there is no requirement for it to conclude within this timeframe, allowing flexibility for meetings to extend beyond regular business hours if necessary.

Venue of the meeting

According to Section 101(2) of the 2013 Act, the notice should contain comprehensive details regarding the venue where the general meeting is to be held. Such comprehensive details include a route map and a prominent landmark for easy identification. Even though e-voting is mandatory for such a company, such practice of providing full details regarding the venue of the meeting is beneficial for members who may prefer to attend the meeting physically.

The term ‘place’ in clause 2 of Section 101 implies the exact location or full postal address where the meeting will take place. In the case of Aidqua Holdings (Mauritius) Inc vs. Tamil Nadu Water Investment Co. Limited (2014), it was held by the court that the company cannot choose a meeting place prohibited by its Articles in order to ensure that individuals can easily locate the venue without encountering any difficulty.

The practice of providing a route map and a prominent landmark is considered a good practice, however, such inclusion may not be necessary if the venue of the meeting is generally known to the members. For instance, Mr. X, Ms. Y (Mr. X’s wife), and Mr. C (Mr. X & Ms. Y’s son) are Directors and Members of XYZ Ltd. Along with four other members who are siblings of Mr. X, they plan to hold a General Meeting at Mr. X’s residence. Because everyone in XYZ Ltd. knows Mr. X’s residence and it’s easy to find, there’s no need to include a route map or prominent landmark in the notice.

As per the requirement under SS-2, the meeting may be held either at the registered office of the company. The company may also take place at any other location, but such location has to be within the same city, town, or village where the registered office of the company is located.

Statement to be annexed to the notice

In addition to mentioning the date, time, and place of the meeting, section 101(2) also provides that every notice for a meeting is required to include a comprehensive statement regarding the business to be transacted during the meeting. 

As per Section 102 of the 2013 Act, a business is categorised into two types. The first type of business is known as the General Business and the other one is known as Special Business. The general business as provided under Section 102(2), includes the consideration of accounts and the directors’ report, declaration of dividends, and the appointment of directors and auditors, along with fixing their remuneration. These matters are typically addressed at annual meetings. On the other hand, any other business at an annual meeting and all business at extraordinary general meetings fall under the special business category. This can include significant decisions or matters beyond the routine affairs of the company.

Where the business to be transacted at the general meeting includes the further issue of capital, that falls under the special business category, it becomes obligatory to mention such special business in the notice sent to its member. The failure to do so not only renders the meeting invalid but also impacts the validity of the notice itself and any subsequent actions related to the further issue.

Section 102 of the 2013 Act provides in detail as to what all special business that is going to be dealt with in the meeting should be mentioned in the notice calling for the meeting. The section mandates that if any special business is intended to be conducted in an annual meeting, a notice is to be attached with the statement explicitly indicating such business. The provisions of this section further mandate that the statement attached to the notice should comprehensively outline all relevant facts related to each aspect of the special business, ensuring a transparent disclosure of information. The statement should also contain information disclosing any potential interests held by directors or other key managerial personnel in the matter because it becomes crucial for the shareholders who are asked to vote on the matter to have a thorough and open disclosure of the facts that might affect their decision. Such a disclosure by way of attaching a statement to the notice serves the purpose of keeping members informed about the nature of the business to be discussed in the meeting. It also ensures that the members have the necessary information to make informed decisions during the course of the meeting.

Contents of the statement

When a meeting involves special business, the notice must contain a statement with key details about each special business item. As provided under Section 102(1) the statement must cover the nature of concern and interest, whether financial or otherwise related to directors, managers, key managerial persons, and relatives of these persons. In addition to this clause 1 of section 102 further provides that the statement must also contain all that information that assists the members in understanding the meaning, scope, and implications of the business to be discussed in the meeting as such information empowers members to make informed decisions during the meeting when asked to vote on these matters.

The form of such disclosure can be understood with the help of an example. For example, if the meeting involves consideration of a special business that pertains to or influences another company, then the notice shall be attached with the statement specifying the extent of shareholding in the other company by every promoter, director, and manager, as well as for every other key managerial personnel if their shareholding in the paid-up capital is more than 2%. Another example would be if in the meeting a particular document is to be referred to that relates to the special business, the notice must specify the time and place where such document can be inspected by the members. It is to be understood with the help of these examples that such information ensures transparency and provides every member with the opportunity to review relevant materials before the meeting, fostering an informed decision-making process.

The decision made by the court in the case of Bimal Singh Kothari v Muir Mills Co Ltd. (1952) highlights the importance of notice being transparent, clear, and complete. In this case, a large group of shareholders resides at considerable distances from the company’s registered office. The court held that it is unfair to merely leave the proposed articles at the registered office and inform shareholders of that fact. In such cases, printed copies of the new Articles should be sent along with the notice to ensure sufficiency. Failure to do so renders the notice inadequate.

The importance of disclosing material facts is underscored by instances where non-disclosure has led to legal consequences. For example, if a notice contains  information that the meeting is convened for the purpose of adopting an agreement related to the proposed transaction of selling one company’s assets to another. A notice fails to fully disclose important information, such as compensation payable to directors as compensation for loss of office. In such a case, if the court determines that the undisclosed information is significant and could impact shareholders’ decisions, it may declare that the notice did not fairly represent the true purpose of the meeting.

According to Section 102(4), if by reason of any non-disclosure or inadequate disclosure in any statement made by a promoter, director, manager, or other key managerial personnel, such person or their relative accrues any benefits either directly or indirectly, then in such circumstances they are responsible to hold such benefits in trust for the company. Moreover, they are also liable to compensate the company to the extent of the benefits received by them. The provision with this regard has been incorporated under the Act of 2013 to ensure that any benefits arising from non-disclosure or insufficient disclosure are treated as belongings to the company and the person benefiting must repay the company for the value of those benefits.

Section 102(5) of the Act of 2013 provides that, if any individual fails to adhere to the provisions as outlined under Section 102, then such individuals including promoters, directors, managers, or other key personnel found to be in default shall be made subject to a penalty. As per the provision of clause 5 of Section 102, the person who is found to have non-complied with the provision of this section shall be fined with the amount being either up to Rs 50,000 or five times the value of the benefit accrued to the person in question, whichever amount is higher. 

Quorum for an Annual General Meeting (AGM)

The term “quorum” refers to the minimum number of members that are required in order to declare a meeting to be valid. Quorum is essential for assuring the presence of sufficient members to effectively make decisions throughout the meeting. Quorum requirements help maintain the integrity of the decision-making process and prevent decisions from being made without adequate representation.

The provisions contained in the Act of 2013 with regard to quorum provide the minimum number of members needed to be present to have a valid meeting. The Articles of Association, which is the governing document of the company, may require a higher number of members needed to constitute a valid meeting. This provides companies with the flexibility to set quorum levels that align with their specific organisational needs and structures.

The provisions related to quorum are contained under Section 103 of the Act of 2013. According to section 103, there are different categories of firms for which different minimum quorum requirements are specified. For example, a different quorum is required in case of a private company and public company. The quorum requirement in case of a public company also depends upon the number of members the company has. However, the Articles of Association of the Company may determine a higher figure than the minimum threshold required by the law.

Why quorum is required

According to SS-2 the presence of a quorum is essential for a meeting to be constituted appropriately and the proceedings to be considered as valid. The quorum specifies the minimum number of members that need to be present in person for the purpose of the meeting to be considered officially convened and for business to be transacted in a legally recognized manner.

It is vital to ensure that a quorum is present during the entire voting period, conference, and even adjournment for an effective meeting. Not only must it be set at the very beginning of the meeting, it must be maintained consistently during the conducting of the business. In other words, there should be a quorum not only at the commencement of the meeting but also at the time of decision-making on different issues at hand.

The necessity of a quorum during the decision-making process is particularly emphasised. The mere presence of a minimum number of members at the beginning of the meeting is not sufficient. A quorum must be maintained when the critical questions or issues presented before the meeting are actively being decided. This guarantees that decisions are made with the majority of those in the meeting thus participatory democracy is rendered possible resulting in the enhancement of the legitimacy and validity of the meeting’s outcomes. Therefore, a meeting is considered to have been held in the right way and is legally valid only when there is a continuous presence of a quorum.

There are different quorum requirements for both private and public companies unless a larger quorum is prescribed by the Article of the respective company under section 103 of the Act of 2013.

