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company law - meetings & proceedings
a presentation on the kinds of meetings held by a company followed by their...
From roshnip17
© Copy Right: Rai University
LEGALASPECTS OF BUSINESS
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LESSON 34:THE COMPANIES ACT, 1956MEETINGS AND PROCEEDINGS
Learning Objectives
After reading the lesson, you will be able to know about the:
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The kinds of meeting of a company
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The requisites of a valid meeting of a company
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The kinds of resolutions
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The other important terms related to meeting, viz;adjournment, postponement, dissolution andminutes of meeting
Introduction
A company is an association of several persons. Decisions aremade according to the view of the majority. Various mattershave to be discussed and decided upon. These discussions takeplace at the various meetings, which take place between mem-bers and between the directors. Needless to say, the importanceof meetings cannot be under-emphasized in case of companies.The Companies Act 1956 contains several provisions regardingmeetings. These provisions have to be understood andfollowed.For a meeting, there must be at least 2 persons attending themeeting. One member cannot constitute a company meetingeven if he holds proxies for other members.
Kinds of Company Meetings
Broadly, meetings in a company are of the following types :-
I Meetings of Members
These are meetings where the members / shareholders of thecompany meet and discuss various matters. Member’s meetingsare of the following types :-
Statutory Meeting (Sec 165)
A public company limited by shares or a guarantee companyhaving share capital is required to hold a statutory meeting. Sucha statutory meeting is held only once in the lifetime of thecompany. Such a meeting must be held within a period of notless than one month or within a period not more than sixmonths from the date on which it is entitled to commencebusiness i.e. it obtains certificate of commencement of business. In a statutory meeting, the following matters only canbe discussed: -a.Floatation of shares / debentures by the companyb.Modification to contracts mentioned in the prospectusThe purpose of the meeting is to enable members to know all-important matters pertaining to the formation of the companyand its initial life history. The matters discussed include whichshares have been taken up, what money has been received, whatcontracts have been entered into, what sums have been spent onpreliminary expenses, etc. The members of the companypresent at the meeting may discuss any other matter relating tothe formation of the Company or arising out of the statutoryreport also, even if no prior notice has been given for such otherdiscussions but no resolution can be passed of which noticehave not been given in accordance with the provisions of theAct.A notice of at least 21 days before the meeting must be given tomembers unless consent is accorded to a shorter notice bymembers, holding not less than 95% of voting rights in thecompany.A statutory meeting may be adjourned from time to time bythe members present at the meeting.The Board of Directors must prepare and send to everymember a report called the “Statutory Report” at least 21 daysbefore the day on which the meeting is to be held. But if all themembers entitled to attend and vote at the meeting agree, thereport could be forwarded later also. The report should becertified as correct by at least two directors, one of whom mustbe the managing director, where there is one, and must also becertified as correct by the auditors of the company with respectto the shares allotted by the company, the cash received inrespect of such shares and the receipts and payments of thecompany. A certified copy of the report must be sent to theRegistrar for registration immediately after copies have been sentto the members of the company.A list of members showing their names, addresses andoccupations together with the number shares held by eachmember must be kept in readiness and produced at thecommencement of the meeting and kept open for inspectionduring the meeting.If default is made in complying with the above provisions,every director or other officer of the company who is in defaultshall be punishable with fine upto Rs. 500. The Registrar or acontributory may file a petition for the winding up of thecompany if default is made in delivering the statutory report tothe Registrar or in holding the statutory meeting on or after 14days after the last date on which the statutory meeting ought tohave been held.
Contents of Statutory Report Must provide thefollowing Particulars
(a)The total number of shares allotted, distinguishing thosefully or partly paid-up, otherwise than in cash, the extent towhich partly paid shares are paid-up, and in both cases theconsideration for which they were allotted.(b) The totalamount of cash received by the company in respect of allshares allotted, distinguishing as aforesaid.(c) An abstractof the receipts and payments upto a date within 7 days of the date of the report and the balance of cash and bank accounts in hand, and an account of preliminaryexpenses.(d) Any commission or discount paid or to bepaid on the issue or sale of shares or debentures must beseparately shown in the aforesaid abstract.(e) The names,addresses and occupations of directors, auditors, manager
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and secretary, if any, of the company and the changes whichhave taken place in the names, addresses and occupationsof the above since the date of incorporation.(f) Particularsof any contracts to be submitted to the meeting forapproval and modifications done or proposed.(g) If thecompany has entered into any underwriting contracts, theextent, if any, to which they have not been carried out andthe reasons for the failure.(h) The arrears, if any, due oncalls from every director and from the manager.(i) Theparticulars of any commission or brokerage paid or to bepaid, in connection with the issue or sale of shares ordebentures to any director or to the manager.The auditors have to certify that all information regarding callsand allotment of shares are correct.
