In this blogpost, Aishwarya Wagle, Student, Government Law College, Mumbai, writes about what is an extraordinary general meeting, instances under which EGM is conducted, conditions for requisition of EGM and steps to be followed to convene an EGM.

Under the Companies Act 2013, a meeting of the members other than an Annual General Meeting is termed as an Extra Ordinary General Meeting (EGM). To summon such a meeting is the privilege of the Board of Directors. However, S.100 makes provisions with respect to an EGM being held other where sub-section 4 of Section 100 of the Act binds the Board of Directors to call an EGM after receiving required requisition from members. The ingredients of a valid requisition and the power of requisitionists have also been stated in subsections 2, 3, 4, 5 and 6 of S. 100 of the Act respectively.

Instances when EGM is conducted

An extraordinary general meeting may be convened by the directors if some business of special importance requires approval from members and it cannot wait till the next annual general meeting. The Act itself provides instances where EGM will have to be convened by the Board to transact businesses which cannot wait till next AGM:

(i) The first auditor of a company,other than a Government company, shall be appointed by the Board of Directors within thirty days from the date of registration of the company. In the case of failure of the Board to appoint such auditor, it shall inform the members of the company, who shall within ninety days at an extraordinary general meeting appoint such auditor [Section 139(6)]

(ii)  In the case of a Government company or any other company owned or controlled, directly or indirectly, by the Central Government, or by any State Government, or Governments, or partly by the Central Government and partly by one or more State Governments, the first auditor shall be appointed by the Comptroller and Auditor-General of India within sixty days from the date of registration of the company. In case the Comptroller and Auditor-General of India does not appoint such auditor within the said period, the Board of Directors of the company shall appoint such auditor within the next thirty days. In the case of failure of the Board to appoint such auditor within the next thirty days, it shall inform the members of the company who shall appoint such auditor within the sixty days at an extraordinary general meeting [Section 139(7)]

(iii)  Any casual vacancy in the office of an auditor shall in the case of a company other than a company whose accounts are subject to be audited by an auditor appointed by the Comptroller and Auditor- General of India, be filled by the Board of Directors within thirty days, but if such casual vacancy is as a result of the resignation of an auditor, such appointment shall also be approved by the company at a general meeting convened within three months of the recommen– dation of the Board and he shall hold the office till the conclusion of the next annual general meeting [Section 139(8)].

Shareholders of the company have a right to requisition a meeting if they have completed the prescribed procedural and numerical requirements. The board is also legally bound to call an EGM if it receives a valid requisition for its members. If it does receive a valid requisitioning from the members with specific regard to any matter, it should affirmatively call for  an EGM to be held within  21 days of such receipt and should proceed to conduct the meeting within 45 days of receipt of such requisition. Neither are the reason for the resolution passed needed to be disclosed nor are the resolutions subject to judicial review. The Supreme Court has held in Life Insurance Corporation of India v. Escorts Ltd.[1] that when the state or an instrumentality of the state purchases shares of a company, it assumes the role of an ordinary shareholder, and there is no reason why the State as a shareholder is required to give reasons when it seeks change of management by a resolution like any other shareholder. The requisition to call an EGM must set out the agenda for the meeting and no other business than the agenda can be transacted in such a meeting (Ball v. Metal Industries Ltd.)[2] The Bombay High Court in Cricket Club of India v. Madhav Apte[3]that the refusal of the directors to hold an EGM when it has been validly requisitioned cannot be justified on the ground that the resolution passed at such a meeting would be contrary to the provisions of the Companies Act. However, the refusal of the directors to hold an EGM does not amount to an offence under the Companies Act, 2013. The only remedy available to the requisitionists is to call the meeting themselves and recover their expenses from the company.[4]

Conditions for requisition of an EGM

There are certain requirements to be fulfilled to requisition an EGM. In Queens Kurries& Loans Pvt. Ltd v Sheena Jose[5] it was held that in order to requisition a meeting, the requisitionists must hold not less than one-tenth of the paid-up capital of the company on the date of the deposition of the requisition. Under S.100 of the Act, in spite of the words ‘Such number of members of the company’ has been used in the plural, the requirements of the said section would be satisfied even if one member holding the requisite number of shares makes the requisition as it has been held in S. Vardarajan v Venkateswara Solvent Extraction Pvt. Ltd.[6]

In the case of a Company not having Share Capital, not less than one-tenth of the voting strength of the company should sign the proposal for the EGM. The requisitionists have to make the proposition for the EGM at least 21 days before the proposed date of the meeting by sending a notice by electronic mode (as permitted under the New Act) or in writing. The notice should specify the time and place of the proposed meeting and shall also mention the agenda. The meeting should be held at the Registered Office or the same city in which the registered office is situated and on a working day. The proposed resolution will be a Special Resolution, and all the requisitionists should sign the notice. The notice will be sent to all the members whose name is present in the Register of Members. It should also be noted that no further dividend can be declared at the EGM  once it has already been declared at the Annual General Meeting.

Inter alia, there have been changes in the Companies Act 2013 vis-à-vis the Companies Act, 1956. The section corresponding to Section 100 of the New Act corresponds to Section 169 and Regulation 48(1) of Table A of Schedule 1 of the 1956 Act. The provisions of Reg. 48(1) are now contained in S.100 sub-section 1.

Steps to be followed to convene an EGM

The following steps are to be followed in order to convene an EGM. Firstly, a board meeting should be convened after notice has been sent to all the directors to discuss inter alia the proposed resolutions to be passed at the EGM and to fix the time, date and venue for the same.

The next step should be to dispatch notices in writing or in electronic mode (now permitted under the New Act) giving at least 21 days notice. Subsections 4 and 5 of Section 101 deal with the details of sending such notice. The nature of concern of such meeting and any other information regarding the scope and implications of the decisions taken in this meeting should also be mentioned in the aforesaid notice.

Section 103 relates to the requisite quorum of the companies. The New Act Provides that in case of an adjourned meeting or of a change of day, time or place of meeting under clause (a), the company shall give not less than three days notice to the members either individually or by publishing an advertisement in the newspapers (one in English and one in vernacular language) which is in circulation at the place where the registered office of the company is situated. As provided by Section 104, all the members personally present at the meeting should elect a chairman among themselves by a show of hands. The poll should be in accordance with the Act.

Section 105 provides for the appointment of proxies. It states that a person who is appointed as a proxy should act on behalf of such members or a number of members (not exceeding 50). The New Act provides that the Central Government can a class or classes of companies that shall not be allowed to appoint another person as a proxy.

The next step is to vote. Voting is permitted by a show of hands unless a poll is demanded. The New Act provides for voting to be done through electronic means. It is to be ensured that the resolutions passed and the minutes should be prepared and signed within 30 days of the conclusion of the meeting. Once this is done the appropriate form needs to be filed with the Registrar of Companies.

[1][1986] 59 Comp. Cas. 548 (SC)

[2] 1957 SLT 124

[3][1975] 75 Comp.Cas. 574 (Bom.)

[4]Anantha R. Hegde v Capt. T. S. Khosla; [1996] 3 Co. Law Journal 333

[5][1993] 76 Comp.Cas. 821 (Ker.)

[6] [1994]  80 Comp. Cas. 693 (Mad.)