The quorum requirement for a public company

In accordance with Section 103 (1) (a) of the Act of 2013, the requirement of a quorum for a public company depends upon the total membership of the company. Thus, on the day of the meeting the total membership of the company is less than one thousand (1000), the quorum for the meeting shall be five (5) members personally present. On the other hand, if the membership of the company ranges from one thousand to five thousand, the quorum shall be fifteen (15) members personally present. Moreover, if the membership exceeds five thousand, then in such a case, the quorum shall increase to thirty (30) members personally present.

However, it is important to note here that the public company has the flexibility of establishing a higher quorum than the statutory requirement outlined in the Act through its Articles. In such a scenario the company is obligated to adhere to the quorum as specified by the company in its Articles. This requirement balances the adaptability to the company’s internal governance structures while maintaining a threshold of member representation for valid decision-making during meetings.

The Quorum Requirement For A Private Company

As per clause (b) of Sub-section (1) of Section 103 of the Act of 2013, the quorum requirement for a private company is two (2) members personally present.  As with the case of public companies as provided above, private companies too, can prescribe a higher quorum than required by the provision of the Act of 2013 through its Articles. Where the higher quorum is specified under the Articles of the private company, such a requirement shall be complied with. It is also provided that the requirement of the quorum should be maintained during the meeting. It is not sufficient for the quorum to be present only at the start of the meeting, but throughout the meeting, whenever any business is proposed to be transacted.

Requirement of quorum under articles of the company

In accordance with Section 103(1), the Articles of the company may set a quorum with a number of members that exceeds the statutory minimum. In addition, the Articles of the company may also provide for the provisions dealing with the composition of the quorum. Generally, such clauses are present in agreements mainly among shareholders such as the shareholders’ agreement or the share subscription agreement, which give the preferential vote or other specific rights to shareholders. For the legal compliance of these contractual agreements, they need to be included in the company’s articles, which is a document signed by all the shareholders. Thus, once inserted into the Article, these provisions carry statutory binding force, superseding the requirements of the Act. Through this mechanism, the provisions of the Articles supersede those of the contractual nature among shareholders by the application of a stricter regime than what is statutorily stated.

Members constituting the quorum

As per para 3.1 of SS-2 in order to establish a quorum for the purpose of convening a meeting, the members constituting the quorum must physically present themselves. Only those members who are present in person shall be considered to ascertain the quorum. It is mentioned that proxies representing the interest of the member absent in the meeting are not taken into consideration while determining the quorum. A proxy cannot be considered equivalent to a member personally present and is therefore excluded from the determination of the quorum.

However, certain individuals who are representing body corporates, Government officials like the President or Governor, and a donee of a power of attorney specifically authorised to attend the meeting, are considered as members personally present and are included in quorum calculations. These include:

Para 3.2 of SS-2 further provided that in no other case, an individual attending a meeting as a representative of a member absent from the meeting shall be considered a member 

personally present for quorum purposes.

For the purpose of establishing the quorum, joint shareholders shall be considered as a single member. As per the terms provided in the Articles of the company, any one of the joint shareholders present at a meeting has the power to exercise the voting right and contribute to the quorum count. Similarly, in the case of multiple joint shareholders, only one amongst them is entitled to exercise voting rights, when it comes to voting on a particular matter. As per Regulation 52 of Table F of Schedule I of a Regulations For Management of A Company Limited By Shares the senior holder among the joint holders has the exclusive right to exercise the voting rights, disregarding the others.

With regards to a body corporate, an individual who attends the meeting in person as an authorised representative for multiple bodies corporate, such an individual is considered equivalent to the number of bodies represented for the purpose of establishing the quorum. However, in order to officially constitute a meeting a minimum of two members are required to be present in person. For example, if a public company has a total membership of less than 1000 members, the quorum requirement to constitute the meeting is five, in this case even if the body representative who represents five body corporate is present in the meeting, it shall not constitute a quorum, representative of other body corporate is also required to be present for the quorum to be present validly. 

It is important to note that the members who are present and attend the meeting by way of an e-remote facility are also counted for the purpose of quorum. The related party of the company, though they do not have the right to vote, shall also be considered while counting for the quorum.

It is important that for every business transacted at the meeting, the quorum is present. However, in the case of business transacted through postal ballots, the requirement of a quorum can be done away with. In other words, it is not mandatory to ensure that the quorum requirement is met when the business is being transacted by way of postal ballots.

Consequences, when the requirement of quorum is not met

It is established that for the meeting to initial its proceedings, it is essential that the quorum is present, without it the meeting can be conducted validly. If the quorum requirement as provided under the Act of 2013 or the Articles of the company, is not met, and the meeting is conducted then it shall be considered invalid due to the lack of the required quorum. Such a requirement of establishing a quorum is not waivable, and therefore any business conducted or resolution passed in such a meeting shall be considered void. However, there is an exception to the above-mentioned requirement. A circumstance may arise where all the members of the company are present and the quorum provided by the Article is higher. In such a situation, the proceedings of the meeting shall be considered valid. Such a scenario can be understood by way of an example. For instance, a company has five hundred (500) members and the quorum prescribed by the Articles was a hundred members (100). However, later on, 450 members sold their shares that were purchased by the remaining 50 members. Under such circumstances, if the meeting is attended by all the 50 members of the company the proceedings would be valid.

Section 103(2) of the Act of 2013 prescribes that if within half an hour from the time scheduled for the meeting, a quorum is not achieved, then the meeting gets adjourned to the same day in the next week at the same time and place or to any other day, time, and place as may be decided by the board. Further, according to Section 103(3), if, at the adjourned meeting the quorum is still not achieved within half an hour from the time appointed for the meeting, the members that are already present shall constitute the quorum.

In the case of Janaki Printers Private Limited vs. Nadar Press Ltd. and Others (1999), a principle was established regarding the establishment of a quorum within a specified time frame for meetings as outlined in the Act. It was determined that although the Act stipulates a half-hour period for quorum establishment from the designated meeting time, members desiring to extend the waiting period beyond this duration are permitted to do so, as there is no explicit prohibition in the Act. The Company Law Board clarified that the half-hour timeframe is regarded as a recommendation rather than a mandatory requirement, thereby affirming that exceeding this duration does not contravene legal provisions.

Notice of adjourned meeting

When the Board of Directors adjourns a meeting to a different date, time, or venue than initially indicated in Clause (a) of Section 103(2), it is obligatory to inform the members accordingly in accordance with the stipulations outlined in the proviso to sub-section (2) of section 103. The adjournment of a meeting necessitates the company to issue a notice to its members, ensuring that they are promptly informed of the change.

As per the provision contained in the proviso to sub-section (2) of section 103, the notice should be given not less than three days before the rescheduled meeting. The section further provides that the company may send notice by either sending it individually to every member or by publishing an advertisement in newspapers. If the notice is served by way of publishing it in a newspaper, then it must be assured that the advertisement is published in both English and a vernacular language. The advertisement should be published in a newspaper widely circulated in the vicinity where the registered office of the company is situated. This measure guarantees that members are sufficiently informed regarding the alterations to the meeting schedule.

In accordance with the provisions of SS-2, a properly arranged meeting should not be adjourned without valid justification. In the event that the quorum is met, the Chairman may adjourn the meeting with the consent of the members in attendance or as directed by the members present in the meeting. The Chairman, possessing the authority to adjourn the meeting, may also adjourn it in instances of insufficient quorum or in the event of disorder that renders it impracticable to proceed. Para 15 of SS-2 additionally stipulates that the adjourned meeting’s proceedings should solely address the business that remains unfinished from the original meeting. Any resolution passed at the adjourned meeting is deemed to have been passed on the date of the adjourned meeting and not on any preceding date.

Can a single member present in the adjourned meeting constitute a quorum

It’s crucial to emphasise that even at the adjourned meeting, a minimum of two members must be present. The Ministry of Corporate Affairs has provided clarification that the presence of a single member in a meeting is insufficient to constitute a quorum for conducting business and passing resolutions. A minimum of two individuals is necessary to establish a quorum for the valid conduct of a meeting. Nevertheless, there exists a particular circumstance wherein a meeting can be convened with only one member present. As outlined in the Proviso to Section 97 (1) of the 2013 Act, in instances of default in convening an Annual General Meeting pursuant to Section 96 of the Act, the Company Law Board or the Tribunal, while instructing the convening of the meeting, may specify that a single member, either present in person or represented by proxy, constitutes the quorum. Another exception arises when an individual holds all the shares of a specific class; in such cases, that individual may convene a class meeting alone. This exception to the general rule prohibiting one-person meetings is further substantiated by judicial rulings.

