This article has been written by Gaurav Bandi pursuing a Diploma in Domestic & International Commercial Arbitration from LawSikho.

This article has been edited and published by Shashwat Kaushik.

Introduction

Shareholders are the main stakeholders of a company. Shareholders’ meetings play a critical role in ensuring a company’s accountability, transparency, and effective governance. Such meetings develop better communication, increase investor engagement, and facilitate important decision-making, which ultimately bring about the company’s long-term success and sustainability.

Download Now

What is a juridical review invitation

A juridical review invitation is a formal document that is sent to all shareholders of a company. It provides information about the date, time, and location of the general meeting of shareholders, as well as the agenda for the meeting. The invitation also includes instructions on how shareholders can participate in the meeting, either in person or by proxy.

Role of juridical review invitation to general meeting of shareholders

The juridical review invitation to a general meeting of shareholders plays a pivotal role in the corporate governance process.

  1. Legal compliance:
    • The juridical review ensures that the invitation complies with all applicable laws and regulations governing shareholder meetings. This includes adherence to notice periods, content requirements, and delivery methods.
  2. Transparency and accountability:
    • The invitation serves as a formal communication to shareholders, providing them with essential information about the upcoming meeting. It establishes transparency and accountability by ensuring that all shareholders have equal access to the same information.
  3. Shareholder rights:
    • The invitation upholds shareholders’ rights by ensuring that they are properly notified in advance, allowing them to exercise their voting rights and participate in the decision-making process. It promotes shareholder democracy and encourages active engagement.
  4. Decision-making authority:
    • The general meeting of shareholders is the highest decision-making body in a corporation. The juridical review invitation sets the stage for this critical event by ensuring that all shareholders are aware of the matters to be discussed and voted upon.
  5. Meeting validity:
    • A properly executed juridical review invitation helps validate the legitimacy of the general meeting. Without a valid invitation, the meeting may be subject to legal challenges, potentially invalidating any decisions made during the meeting.
  6. Record-keeping:
    • The invitation serves as a vital record of the meeting’s proceedings. It provides a verifiable account of the date, time, location, and agenda items, as well as the notification process followed.
  7. Investor confidence:
    • A well-conducted legal review invitation instills confidence among shareholders and investors. It demonstrates the company’s commitment to good governance practices, transparency, and respect for shareholder rights.
  8. Stakeholder engagement:
    • The invitation extends beyond shareholders to include other stakeholders, such as creditors, employees, and regulators. By ensuring their awareness of the meeting, the company fosters open communication and promotes stakeholder engagement.
  9. Risk mitigation:
    • A thorough legal review invitation helps mitigate the legal risks associated with shareholder meetings. It minimises the likelihood of legal challenges or disputes arising from improper notice or failure to comply with regulatory requirements.
  10. Continuous improvement:
    • The review process allows companies to assess their compliance practices and identify areas for improvement. It contributes to the continuous enhancement of corporate governance standards.

Types of general meetings

The Companies Act 2013 stipulates mainly two types of meetings for all shareholders and other stakeholders of a company, namely. 

Annual General Meeting (AGM)

This is the most important meeting of the year, where shareholders come together to discuss and vote on a variety of matters, including the company’s financial performance, the appointment of directors, and the approval of dividend payments. Every company must hold an AGM within six months of the end of its financial year.

Extraordinary General Meeting (EGM)

This is called for specific urgent matters that cannot wait until the next AGM. For example, an EGM may be called to approve a major acquisition or to remove a director from the board.

Meeting of a particular class of shareholders

This type of meeting is held when a company has different classes of shares with different rights attached to them. For example, a company may have preference shares and ordinary shares. The holders of each class of shares may have the right to hold a separate meeting to vote on matters that affect their particular class of shares

Debenture holders meeting

Apart from shareholder meetings, other stakeholders, like debt holders, can also call a meeting. Debenture holders play a crucial role in the financial structure of a company. Debentures, being a form of debt instrument, represent a promise by the issuing company to repay the borrowed sum along with interest at specified intervals. The relationship between a company and its debenture holders involves periodic interactions, often facilitated through debentureholder meetings. Debentureholder meetings operate under legal frameworks, often outlined in the debenture trust deed and relevant financial regulations.

Who can call a meeting

Only the Board of Directors of the company has the power to convene an AGM. However, an EGM can be called by directors as well as by shareholders of the company, provided they hold at least 10% of the paid-up share capital and a formal requisition with reasons is submitted to the board.

There are specific situations where the central government or the Registrar of Companies (ROC) can intervene and call for a shareholders meeting

Legal and procedural requirements

A shareholders meeting is mainly governed by the norms prescribed in the Companies Act 2013, but listed companies are also obliged to follow the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 as amended from time to time. Therefore, the procedural requirements prescribed for Pvt Ltd Companies versus publicly Listed Companies are different. Let’s take a look at these requirements and how they differ.

Notice period

Pvt. Ltd. companies require a minimum notice period of 14 days for AGMs and EGMs, while listed companies typically need 21 days. Listed companies also need to disclose additional information in the notice, such as explanatory statements and proxy forms.

Modes of dispatch

Notices can be dispatched through various modes, including physical copies, electronic means, or any other method prescribed in law. The use of electronic modes has gained prominence in recent years, aligning with the digital transformation of corporate communication.

Information dissemination

Listed companies must publish AGM notices in newspapers and on their websites, while Pvt. Ltd. companies can use more informal means like email or physical copies.

Attendance and quorum

The minimum number of shareholders required to be present for a valid meeting is generally lower for Pvt. Ltd. companies (2 members or 2% of shareholders) compared to listed companies (50 shareholders or 10% of the paid-up capital). Listed companies often have a larger shareholder base, leading to potentially higher attendance at meetings compared to Pvt. Ltd. companies.

