In this blog post, Pritishree Dash, a student, pursuing her fourth year LLB at National University of Advanced Legal Studies, Kochi and a Diploma in Entrepreneurship Administration and Business Laws from NUJS, Kolkata, discusses the proceedings of a Shareholder Meeting.
A company is an entity distinct from its members. The members of a company are the persons who constitute the company as a corporate entity. A company cannot act on its own as it is an artificial person. Hence, it expresses its will or makes decisions through resolutions passed at meetings through its members. The primary purpose of a meeting is to ensure that a company gives a reasonable and fair opportunity to those entitled to participate in the Meeting to take decisions with regards to the management of the affairs of the company as per the prescribed procedures.
Shareholder meetings are popularly known as general meetings. A company conducts meetings of its members for approval of certain business items such as appointments, vote on various matters, hearing reports and presenting questions before the board as prescribed in the Act. There are various kinds of shareholder meetings. The meetings to be held for seeking approval to ordinary business and special business are called an annual general meeting and extraordinary general meeting respectively. Any meeting other than the annual general meeting is known as an extraordinary general meeting. In certain cases, a company may have to hold a meeting of the members of a particular class of members which is known as class meetings. Although mostly matters are decided by a process of ‘show of hands,’ taking polls is another method based on the number of shares a person holds (This happens on the demand of a minimum of 10% shareholders).
Annual General Meetings
Section 96 provides that every company, other than a one person company is required to hold an annual general meeting every year. They are meant for both private and public companies. A one person company needn’t hold annual general meeting.
Frequency: The annual general meeting should be held once every year. First annual general meeting of the company should be held within nine months from the closing of the first financial year. Hence, it shall not be necessary for the company to hold any annual general meeting in the year of its incorporation. Subsequent annual general meetings of the company should be held within six months from the closing of the financial year.
The gap between two annual general meetings should not exceed 15 months. In case, there is a difficulty for a company to hold an annual general meeting within the prescribed time, the Registrar may, for any special reason, extend the time for an annual general meeting. Such extension can be for a period not exceeding three months. The application for the annual general meeting must be made before its due date. No such extension of time can be granted by the Registrar for the holding of the first annual general meeting. Delay in completion of audits is not a special reason for the extension.
Time and place for holding an annual general meeting: An annual general meeting should be held on any day that is not a National Holiday during business hours between 9 a.m. and six p.m. AGM can be conducted on public holidays except national holidays in case it has already been notified. It should be held either at the registered office of the company or at some other place within the city, town or village in which the registered office of the company is situated. The Central Government is empowered to exempt any company from these provisions, subject to such conditions as it may impose.
Business to be transacted at an AGM: Sub-section (2) of Section 102 provides that the following businesses transacted at an Annual General Meeting are ordinary business:
- The consideration of financial statements and the reports of the Board of Directors and auditors;
- The declaration of any dividend;
- The appointment of directors in place of those retiring;
- The appointment of and the fixing of the remuneration of, the auditors.
Any other transactions amount to a special business. According to Section 129(2), at every AGM board of directors of the company shall lay before the meeting financial statement for the financial year. Moreover, Section 129(3) says, where the company has one or more subsidiaries, they have to prepare in addition to the statement under section 129(2) a consolidated financial statement and of all subsidiaries in the same format and also present before the AGM of the Company with the prescribed statement under section 129(2).
Default in holding an AGM: Section 99 provides that if any default is made in complying or holding a meeting of the company, the company and every officer of the company who is in default shall be punishable with fine which may extend to 1 lakh and if the default continued, with a further fine which may extend to Rs. 5,000/- for each day during which such default continues.
If any default is made in holding the annual general meeting of a company, any member of the company may make an application to the Tribunal to call or direct the calling of an annual general meeting of the company and give such ancillary or consequential directions as the Tribunal thinks necessary. Such directions may include a direction that one member of the company present in person or by proxy shall be deemed to constitute a meeting.
Report on AGM: According to Section 121, every listed company has to prepare in the prescribed manner a report on each AGM including confirmation to the effect that the meeting was convened, held and conducted as per the provisions of the Act.
A copy of the same should be filed with the Registrar within 30 days of the AGM, failure which can lead to a fine within 1 lakh to 5 lakhs.