In the case of Sharp vs. Dawes (1876), the question before the Court of Appeal was if only one member attends the meeting after it is adjourned, whether such a meeting be considered valid. In this particular case, the business to be transacted in the meeting was related to making a financial call. Only one shareholder attended the meeting and he also held proxies from other shareholders. Despite being the sole member present at the meeting, he proceeded to pass a resolution for the financial call and proposed and passed a vote of thanks. In the court of appeal, lord Coleridge stated that the ‘meeting’ implies the accumulation of more than one person and therefore he concluded that the meeting with only one member present did not meet the criteria of a meeting as prescribed under the law. 

On the basis of the decision as provided in the above-mentioned case, it follows that even in the case of a meeting adjourned due to a lack of quorum, having only one member present at the re-assembled meeting might not be sufficient. The usage of the term ‘members’ in Section 103(3) connotes that at least two members should be present to form a quorum. However, there are some exceptions to this rule. Such an exception has been aptly dealt with in the case of East v Bennet Bros Ltd. (1911) 1 Ch 163, where all the preference shares in a company were held by a single shareholder, and a meeting attended by only that shareholder was deemed appropriate.

Appointment of chairman for an Annual General Meeting (AGM)

For the effective functioning or conducting the business at the meeting the presence of a Chairman is necessary.  According to Section 104 of the Act of 2013, the procedure for appointing the Chairman of the company is usually provided under the Articles of the Company. However, where no such procedure is outlined in the company’s article, the members present in person in the meeting are required to collectively choose one of themselves to act as the Chairman.

The procedural requirement for conducting business in the meeting by the Chairman is provided under Para 5 of SS-2. As per para 5 of SS-2, the Chairman of the company is entrusted with the authority to preside over and manage the meeting. If within fifteen minutes from the scheduled time of the meeting, the Chairman is not present or is unwilling to act or if the director is not designated to act as a Chairman in his absence, then in all such scenarios the directors present in the meeting shall elect one of themselves as the Chairman. In the case where no director is present or is not willing to act as a Chairman within the specified time, then the members present will elect one of themselves as the Chairman through the show of hands unless the Article specifies otherwise.

In the circumstances where the election of a Chairman is requested to be made by way of a poll, it shall be conducted immediately. The Chairman earlier appointed by show of hand shall conduct the poll and when the new Chairman is elected after the conclusion of voting by poll, such a Chairman shall resume the position for the rest of the meeting. The responsibility attached to the position of a Chairman is to ensure that the meeting is properly constituted before the proceedings of the meeting start. He is also responsible for seeing that the meeting is conducted without any impartiality or biasedness and the meeting discusses only those matters that have been part of the agenda. He should also ensure that the voting process is undertaken as per the legal provisions.

The responsibilities of the Chairman are outlined in detail under Para 5.2 of SS-2, wherein it emphasises that the Chairman must explain the purpose and implication of particular resolutions before they are put to vote. Moreover, the Chairman shall be obligated to offer the members who are entitled to vote an opportunity to seek clarification or provide comments on any business item.

According to the provision outlined in Para 5.3 of SS-2, concerning public companies, if the Chairman has an interest in any business to be transacted in the meeting, then such a Chairman cannot propose a resolution and they cannot take part in conducting the proceeding related to that specific business item. Where a Charman has an interest in any of the business items, he can entitle any other director who is disinterested or any other member with the consent of the present members and entrust him to conduct the proceedings of the meeting. Once that specified business is decided the Chairman can resume the chair.

Duties of  chairman

The duties entrusted to the Chairman presiding over the meeting play a vital role in guaranteeing that the meeting is conducted properly. Before resuming the role of the Chairman, the Chairman must ensure that the meeting is constituted in accordance with the provisions contained under the Act of 2013, the Articles of the company, or any other relevant laws. Once it is established that the meeting is legally constituted, the Chairman’s obligation to oversee the proceedings of the meeting starts.

The Chairman is obligated to look at the proceedings of the meeting and consider whether the meeting is conducted in a fair and impartial manner. Such a responsibility entrusts the Chairman with an obligation to ensure that only the business items outlined in the meeting notice sent to every member are addressed. They are also responsible for regulating the procedure while voting is taken from the members. The Chairman has to ensure that the voting process adheres to the legal provisions provided in the Act of 2013.

The Chairman is further obligated to maintain complete order while the meeting is in process. This duty obligated him to manage and conduct the meeting in a manner that 

upholds decorum and ensures proper, organised conduct of business. In essence, the Chairman’s role is like an organiser, who makes sure that the meeting is conducted in a way that follows prescribed rules and procedures, thereby respecting the rights of all the members participating in the meeting. 

An exact description of the nature of the Chairman’s duty was provided in the case of Servopori Investments (P) Ltd vs. Soma Textiles & Industries Ltd, (2005), wherein it was observed by the Calcutta High Court that the Chairman’s role in conducting the meeting involves the amalgamation of both ministerial and judicial responsibilities. As an individual, he cannot be considered wholly a ministerial officer or purely a judicial officer. Resultantly, the Chairman cannot be held liable for any damages, if without any malice and mala fide intention, he does not allow a shareholder to cast his vote or in case he declares them ineligible as a director. In other words, a shareholder cannot bring any action against the Chairman for wrongfully denying voting rights and directorship, provided the Chairman acted in good faith and without malice.

Powers of Chairman

The powers and the authority that the Chairman enjoys while conducting the meeting were outlined by the Madras High Court in the case of Narayana Chettiar vs. Kaleeswara Mills (1950), wherein it was held that the Chairman may exercise his power to adjourn and postpone the meeting if any reasonable cause arises. The court further held that if the Chairman without any reasonable cause and without obtaining the consent of the members adjourns the meeting, then in such scenarios the members are authorised to elect a new Chairman and resume the business that was left to be discussed before such adjournment. The court asserted that the Chairman cannot by himself decide to postpone a meeting. For exercising such a right he has to follow appropriate procedures as provided under SS-2. The Chairman first has to commence the meeting and then adjourn it to a more suitable date only if it is necessary for the proper functioning of the meeting.

It was further emphasised by the court that the Chairman can only exercise his power of adjourning the meeting only when there are circumstances like disorder and while exercising this power it should be ensured that it does not exceed what is absolutely necessary. If the Chairman infringes upon this limited power, in such scenarios, the members forming a quorum have a right to proceed with the proceedings of the meeting and any business transacted shall be held legal. 

In a situation where the Chairman, who has applied for the managing director position, adjourns the meeting prematurely, foreseeing a lack of support, and the members forming the quorum have subsequently appointed another Chairman, such an appointment was held valid by the court.

However, a contrasting opinion was expressed in the case of United Bank of India vs. United India Credit and Development Co Ltd. (1973). In this case, the Calcutta High Court recognised that the Chairman has the legitimate right to a bona fide adjournment provided such an exercise of power does not attempt to obstruct or delay business. In such a scenario, the adjournment shall be held invalid. 

The power associated with the position of the Chairman was clarified by the court of appeal in the case Eying vs. Rondan Life Assn Ltd. (1988). In this case, the meeting was held to bring some changes to the company’s memoranda in order to facilitate amalgamation. A Large number of members came to attend the meeting and hence the venue got too small to accommodate all the members. In order to accommodate them, a provision was made to have them seated in adjoining rooms and a sound system was installed to enable them to hear and to participate. The sound system stopped working and there was a bewildering confusion amongst the members. 

In such a scenario the Chairman decided to adjourn the meeting and to arrange for an alternate venue for the meeting to be held in the afternoon in the new venue. There was resistance to this decision. The evening session at the new venue was deemed invalid, and the Chairman’s adjournment of the morning meeting without gauging the sentiment of the participants was considered unlawful. The court recognized the need on the part of the Chairman to consider relevant factors before adjourning the meeting. Thus, the court concluded that the adjournment of the meeting by the Chairman was not fair as he failed to take into account the relevant factors, such as, member’s attempts at sine die (without specifying a date for a future meeting) adjournment, their objections to the temporary adjournment and that there was no such urgency, the final date of the merger being still off. The court underscored that for assessing the reasonableness of the Chairman’s conduct, the standard applied is similar to that of the general approach applied in judicial reviews. Specifically, it examines whether the Chairman arrived at a conclusion that no reasonable Chairman, considering the purpose of the adjournment power, could have reached.

In addition to the power of adjourning the meeting, the Chairman also has the power of casting votes. In case of a tie of votes, a Chairman can exercise a casting vote. This right can be exercised by anyone who is appointed as a Chairman on the day the occasion for exercising the casting vote arises. The Chairman does not need to be a regularly elected Chairman. 

In short the powers associated with the position of the Chairman supervising the meeting includes adjourning the meeting to some later date when some reasonable cause arises. He also enjoys the power of casting vote in case there is a tie in the votes of the members present in the meeting.