Voting and proxy

Listed companies have stricter regulations on voting procedures, such as mandatory use of proxy forms or electronic voting platforms. Proxy voting usage is higher in listed companies due to the larger shareholder base. Both company types allow proxy voting, where a shareholder appoints another person to vote on their behalf. However, listed companies have stricter eligibility or registration requirements for proxies.

Regulatory requirements

Listed companies face additional regulations and reporting requirements regarding shareholder meetings, such as disclosures to stock exchanges and compliance with listing agreements. Pvt Ltd companies have fewer compliance burdens in this regard.

What all should be covered

A notice for calling shareholders to meet should impart all the information, which a shareholder will need to know before attending the meeting so that they come prepared for the meeting well in advance, have a meaningful discussion and a constructive decision can be taken. Let’s look into a few such pointers, which are the essence of a notice. (Sample of AGM Notice of Hindustan Petroleum Corporation Limited can be referred as a live example.)

Basic information:

  • Company name: Clearly state the name of the company holding the meeting.
  • Meeting type: Specify whether it’s an Annual General Meeting (AGM) or an Extraordinary General Meeting (EGM).
  • Date and time: Provide the exact date and time of the meeting.
  • Venue: Clearly state the address and/or name of the location where the meeting will be held. A Google location should be inserted for the convenience and at times, it is also mandatory.
  • Use clear and concise language, avoiding legal jargon.
  • Proof read the notice carefully before sending it out.

Agenda:

  • Outline the key matters to be discussed and voted on at the meeting. This should include, but not be limited to:
    • Approval of the minutes of the previous meeting (for AGMs)
    • Consideration of the company’s financial statements and directors’ report
    • Appointment or re-appointment of directors and auditors
    • Declaration of dividends (if applicable)
    • Any other business items proposed by the Board or shareholders (according to relevant policies)
  • For EGMs, the agenda should clearly state the specific reason for calling the meeting and the matters to be addressed.

Proxy information:

  • Explain how shareholders can appoint a proxy to vote on their behalf if they are unable to attend the meeting in person.
  • Include details about the proxy form and deadline for submission.

Record date:

  • Specify the record date, which determines which shareholders are entitled to receive the notice and vote at the meeting.

Additional Information:

  • Depending on the meeting and company specifics, consider including additional information like:
    • Any explanatory statement or documents related to proposed resolutions
    • Instructions for participating in the meeting, including virtual access details if applicable
    • Details about registering for the meeting or submitting questions in advance
    • Deadline for submitting proposals for consideration at the meeting (for AGMs)
  • Any vested interest of the directors, other stakeholders or related parties having an interest in the proposed.
  • Disclosure of e-voting guidelines and meeting via video conferencing.

Advantages 

Shareholders’ meetings serve various crucial functions within a company, making them integral to good corporate governance and the overall health of the organisation. Here are some key reasons why these meetings are so important:

Accountability and transparency

Shareholder oversight

Meetings provide a platform for shareholders to hold the Board of Directors and management accountable for their performance. Through voting on proposals and asking questions, shareholders can exert their influence on the company’s direction and ensure responsible decision-making.

Financial transparency

Meetings showcase the company’s financial results, including the annual report and audited accounts. This transparency allows shareholders to assess the company’s financial health and make informed investment decisions.

Communications and engagement

Direct dialogue

These meetings offer a dedicated avenue for direct communication between shareholders and the company’s leadership. Shareholders can voice their concerns, ask questions, and receive updates on the company’s plans and strategies.

Building confidence

Open communication fosters trust and understanding between the company and its investors, promoting long-term stability and investment confidence.

Decision making and governance

Voting rights

Meetings provide shareholders with the opportunity to exercise their voting rights on critical matters, such as the appointment of directors, dividend distributions, and major acquisitions. This ensures that significant decisions are made with shareholder input and approval.

Compliance and legal framework

Meetings serve as a formal platform for adhering to legal and regulatory requirements for corporate governance. They provide documented proof of shareholder participation and adherence to established procedures.

Assessing strategy and progress

Performance review

Meetings offer a structured setting for shareholders to evaluate the company’s performance against its stated goals and strategies. This assessment helps ensure alignment between the company’s objectives and the expectations of its investors.

Course correction

Through discussions and feedback, shareholders can contribute to shaping the company’s future direction. If needed, they can prompt course corrections or adjustments to strategies based on their insights and concerns.

Overall, shareholders’ meetings play a critical role in ensuring a company’s accountability, transparency, and effective governance. They foster communication, engage investors, and facilitate vital decision-making processes, ultimately contributing to the company’s long-term success and sustainability.

Benefits of juridical review 

With the ever increasing regulations and disclosures required by companies, especially the listed ones, a well reviewed notice of shareholder meetings can help mitigate compliance and the legal risk that the company and its key managerial personnel face. A routine practice of review leading to the eradication of errors and omissions will inculcate shareholder confidence and help protect their right to know. It also brings more transparency into the workings of the company, thereby increasing overall investor confidence. The in-house legal team of the company can do this juridical review or assistance from an expert corporate lawyer must be utilised.

Conclusion

In conclusion, shareholders meetings play a pivotal role in shaping the destiny of companies, fostering collaboration between management and shareholders. The notice requirements prescribed by the Companies Act 2013 serve as the foundation for transparent and inclusive decision-making. Adherence to these requirements ensures that shareholders are well informed, enabling them to actively contribute to the growth and governance of the company. As technology continues to reshape corporate communication, companies must adapt while upholding the principles of accountability, transparency, and shareholder democracy.

References

RELATED ARTICLESMORE FROM AUTHOR

LEAVE A REPLY

Please enter your comment!
Please enter your name here