In this article, Prakarsh Seth, pursuing Diploma in Entrepreneurship Administration and Business Laws from NUJS, Kolkata discusses the guidelines for conducting EGMs under Company Law
Extraordinary general meeting
The clause 42 of Table F (Schedule 1) states that all the meetings other than the ones which are annual general meetings shall be classified as extraordinary general meetings. The Board of directors of the company have the power to call an extraordinary general meeting whenever, in its opinion, it deems fit. The reason for the existence of an extraordinary general meeting is that the annual general meeting is conducted within a gap of about 18 months between two consecutive meetings. This gap is mandatory and shall be maintained, however, if an urgent matter arises between the two annual general meetings then it can be handled by the way of extraordinary general meeting. The matters if requires the shareholder’s approval, then an extraordinary meeting may be called.
When can an extraordinary general meeting be called?
From the abovementioned, it can be understood that an extraordinary general meeting may be called if the business which has to be transacted is of urgent nature and cannot be put on hold till the next annual general meeting. Usually, an EGM may be called in the following circumstances:
1) By the board ‐ an extraordinary general meeting may be called by the board on its own motion.
2) By a director ‐ An EGM may be called by a director and if at a time they are called and are not in India, then the director capable of acting and who are sufficient in number shall be called to form the quorum.
3) An EGM may be called by the board at the requisition made by the members as per Section 100.
4) It may be called by the requisitionists themselves
5) Tribunal ‐ An EGM may be called by the Tribunal or the NCLT.
Matters that can be dealt in EGM
It has been provided in the Companies Act, 2013 that any business that is considered in the extraordinary general meeting shall be considered as special business. EGM has various functions attached to it. EGM is used to help the Board to know about certain matters which are important in nature. It also places a duty on the company to provide to the shareholders more information about the business to be transacted in the form of an explanatory statement. The explanatory statement shall have attached to itself a notice to the EGM which shall include the relevant information such as the nature of concern or interest which may be financial or otherwise. It shall also include the information and facts that may enable members to understand the meaning and the implications of the business and the scope of transactions of business and to take decisions.
Procedure to call for an EGM
The meeting shall be called at any day other than the national holiday and the procedure for calling an extraordinary general meeting shall be given in the articles of association of the company.
How to initiate an EGM?
Section 100(2) of the Companies Act, 2013 makes it clear that an extraordinary general meeting can be held via requisition which has been made by a member who at the time of making a requisition holds at least one‐tenth of the share capital. This can be done only in the companies which have share capital. In the case of companies, which do not have share capital, the members who have a minimum of a total of one‐tenth of the total voting power of all the member who have the right to vote, such members on the date of requisition shall have the power to call an extraordinary general meeting.
The requisition mentioned above has to set out the matters for which the meeting has to be held and these matter of considerations shall be signed by the requisitionists and has to be sent to the registered office of the company. The board has a duty to call proceed to call the meeting within 21 days from the receipt of the said requisition and the meeting has to held within 45 days. If the board fails to do so, then the meeting can be called and held by the requisitionists within 3 months. In the latter scenario, the meeting which has to be conducted by the requisitionists has to follow the same manner in which the meetings are conducted by the board.
The expenses which have been incurred by the requisitionists shall be reimbursed to them from the company and the company can deduct these amounts from the remuneration of directors, because of whom the default occurred and the meeting had to be conducted in the said manner.
Amendment to Section 100
There has been an amendment to Section 100 of the Companies Act which states that unless the company is a wholly owned subsidiary of a company registers outside India, the extraordinary meeting of all the companies which are remaining shall be conducted a place in the territory of India.
Another modification which has been made into the Act is that there is a proviso inserted into the subsection 1 of section 100, which states that in case of Specified IFSC companies, the board can if the shareholders have given their consent, conduct their Extraordinary general meeting at any place. This shall include places within the territory or outside the territory of India.
With respect to the requisitions mentioned above, it has to be noted that the requisitions shall set out the matter for considerations and no other business can be done apart from it. This principle was laid out in the case of Malvika Apparels v. Union of India in which the notice which was served in response to the requisition had not included all the items specified by the requisitionists.
Similarly, in the case of Ball v. Metal Industries where the meeting was conducted by the requisitionists for inducting three new directors and subsequently the agenda for removal of a director was also added, the matter was restrained to be considered.
The calling of the meeting cannot be refused only on the ground that the resolution which shall be discussed will go against the act. The directors do not have the power to refuse for the abovementioned reason as the court has the power to take action if at all that is the case. In the case of Cricket Club of India v Madhav Lal Apte, the requisitionists wanted to add a clause in the articles of the company which stated that a person occupying the position of a director for six years shall not have the power to stand for re‐election. This shall be done for a period of three years after that he shall be rested with the power to stand for elections. Although this was violative of section 168 as it added additional ground of disqualification, even then the directors should not refuse to respond to the said requisition.
If the resolution in the EGM has to be with respect to the removal of a director, a requirement of sending a special notice has to be given. If this is not done, severability has to be maintained as the meeting shall stand to be valid but the resolution shall be considered as void. In the case of Queens Kuries and loans (p) Ltd v. Sheena Jose, it was held that where a notice was not given to the director who was concerned to the resolution, the proceedings had to be declared invalid.
With respect to the place for conducting the Extraordinary general meeting, it is not mandatory to conduct it at the place of the registered office of the company. The resolution passed at a meeting held at a different place shall have the same validity as that of the one conducted at the office. This was held in the case of Metal Box Ltd., A meeting cannot be called for the declaration that the directors of the said company have been elected in a manner which is not valid and that in his place the people applying for the requisition shall be put in their place.
One thing which is very much important for an Extraordinary general meeting is that the refusal to grant a meeting upon requisition would not amount to an offence. The requisitionists have the remedy of calling an alternate meeting. The requisitionists have an alternate to go to the tribunal under section 98 if the holding of any meeting other than the annual general meeting has become impracticable, in such cases the tribunal has the power to order a meeting on the application of a member or the director. But the requisitionists, according to the case of B Mohandas v. AKMN cylinders P(ltd), cannot go to the tribunals directly if they have first not exhausted the remedy of applying for an extraordinary general meeting themselves.