Proxies for an Annual General Meeting (AGM)

The provisions regarding the proxy are contained under Section 105 of the Act of 2013. In the meeting, every member who is present has a right to vote on the matter that is presented for discussion. However, the situation may arise wherein some members are unable to attend the meeting in person and hence the provision for proxy has been incorporated under the company law, in order to give equal opportunity to every member of the company if they are not present physically.

Meaning of proxy

The term proxy has not been defined under the Act of 2013. However, it has been defined under the SS-2. According to the definition provided under the SS-2 the term “proxy” has two meanings.  The proxy is defined as an agent who is appointed by the member to attend and take action in the meeting on his behalf. Additionally, the term proxy may also be described as an instrument or document signed by the member, through which an individual, whether or not he is a member, is appointed and authorised to attend and vote in the meeting on his behalf.

Who can be appointed as a proxy

Every member of the company who is eligible to vote and to whom the notice for the meeting has been sent can appoint a proxy to represent himself in the meeting. The provisions regarding who can appoint a proxy are contained under Section 105(1). According to this Section, all those members who have a right to vote in the business of the meeting have the authority to appoint the proxy who shall take action and vote on his behalf. It is essential that an individual who is not a member of a company can also be appointed as a proxy. Section 105 also outlines some of the exceptions to this rule, wherein only an individual who is a member can be appointed as a proxy.

Exceptions-

According to the second proviso to Section 105 (1), only the members of the company having a share capital are entitled to appoint a proxy. However, in the case of the company not having the share capital this right is only available if it is specifically provided by the Articles of the company. 

According to the third Proviso to Subsection (1) of Section 105 of the Act of 2013, members of certain class or classes of companies as may be specified by the Central Government shall have the right to appoint only the member as a proxy and no one else. 

As per the provisions contained in Rule 19(1) of the Companies (Management and Administration) Rules, 2014, an exception is created with regard to Section 8 companies. According to Rule 19(1), the company incorporated under Section 8 of the Act of 2013, the member is not entitled to appoint any other person as the proxy unless such person is also a member of the company.

Number of proxies

According to the provisions contained in the fourth proviso of Subsection (1) of Section 105 read with Rule 19(2) of the Companies (Management and Administration) Rules, 2014, a restriction has been imposed on the number of members and shares a proxy can represent. A proxy can act on behalf of the members, not more than 50 members, or hold more than 10 percent of the total share capital with voting rights. If a member holds more than 10 percent of the total share capital with voting rights, then such a member can appoint a single proxy representing such shareholding, but he can not represent any other member or shareholder. 

A member has the option to designate one or more “alternate” individuals to serve as their proxy in case the initially appointed proxy is unable to attend the meeting. These alternates act as substitutes to fulfil the proxy duties in the absence of the primary proxy holder.

As per Para 6.1 of SS-2, if the proxy is appointed to represent more than 50 members, a proxy must select any 50 members and inform the company about this selection before the specified period for inspection begins. If the proxy is unable to select the 50 members he is willing to represent, then the company will consider the first 50 proxies received by them as valid.

Rights and restrictions of proxies

A proxy, appointed by a member to represent them at a meeting, holds certain rights and limitations. Firstly, a proxy has the right to physically attend the meeting on behalf of the member they represent, allowing them to participate in the proceedings. However, their voting rights are typically exercised only when a formal vote is conducted by way of a poll. If eligible under relevant regulations, a proxy can demand a poll. Despite their representation role, proxies do not possess the right to speak at the meeting and cannot vote on a show of hands. Additionally, they are not counted for the purpose of determining quorum, which refers to the minimum number of members required for the meeting to proceed.

Instrument of proxy

According to Para 6.2 of SS-2, the proxy shall be in the form as may be prescribed by the Articles of the company or as specified by the provisions of the Act of 2013. Section 105(6) of the Act of 2013 along with Rule 19(3) provides that the instrument of appointment of a proxy shall be in Form No. MGT.11. It further specifies that such an instrument shall be in writing and signed by the person appointing the proxy or the attorney duly authorised in writing by the person on whose behalf a proxy is appointed. In the case where the proxy is appointed by a corporate body, the instrument shall be signed under its seal, if available, or by an attorney authorised by the body corporate to appoint the proxy.

As per the provisions of Section 105(7), if the instrument appointing the proxy is in the prescribed form (i.e., Form No. MGT-11), it shall not be rejected on the pretext that it is not in compliance with the special requirement specified for such instrument as provided in the Articles of the company. This entails that the company may provide any other requirement or format for the form of proxy through its Articles, however, if the member appoints the proxy using Form MGT-11 and deposits with the company, the company shall not reject it of it being non-compliant with the specific requirement provided in the Articles of the company.

Proxy at the adjourned meeting

The SS-2 provides for the rules relating to the validity of the instrument through which a proxy is appointed in the case of adjourned meetings and also for the appointment of a fresh proxy in an adjourned meeting. As per the provisions contained in Para 6.2.2 of SS-2, an instrument appointing a proxy, if it is duly filled, stamped, and signed shall be valid not only for the original meeting but also for any adjournments of that meeting. Furthermore, Para 6.6.2 of SS-2, provides that if the member has not appointed any proxy in the original meeting, he can appoint a fresh proxy in the adjourned meeting, provided the articles of the company permit for such appointment. However, this appointment must be made no later than 48 hours before the scheduled time of the adjourned meeting.

Deposit of proxy

Section 105(4) together with Para 6.6.1 of SS-2 outlines the procedure for depositing the proxies with the company. The provisions provide that the proxies can be submitted either in writing or through postal services. Such a deposit has to be made not later than 48 hours before the meeting for which the proxy has been appointed. Section 105(4) provides that even if the last day falls on a holiday, proxies should still be accepted. It is further provided that if the article of the company provides for a longer period than 48 hours for depositing the proxy before the meeting of the company, such a time frame shall be deemed as if a period of forty-eight hours had been specified in or required for such deposit. In other words, the rules outlined in the Act take precedence over any conflicting provisions in the company’s articles.

The 48-hour timeframe allows the company to carefully review and verify proxies, ensuring their validity before the meeting. This period also gives the Chairman sufficient time to make informed decisions regarding the proxies. Additionally, it enables the company to compile a comprehensive list of proxies received, including the total number of votes they represent. This compiled list facilitates various processes during the meeting, such as checking proxies, conducting polls, and counting votes.

For the purpose of computing the time frame of 48 hours before the meeting of the company it was held in the case of K.P. Chackochan vs Federal Bank (1989) that Sundays are not excluded from the 48-hour calculation, meaning proxies delivered on a Sunday for a meeting scheduled 48 hours later, on Tuesday, would still be considered valid, provided the receipt of the proxy at the specified time could be verified.

Inspection of proxies

Every member of the company who is entitled to attend the meeting and vote on any proposed resolution also has a right to inspect the proxies deposited with the company. According to Para 6.8.1 of the SS-2, such a right can be exercised provided that they give the company at least three days written notice beforehand. Such a notice should be received by the company no later than three days before the start of the meeting. Para 6.8.2 provided that the inspection of proxy by the members shall be open 24 hours before the commencement of the meeting and shall end with the conclusion of the meeting. In the case where the meeting gets adjourned the request for inspecting the proxy shall have to meet the same requirement as provided for in the original meeting.

Revocation of proxy

This authority remains valid unless explicitly revoked. According to the ruling of the High Court in S. Rm. S.T. Narayana Chettiar vs. Kaleeswarar Mills Ltd. (1952), The relationship between a shareholder and their Proxy mirrors that of a principal and agent. A Proxy holds a position akin to that of an agent, and like an agent, their authority to act can be revoked in a similar manner.

Under Para 6.7 of SS-2 revocation can be done in two ways, impliedly and expressly. The implied revocation of the proxy happens when the proxy is automatically revoked by the operation of law. When the proxy is revocated by the operation of law, there is no need for the member to expressly notify the company about the revocation of the proxy. Certain examples have been provided under SS-2 to illustrate how the implied revocation of the proxy occurs. For instance, if the member decides to attend the meeting personally after appointing the proxy, the proxy appointed shall be revoked when the member attends the meeting. Another example of implied revocation would be if a Member appoints a new Proxy, any previously appointed Proxy is automatically revoked. If the proxy is appointed for the meeting and the meeting gets adjourned and for the adjourned meeting a new proxy has been appointed, then in such a case as well the proxy appointed for the original meeting shall be considered as revoked implicitly. However, in the case of express revocation, the member is required to expressly notify the company about their decision to revoke the Proxy.

Resolution

Every business of the company is determined by way of proposing the resolution and passing it by the prescribed majority of members present and attending the meeting. As per Section 114 of the Act of 2013, resolutions are of 2 types, i.e., ‘ordinary resolution’ and ‘special resolution’. Section 115 provides the third type of resolution in the form of a resolution requiring special notice. 

Ordinary and special resolution

Ordinary and special resolutions are defined under Section 114 of the Act of 2013. As per the provisions of this Section, a resolution is considered ordinary if the votes in affirmation of the matter are more than the votes against it during the meeting of the company. In other words, an ordinary resolution is a resolution that is approved by a simple majority of shareholders who are present and participate in the voting process.

A special resolution, on the other hand, is one which requires a majority of at least three-fourths of the members present and entitled to vote at the meeting. In simple terms, the votes in favour of the matter must exceed three times the number of votes in opposition to votes against it. Moreover, for the resolution to be considered special it is important that the intention to consider the resolution as special is expressly stated in the notice for conducting the meeting provided to the members in accordance with the provisions of the Act of 2013. 

The resolution passed in the meeting shall be deemed valid if the meeting is constituted and conducted properly. This implies that the validity of the resolution is dependent on several factors such as the notice for conducting the meeting was issued with proper authorisation and in accordance with legal requirements. Also, the quorum is properly and validity constituted and the meeting is preceded by the appropriate person. Lastly, for the resolution to be valid it is important that ample opportunity for reasoned discussion was provided and the motion was accurately voted upon.

A resolution requiring special notice

Section 115 of the Act of 2013 contains provisions regarding the resolution requiring special notice. According to this Section, the intention to move the resolution must be conveyed to the company by the members if such a requirement is mandated by any provisions contained in the Act of 2013 or the Articles of the Company. It is further provided that a notice shall be given by such a number of members who are holding not less than 1 percent of the total voting power or holding shares on which such aggregate sum not exceeding Rs 5,00,000, as may be prescribed has been paid. The notice should be given at least 14 days before the meeting where it is to be proposed. In computing the timeline of 14 days the day on which the notice is served and the day of the meeting itself shall not be included. When the company receives the notice, it is obligated to inform all other members about the resolution in the same manner as it notifies about the conduct of the meeting. However, in cases where it is impractical to notify the members about the resolution, the company must ensure that members receive a minimum of seven days’ notice through alternative means, such as publishing an advertisement in a newspaper with appropriate circulation or utilising other methods permitted by the Articles.

A resolution passed at an adjourned  meeting

According to Section 116 of the Act of 2013, when the resolution is passed at an adjourned meeting, such a resolution shall be considered to have been passed on the date on which it was actually passed and not on the date it was proposed to be passed or on any earlier date.

Voting at the Annual General Meeting (AGM)

In a meeting, every business is transacted in the form of a resolution passed by the members in the meeting. Every shareholder present is entitled to discuss or suggest amendments to every proposed resolution. If an alteration is relevant to a proposed resolution and does not essentially oppose it, it must be accepted and presented to the meeting for consideration. After the resolution is discussed in the meeting, such a resolution is put to vote. 

Voting is considered an important mechanism through which a meeting comes to a conclusive decision regarding the particular resolution that is put to vote, whether it is to be approved or rejected. It provides a structured procedure whereby the Chairman gets an accurate understanding of the collective sentiment of the members attending the meeting regarding the resolution under consideration. As per the provisions of the Act of 2013, only those members who are entitled to vote either physically present or through a proxy, wherever applicable, have a right to take part in the voting process.

Voting at the meeting can be done through various methods in order to serve the needs and preferences of the members of the meeting. Thus, voting can be done through the show of hand, the ballot process, e-voting, and voting by post. Each of these methods ensures that every eligible member has the opportunity to express their opinion and contribute to the decision-making process in a manner that is convenient and accessible.

Who is eligible to vote

Every member of the company is eligible to vote, thus, no member can be prohibited from exercising his right to vote in the meeting. However, there are certain grounds provided under Section 106 of the Act of 2013, in the presence of which the member can not exercise his voting right. According to the provisions contained under Section 106, the Articles of a company may stipulate that a member is prohibited from exercising their voting rights with respect to the shares registered in their name if any calls or other outstanding payments on those shares have not been settled, or if the company has exercised its right to impose a lien on them. The prohibition on exercising voting rights on these grounds safeguards the company’s interests by ensuring that shareholders fulfil their financial obligations before being entitled to participate in voting processes related to their shares. Proxies are not entitled to vote when the resolution is passed to vote by show of hands except in the case where a vote is to be taken by way of polls.

Voting by show of hands

According to Section 107(1), the voting on a resolution shall start with the show of hand unless specific conditions are present. Voting by show of hand may be avoided only if a demand for a poll in accordance with Section 109 is made by the member or if the decision to carry out voting electronically as per the provisions of Section 108 is approved. Under Section 109 of the Act of 2013, a demand for voting by poll can be made without the need to first conduct a show of hands, providing a streamlined process for invoking a poll if desired by the meeting participants. 

Regarding the nature of voting by show of hand, it was held in the case of Mahaliram Santhalia vs. Fort Gloster Jute Manufacturing Company Ltd. (1955) that voting by show of hand is the traditional method for voting at meetings and thus is considered the common law of the country. Voting by show of hand entails that votes are initially counted through a visual display of raised hands by those entitled to vote. 

Regarding the procedure to be conducted while taking votes by show of hands, it was held by the Supreme Court of India, in the case of M/s Amarjit Singh vs. Chanjiti Singh and Ors (2004), that voting by show of hands entails the counting of individuals present and eligible to vote, who indicate their choice by raising their hand. Any member attending the meeting can demand a poll at the conclusion of the show of hands vote, and it’s the chairperson’s prerogative to grant or refuse the poll, which serves as an appeal mechanism for dissatisfied parties. Modern parliamentary practices often see motions carried through acclamation or show of hands, where the presiding officer asks attendees to indicate their vote by raising their hands. Once the presiding officer tallies the votes and declares the result, it is considered final unless challenged by a demand for a poll. If no such demand is made, the Chairman’s declaration stands. Once a motion is voted upon and accepted, it becomes a resolution of the meeting, and the announced results are conclusive.

Thus, voting by show of hand is a mandatory process at the first instance. The Chairman is liable to initiate the voting process by show of hand unless there is a demand by the required number of members for the voting to be conducted through a poll, as outlined in Section 109(1) of the Act of 2013. Further, according to Para 7.5.1 of SS-2, it is a standard practice for every company, during a general meeting, to initially put every resolution to vote by a show of hands, unless the resolution has already been subjected to remote e-voting, or unless a poll is lawfully demanded.

Procedure for voting by show of hand

When the Chairman presents a Resolution for voting by a show of hands, the procedure entails initially inviting members in favour of the resolution to raise their hands, followed by those against it. Upon counting, if the number of hands raised in favour exceeds those against, in the case of an ordinary resolution, or if the number in favour is at least three times the number against, for a special resolution, the resolution is deemed passed. The Chairman must ensure that the resolution garners the required majority of votes in its favour, and if there’s any uncertainty, a poll should be conducted to confirm the outcome.

Once the voting by show of hands concludes, the Chairman declares the result, indicating whether the resolution has been passed by the requisite majority or not. As held by the court in the case of E.D. Sasoon United Mills, Re (1929) such a declaration by the Chairman is deemed conclusive evidence of the resolution’s outcome, and it should be recorded in the minutes of the meeting. Such a record serves as conclusive evidence of the resolution’s passage or rejection, obviating the need for further proof regarding the number of votes cast.

However, there are exceptions to this rule, as highlighted in the case of Dhakeshwari Cotton Mills Ltd. vs. Nil Kamal Chakravarthy and Others (1937) wherein it was held that when a poll is demanded, or when the Chairman’s declaration doesn’t include a count of the votes for or against the resolution, in either of this scenario, the Chairman’s declaration may not be conclusive.

It is also important to note that in case members or proxy holders with the necessary shareholding or voting power demand a poll, the Chairman must order the voting by poll.

Any objection to the result announced through a show of hands must be raised immediately. It’s imperative that challenges to the Chairman’s ruling on the Resolution’s passage during a show of hands occur promptly and cannot be raised afterwards.

Voting by poll

The rules regarding the voting process through the demand of poll are contained under Section 109 of the Act of 2013. Subsection (1) of Section 109 provides that the Chairman may on his own motion or upon the demand by the specified number of the members order the voting through poll. Such an order can be made before or upon the declaration of the voting result on any resolution through a show of hands. Such power to order a poll is discretionary when exercised suo motu. However, this discretion is removed once a demand for a poll is made by the specified number of members. As per the provisions contained in Section 109(1), the specified number of members required to make such a demand is different for companies having share capital and companies other than companies with share capital. For the company with share capital, the demand can be made by members present in person or by Proxy, where permitted, possessing not less than one-tenth of the total voting power or holding shares with a cumulative value of not less than five lakh rupees or any higher amount as prescribed. In the case of any other company, the demand can be made by the members possessing not less than one-tenth of the total voting rights, whether present physically or by proxy, where applicable.

It has been further provided under Section 109(2) of the Act of 2013, that the demand for a poll can be withdrawn by the individuals who made the request. Thus it can be ascertained that any business, except for the specific matter for which a poll has been requested, can be addressed without waiting for the outcome of the poll for the aforementioned matter.

Time for conducting the poll 

According to Section 109 Subsection (2) after the poll has been demanded in accordance with Subsection (1) of Section 109, it must be conducted within 48 hours from the time the demand was made. In case the poll is demanded for the matter pertaining to the adjournment of the meeting or the appointment of the Chairman, then the poll is required to be conducted immediately. 

Procedure for poll 

According to Para 9.2 of SS-2, the Chairman has the authority to announce the date, venue, and time of the poll. Such an authority of stipulating the date, place, and time of the poll by the Chairman has to be exercised impartially and reasonably to ensure that members have ample opportunity to participate conveniently. Para 9.2 further provides that while determining the time and location for the poll, the Chairman should consider various factors, including the particular circumstances, the significance and nature of the agenda items up for vote, and the rationale behind the request for a poll. It is also to be taken care of that the day on which the poll shall take place is not a national holiday.

If the date, venue, and time of taking the poll cannot be announced at the meeting it is the duty of the Chairman to inform the members about the methods and timing of such communication, which should be more than 24 hours before the conclusion of the meeting.

During the poll, the Chairman shall also be responsible for appointing a suitable number of individuals, as he considers necessary, to scrutinise the poll process and votes given on the poll. These individuals appointed by the Chairman shall also be responsible for reporting their findings to the Chairman as may be prescribed.

Appointment of scrutiniser by the chairman

The Chairman has the authority to appoint the scrutiniser for the purpose of overlooking the poll process, monitoring the votes cast, and providing a report on their findings. There is no limit to the number of scrutinisers that need to be appointed. It is the discretionary power of the chair to appoint any many scrutinisers as he deems necessary as per the volume of the work involved. According to Para 9.4 of SS-2, any individual who is a company secretary in practice, a chartered accountant in practice, a cost accountant in practice, or a reputable individual like an advocate, who is not employed by the company can be appointed as a scrutiniser by the Chairman. 

As it is provided above there is no limit to the number of scrutinizers to be appointed by the Chairman, however, while appointing the scrutiniser, at least one of the scrutinizers should ideally be a Member present at the meeting, provided such a Member is available and willing to take on the role. In case of the appointment of multiple scrutinisers, again it must be ensured that at least one of them is a Member, available, and willing to act as scrutinisers. The scrutiniser appointed during remote e-voting and ballot processes may also be appointed for the poll. 

The Chairman is also responsible for removing the scrutiniser from his duties. However, such a right can only be exercised if necessitated by the circumstances and before the poll result is announced. It is also important to mention that the Chairman is expected to exercise such power judiciously and not arbitrarily. Further, the Chairman is required to fill the vacancy in the srutiniser’s position created by such removal or any other cause.

Results of  poll

Section 109(7) of the Act of 2013 stipulates that the result of the poll serves as the definitive determination of the meeting’s stance on the particular matter that prompted the poll. As per the provisions contained in Para 9.5 of SS-2, the scrutiniser appointed by the Chairman needs to submit its report to the Chairman within 7 days of the poll. The Chairman or any person authorised by the Chairman has the authority to declare the result of the poll. Where the poll is conducted immediately, the Chairman may declare the result of the poll orally at the end of the meeting. After the scrutiniser submits the report, the Chairman shall declare the result of the poll providing details regarding the number of votes for or against the resolution, any valid votes, and whether the resolution has been passed or not, within two days after receiving the report from the scrutiniser.

The report submitted by the scrutiniser must be countersigned by the Chairman himself or by the authorised director to whom this responsibility has been delegated. Further, it is mandatory to display the detailed outcome of the poll, including the votes cast, invalid votes, and resolution status in a prominent place on the company’s notice board at its registered office. Such information related to the result of the poll is also required to be placed at the head office and the corporate office if situated elsewhere than the registered office.

Once declared, the result of the poll is considered conclusive and final. The decision announced by the Chairman must be duly recorded in the Minutes of the Meeting to ensure proper documentation and transparency in the proceedings.

Voting by postal ballots

A “postal ballot,” is defined as Section 2 (65), the process of casting one’s vote by post or any other electronic means, thus permitting shareholders to participate in voting without having to physically attend the general meeting. Each item intended for approval via postal ballot must be introduced in the form of a Resolution and this must be accompanied by an explanatory statement. This statement should provide shareholders with complete information to give them a full idea about the context, importance, and implications of the proposed business item. Such a requirement will enable them to make informed decisions.

Which company can conduct business by postal ballots

As per the provisions provided in Para 16.1 of SS-1, every company, excluding those with two hundred Members or fewer, is mandated to conduct specific business items as prescribed solely through a postal ballot instead of transacting such business at a meeting. One-person companies are also not allowed to conduct voting through postal ballots.

Business to be transacted through postal ballots

The list of matters that need to be transacted by way of postal ballots by the companies is provided under Sub-section (1) of Section 110 read with rule 22 (16) of Companies (Management and Administration) Rules, 2014. The list comprises various resolutions including modifications to the objects clause of the memorandum, amendments to articles of association, changes in registered office location, alterations in capital utilisation objectives, issuance of shares with differential rights, variation in share class rights, share buy-back, appointment of a ‘small shareholders’ director, sale of company assets, loans or guarantees exceeding specified limits, and any additional resolutions as mandated by applicable laws or regulations.

Business that can not be transacted by postal ballots

Section 110(1) of the Act of 2013, grants the companies to transact their business through the means of postal ballots. However, there are certain matters that can not be decided on the basis of votes taken by way of postal ballots. These include ordinary business and any matters where directors or auditors are entitled to express their opinions or be heard during a meeting.

Section 102(2) of the Act of 2013 provides a list of businesses, typically transacted during the meeting, that are considered ordinary business. Activities like reviewing financial statements, along with the board’s and auditors’ reports, determining any dividends to be declared, appointing directors to fill vacancies left by those retiring, and selecting and determining the remuneration of auditors are a type of business that comes under the category of ordinary business. Such business can not be transacted by way of postal ballots. Nevertheless, it’s worth noting that the aforementioned ordinary business matters are eligible for transacting via the e-voting process.

The procedure of postal ballots

The procedure regarding conducting business through postal ballots is contained in Rule 22 of the Companies (Management and Administration) Rules, 2014.

Dispatching of notice and advertisement

The company must send a notice to all the shareholders entitled to vote in the meeting. The notice must be accompanied by a draft resolution elucidating the reasons for it and requesting them to send their assent and dissent in writing on the postal ballot provided to them with the notice. Such a postal ballot, which means voting by post or through electronic means, must be conducted within a timeframe of 30 days from the date on which the notice was dispatched. According to Rule 22, the notice must be transmitted through Registered posts or speed posts, electronic channels, such as registered email IDs, or courier services. The notice sent to the shareholders shall also be required to be posted on the website of the company immediately after the notice has been dispatched to the members. Such notice shall remain posted on the website till the date which is stipulated as the last day for receiving the postal ballots from the members. 

The company is required to publish an advertisement at least once in a vernacular newspaper, using the principal vernacular language of the district where the registered office is located, and once in an English newspaper with wide circulation in that district, announcing the dispatch of ballot papers. This advertisement must include several key details like it should contain a declaration about the business that is going to be conducted through postal ballots, including electronic voting. It must also contain the specific date on which the dispatch of notice was completed along with the date of commencement and end of voting through postal ballots and electronic means. The advertisement is required to contain details regarding the invalidity of ballots if received after the stipulated deadline, irrespective of whether they are received by post or electronically. Moreover, the advertisement must contain a clarification that the members can request duplicate postal ballots if they have not received them or for any other valid reasons. It is also required that the advertisement should provide information like contact details for the purpose of addressing grievances related to voting, inclusive of voting by electronic means. Lastly, it is mandatory to provide details regarding the day, date, time, and venue for declaring the results in the advertisement along with the website link which members can visit and view the results declared.

It is also provided that the notice as well as the advertisement published by the company must clearly indicate the record date for the purpose of determining the voting rights of the members. It also provided further that any person who is not recorded as a member on this date shall consider such notice for informational purposes only.

Appointment of scrutiniser

A scrutiniser is appointed to oversee the voting process through postal ballots. The Board of Directors is responsible for appointing the scrutiniser for this purpose. The scrutiniser appointed by the company should possess the necessary skills to oversee the process impartially. The scrutiniser must be an individual who is either a Company Secretary in practice, a Chartered Accountant in Practice, a Cost Accountant in Practice, an Advocate, or any other person of repute who is considered eligible to scrutinise the postal ballot in a fair and impartial manner in the opinion of the Board. It is important that the scrutiniser so appointed is not in the employment of the company. Moreover, the scrutiniser after being appointed and in the discharge of his duties can take assistance from an individual who is not in the employment of the company and who possesses expertise in the e-voting system, if required. It is also to be noted that before appointing a scrutiniser his consent of being so appointed shall be obtained in writing. Such consent must be presented to the Board for acknowledgement. This ensures transparency and accountability in the appointment process, aligning with principles of good governance.

Duties of the scrutiniser

Upon receipt, postal ballots returned by shareholders shall be securely stored under the care of the scrutinizer. Once shareholders have expressed their assent or dissent in writing on a postal ballot, it is strictly prohibited for anyone to tamper with or destroy the ballot papers or to disclose the identity of the shareholders. This protocol ensures the integrity and confidentiality of the voting process, upholding the trust and confidentiality vested in the scrutinizer.

The scrutiniser is obligated to submit his report immediately after the last date of receipt of the postal ballots from the members. However, the submission of such a report shall not be made later than 7 days from the receipt of the postal ballots. He is also required to maintain a register, either manually or in an electronic form, maintaining the record of the assent and dissent received by the members through postal ballots. The register shall also contain details regarding each shareholder, together with information regarding any postal ballots that were received in a defaced form or mutilated condition, as well as those considered invalid. 

Every postal ballot and all other related documents associated with postal ballots, including electronic voting, shall be in the secure and safe custody of the scrutiniser. The scrutiniser shall be responsible for the safe preservation of such documents until the Chairman reviews, approves, and signs the minutes. After the Chairman approves and signs the minutes, all such documents including the register maintained by the scrutiniser shall then be transferred to the company, which will safeguard them diligently.

Declaration of result

In case any assent and dissent are received by the company from the members after the 30-day timeframe from the issuance of the notice, then such response shall be considered as no response has been received from the member.

The result of postal ballots shall be declared by posting it on the website of the company, together with a scrutiniser report. Thus, it ensures transparency and accessibility of the outcome to all stakeholders. The result shall also be displayed at the registered office of the company as well as at the head office and the corporate office if such offices are situated at any other place than the registered office of the company.

Minutes of the Annual General Meeting (AGM)

Minutes, in reference to the proceedings of the meeting refer to the official recording of the proceedings and business conducted during a meeting. The minutes include deliberations, decisions, and every action taken by the participants. Section 118 of the Act of 2013 requires every company to keep the minutes consisting of fair and correct details about the proceedings of the meeting and resolution passed by postal ballot. According to Section 118(1), the minutes have to be prepared and kept within 30 days from the conclusion of the meeting and the passing of the resolution by postal ballots.

Importance of minutes

Every company is mandated to keep the Minutes of all its meetings in strict compliance with the Act. According to Section 118(7), these Minutes act as legal evidence of the proceedings documented as part of the meeting. It has been provided under Section 118(8) that if the minutes are kept in strict observational of provisions contained under above mentioned Section, it is regarded that the meeting has been held in accordance with the required standards and has been correctly convened and conducted with all proceedings executed well, including the resolution passed in the postal ballots and any appointment made in the meeting. However, failure to adhere to these standards can render the Minutes inadmissible as evidence, as illustrated in the case of Marble City Hospitals and Research Centre (P.) Ltd. vs. Sarabjeet Singh Mokha (2009). Consequently, Minutes hold significant statutory importance, serving as crucial evidence until proven otherwise.

Content to be included in the minutes

As per Section 118(2) the minutes shall provide fair and accurate information regarding the proceeding and business conducted in the meeting. In addition to this, according to Section 118(3), if in the proceedings of the meeting any appointment has taken place, the minutes shall also contain a detail regarding such an appointment. 

Content that shall not be included in the minutes 

The Chairman of the meeting has been entrusted with the discretionary power under Subsection (6) of excluding and including the matter on the grounds provided under Section 118(5). This Section provides that if in the opinion of the Chairman, the matter to be included in the minutes is defamatory, irrelevant, or immaterial, or which are detrimental to the interests of the company, such matter shall be excluded from being recorded in the minutes.

Maintenance of minutes

According to Section 118(10), every company is required to observe the standard provided under SS-2 regarding meetings held by the company. Para 17.1 of the SS-2 provides provisions regarding the maintenance of the minutes of the meeting. Minutes for every meeting shall be recorded in the books maintained for that purpose. Companies are required to maintain separate minutes books for different meetings namely General Meetings of the Members; Meetings of the Creditors; Meetings of the Debenture Holders; and Meetings of a class of Members. The minutes for recording resolution passed by postal ballots shall be recorded in the minutes maintained for the general meeting of the members.

According to Rule 27(1) of the Companies (Management and Administration) Rules, 2014, a company is afforded the flexibility to maintain its Minutes in either physical or electronic form. For companies listed on stock exchanges or those with a significant shareholder base exceeding one thousand individuals, debenture holders, or other security holders, this regulation grants such entities the option to maintain their records electronically.

Content of the minutes

Minutes of a meeting serve as a vital record of proceedings and must meticulously capture essential details to ensure accuracy and transparency. The contents of the minutes are classified into two categories, i.e., general and special content. Such a classification of the contents of the minutes is provided under Para 17.2 of SS-2. 

General content

At the outset, the Minutes must contain pertinent information, including the name of the company, along with the date, time, venue, and duration of the Meeting’s commencement and conclusion. If a Meeting is adjourned, the information regarding both the original and adjourned sessions must be meticulously documented within the Minutes.

In instances where a Meeting is convened but subsequently adjourned due to a lack of Quorum, the Chairman or any attending Director must expressly note this occurrence in the Minutes. Furthermore, the Minutes should meticulously list the names of the Directors and the Company Secretary present at the Meeting, ensuring a comprehensive record of attendance.

To streamline readability and organisation, the names of the Directors should be presented in either alphabetical order or any other logical sequence. Regardless of the chosen order, it should commence with the individual presiding over the Meeting.

Specific content

As per Para 17.2.2 of SS-2, the specific content of minute included the following:

1. The record of the election, if conducted, of the Chairman of the Meeting, ensuring clarity regarding the individual presiding over the proceedings.
2. Confirmation that prescribed registers, documents, the Auditor’s Report, and the Secretarial Audit Report were available for inspection, demonstrating compliance with statutory requirements.
3. Documentation of the presence of a Quorum is essential for the validity of the Meeting.
4. Enumeration of the number of Members present in person, including representatives, along with the proxies and the shares represented by them, providing a clear picture of attendance.
5. Notation of the presence of Committee Chairmen or their authorised representatives, ensuring proper representation from key governance bodies.
6. Inclusion of the presence of external parties such as the Secretarial Auditor, Auditors, or their authorised representatives, as well as any Court/Tribunal-appointed observers or scrutinizers, if applicable.
7. Summary of the opening remarks made by the Chairman, outlining the initial discussions and context of the Meeting.
8. Reading and discussion of qualifications, observations, or comments on financial transactions or matters impacting the company’s functioning, as noted in the Auditors’ Report.
9. Summary of qualifications, observations, or comments from the Secretarial Auditor’s report, shedding light on compliance and governance issues.
10. Overview of the clarifications provided on various Agenda Items, ensuring transparency and understanding among attendees.
11. Detailed documentation of each Resolution proposed, including the type, names of proposers and seconders, and the majority with which it was passed. Any modifications to proposed Resolutions and the voting outcomes for such amendments should also be recorded.
12. In cases of a poll, the names of appointed scrutinizers and the voting results, including the number of votes for and against the Resolution, as well as any invalid votes.
13. Notation of any instances where the Chairman vacated the Chair, specifying the Director or Member who assumed the role in their absence.
14. Documentation of the time of commencement and conclusion of the Meeting, providing a clear timeline of proceedings.

By meticulously recording these details, the Minutes serve as a comprehensive and reliable reference, ensuring accountability and adherence to regulatory requirements.

Recording of minutes

The practice with regard to the recording of minutes varies by company. For instance, one company will only record the decisions while the other will only record the resolution that encapsulates those decisions. There are some companies that would meticulously transcribe the entire proceedings, providing a comprehensive account of the Meeting. Thus, there are no fixed criteria for recording the minutes of the meeting. Therefore, with an aim of providing consistency and clarity in the practice of recording minutes of the meetings by the company, SS-2 has provided a standard for recording minutes to streamline these diverse practices. 

As per the standard provided under SS-2, minutes should be structured to make sure that any reader can easily comprehend the information provided in the minutes relating to the discussions and decisions made during the meeting. 

The minutes should record the proceedings of the meeting in a concise manner and it should be fair and accurate. It is not required to record every reason for the decision taken or everything that is said in the meeting. In other words, it should not contain all arguments given in favour of or against a resolution proposed to be decided. The minutes should present a clear synopsis of the proceedings in simple language.

In order to maintain clarity and consistency, Para 17.3.2 provides that the minutes should be written in plain and simple language and in the third person and past tense. The minute should maintain a formal tone throughout. It is further provided that in case of recording resolution, it shall be recorded in the present tense to accurately reflect ongoing actions or decisions.

According to Para 17.3.1 of SS-2, the Company Secretary is responsible for recording the proceedings of the meeting. In the absence of a Company Secretary, any other individual duly authorised by the Chairman or the Board of Directors shall be responsible for such recording on his behalf. The Chairman presiding over the meeting is obligated to ensure that the proceedings of the meeting are recorded properly. 

The inspection of the minutes of the meeting

The provisions regarding the inspection of minutes of the meeting are stipulated by Section 119 of the Act of 2013. The Section specifies that the minutes must be kept at the company’s registered office. It further provides that access to the minutes book should be granted to members during business hours without any charge, adhering to restrictions imposed by the company, which could be outlined in its articles or decided upon in a general meeting. However, the company must allow for a minimum of two hours each business day for inspection.

Section 119 Subsection (2) mandates the company to furnish a copy of the minutes of the meeting within seven working days upon request by an individual. A fee may be charged for furnishing a copy of the minutes, however, such a fee shall not be more than 10 rupees for each page or part thereof. In case soft copies of the minutes of the meeting from previous general meetings held in the past three financial years are requested by the member, such copies shall be provided by the company free of cost.

It has been further provided under Subsection (4) of Section 119, that the Tribunal has the authority to order an immediate inspection of the minutes of the meeting or direct a forthwith delivery of the copy of the minute to an individual as requested by him. Such authority of a Tribunal is in addition to his power of penalising the company in the event of any default with regard to the provisions contained in this Section.

Penalties

Section 118(11) and Section 118(2)and Section 119(4) contain penalties regarding default in complying with the provisions related to minutes of the meeting, found tampering with the minutes, and refusing to furnish the minutes when requested by the members respectively. 

As per Section 118 (11), if the company defaults in complying with the provisions of this Section and the minutes are not recorded or maintained properly, the company and every officer in default shall be liable to pay Rs. 25000 and Rs 5000 respectively. In addition to this and as provided by Section 118(12), any individual who tampers with the minutes of the meeting shall be punished with imprisonment for a maximum term of 2 years and shall also be liable to pay a fine of a minimum Rs. 25,000 that may extend to Rs. 1,00,000.

Report on annual general meeting

It is mandatory to prepare a report on each general meeting conducted by the company, which is then required to be submitted to the registrar of the company. The provisions regarding the report on the general meeting are provided under Section 121 of the Act of 2013. Subsection (1) of Section 121 outlines that every public company is required to prepare a report and such a report must contain a confirmation that the general meeting was convened, held, and conducted in accordance with the provisions of the Act and the rules therein.

Thereafter, the listed company is required to file a copy of the report in the form as may be prescribed, by the Registrar. A report has to be filed within 30 days from the conclusion of the general meeting as provided in Subsection (2). Further, the filing must be accompanied by the prescribed fee or any additional fees as prescribed, within the timeline specified under Section 403 of the Act of 2013. 

Filing a report on a general meeting constitutes an important aspect with regard to ensuring transparency and fairness, therefore any failure to comply with such a requirement is penalised. As per Section 121(3), failure to adhere to the filing requirement within the timeframe as provided under Section 403 of the Act of 2013 shall result in imposing fines that may range from 1 lakh rupees to five lakh rupees. In addition to this, any officer who is found to be in default shall also be fined with a minimum of Rs. 25,000 which may go up to one lakh rupees.

The provisions regarding a report on the general meeting are also contained in the Companies (Management and Administration) Rules, 2014. According to Rule 31, the report shall be prepared in addition to the minutes of the general meeting, providing an additional record of the proceedings of the meeting. Similar to the minutes of the meeting, the report shall also contain brief details regarding the proceeding of the meeting which should be accurate and fair. 

As per Para 19 of the SS-2, the report shall be signed by the Chairman and in his absence by two directors, one of whom should be the managing director and the other one should be a Company Secretary. The report must contain details such as the date, time, venue of the annual general meeting, confirmation of the Chairman’s appointment, the number of attending members, confirmation of quorum, adherence to legal and regulatory requirements, business transactions and outcomes, summary of discussions, information regarding any adjournments, postponements, or venue changes, and any other relevant points deemed necessary for inclusion

Applicability of the provisions to one person company

Section 122 of the Act of 2013, specifies that certain provisions, including Sections 98 and sections 100 to 111, do not apply to one-person companies. In the case of a one-person company, any business that necessitates resolution at a general meeting can be handled differently. Instead of convening a physical meeting, the member of the one-person company can communicate the resolution directly to the company. This communication should be duly recorded in the minute book maintained by the company. Upon recording the resolution, the member is required to sign and date the minute book entry. The date of entry in the minute book is deemed to be the date of the meeting for all practical purposes concerning the resolution communicated by the member. This provision simplifies the process for OPCs, allowing them to handle resolutions without convening formal meetings, thereby streamlining administrative procedures.

Conclusion 

The Annual General Meeting serves as a cornerstone of corporate governance under the Act of 2013, providing shareholders with a crucial platform to exercise their rights, engage with company leadership, and oversee key decisions. Ensuring compliance with legal requirements, such as timely convening and proper conduct of the meeting, is essential for maintaining transparency, accountability, and trust between companies and their stakeholders. By adhering to statutory provisions, including those outlined in the Act of 2013 and related regulations such as SS-2, companies can foster effective communication, address concerns, and uphold the principles of corporate democracy. It is the responsibility of the Board of Directors of the company to follow the procedure of conducting the meeting as provided under the Act of 2013, as such noncompliance will render the meeting invalid and lead to the imposition of penalties on the company for such non-compliance. Annual general meetings, therefore, play a pivotal role in shaping the direction and governance of companies, contributing to their long-term sustainability and success in the business landscape.

Frequently Asked Questions (FAQs)

What is the provision related to the first Annual General Meeting?

As per the provisions of Section 96 of the Act of 2013, the first meeting of a newly incorporated company shall be held within the period of nine months from the date of the closing of the first financial year of a company.

What is a quorum and why is it required?

The term “quorum” refers to the minimum number of members that is required in order to start with the proceedings of the meeting. It is required for a meeting to be constituted appropriately and the proceedings to be considered valid.

What is a resolution?

Every business of the company is determined by way of proposing the resolution and passing it by the prescribed majority of members present and attending the meeting. As per Section 114 of the Act of 2013, resolutions are of 2 types, i.e., ordinary resolution and special resolution.

How many members can a proxy represent?

A proxy can act on behalf of the members, not more than 50 members, or hold more than 10 percent of the total share capital with voting rights. If a member holds more than 10 percent of the total share capital with voting rights, then such a member can appoint a single proxy representing such shareholding, but he can not represent any other member or shareholder.

References 

• https://blog.ipleaders.in/annual-general-meeting-concept-application/ 
• https://www.icsi.edu/media/portals/86/Geeta_Saar_36_Annual_General_Meeting.pdf
• https://www.legalwindow.in/concept-of-minutes-of-meeting-companies-act-2013/
• https://www.icsi.edu/media/website/SS-2%20General%20meeting.pdf
• https://www.icsi.edu/media/webmodules/publications/FinalCLStudy.pdf
• https://www.icsi.edu/media/webmodules/publications/Company%20Law.pdf
• https://www.icsi.edu/media/portals/86/Geeta_Saar_vol_45%20(1).pdf
• https://www.icsi.edu/media/portals/86/Geeta_Saar_53_Voting_by_show_of_hands.pdf

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