B. Annual General Meeting (Secs. 166 and 167)
It must be held by every type of company, public or private,limited by shares or by guarantee, with or without share capitalor unlimited company, once a year. Every company must in eachyear hold an annual general meeting. Not more than 15 monthsmust elapse between two annual general meetings. However, acompany may hold its first annual general meeting within 18months from the date of its incorporation. In such a case, itneed not hold any annual general meeting in the year of itsincorporation as well as in the following year only.Note the following case:Sree Meenakshi Mills Co. Ltd. V. Assistant Registrar of Companies. A.I.R. (1938) Mad 640. The annual generalmeeting of a company called in December 1934 was adjournedand held in march 1935, the next meeting was held in January,1936, no other meeting being held in 1935. the companycontended that it did hold a meeting in the year 1935. but it washeld by the court that the meeting of march 1935 was theadjourned meeting of 1934.In the case there is any difficulty in holding any annual generalmeeting (except the first annual meeting), the Registrar may, forany special reasons shown, grant an extension of time forholding the meeting by a period not exceeding 3 monthsprovided the application for the purpose is made before the duedate of the annual general meeting. However, generally delay inthe completion of the audit of the annual accounts of thecompany is not treated as “special reason” for granting exten-sion of time for holding its annual general meeting. Generally,in such circumstances, an AGM is convened and held at theproper time . all matters other than the accounts are discussed.All other resolutions are passed and the meeting is adjournedto a later date for discussing the final accounts of the company.However, the adjourned meeting must be held before the lastday of holding the AGM.A notice of at least 21 days before the meeting must be given tomembers unless members, holding not less than 95% of voting rights in the company, accord consent to a shorter notice.The notice must state that the meeting is an annual generalmeeting. The time, date and place of the meeting must bementioned in the notice. The notice of the meeting must beaccompanied by a copy of the annual accounts of the company,director’s report on the position of the company for the yearand auditor’s report on the accounts. Companies having sharecapital should also state in the notice that a member is entitledto attend and vote at the meeting and is also entitled to appointproxies in his absence. A proxy need not be a member of thatcompany. A proxy form should be enclosed with the notice.The proxy forms are required to be submitted to the companyat least 48 hours before the meeting.The AGM must be held on a working day during businesshours at the registered office of the company or at some otherplace within the city, town or village in which the registeredoffice of the company is situated. The Central Governmentmay, however, exempt any class of companies from the aboveprovisions. If any day is declared by the Central government tobe a public holiday after the issue of the notice convening suchmeeting, such a day will be treated as a working day.A company may, by appropriate provisions in its articles, fix thetime for its annual general meeting and may also by a resolutionpassed in one annual general meeting fix the time for itssubsequent annual general meetings.Companies licensed under Section 25 are exempt from theabove provisions provided that the time, date and place of eachannual general meeting are decided upon beforehand by theBoard of Directors having regard to the directions, if any, givenin this regard by the company in general meeting.In case of default in holding an annual general meeting, thefollowing are the consequences: -1.Any member of the company may apply to the CompanyLaw Board. The Company Law Board may call, or direct thecalling of the meeting, and give such ancillary orconsequential directions as it may consider expedient inrelation to the calling, holding and conducting of themeeting. The Company Law Board may direct that onemember present in person or by proxy shall be deemed toconstitute the meeting. A meeting held in pursuance of this order will be deemed to be an annual general meetingof the company. An application by a member of thecompany for this purpose must be made to the concernedRegional Bench of the Company Law Board by way of petition in Form No. 1 in Annexure II to the CLBRegulations with a fee of rupees fifty accompanied by (i)affidavit verifying the petition, (ii) bank draft for paymentof application fee.2.Fine which may extend to Rs. 5,000 on the company andevery officer of the company who is in default may belevied and for continuing default, a further fine of Rs. 250per day during which the default continues may be levied.
Business to be Transacted at Annual GeneralMeeting
At every AGM, the following matters must be discussed anddecided. Since such matters are discussed at every AGM, they areknown as ordinary business. All other matters and business tobe discussed at the AGM are specila business.The following matters constitute ordinary business at an AGMa.Consideration of annual accounts, director’s report andthe auditor’s report
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b.Declaration of dividendc.Appointment of directors in the place of those retiringd.Appointment of and the fixing of the remunerationof the statutory auditors.In case any other business ( special business ) has to bediscussed and decided upon, an explanatory statement of thespecial business must also accompany the notice calling themeeting. The notice must should also give the nature andextent of the interest of the directors or manager in the specialbusiness, as also the extent of the shareholding interest in thecompany of every such person. In case approval of anydocument has to be done by the members at the meeting, thenotice must also state that the document would be available forinspection at the Registered Office of the company during thespecified dates and timings.
C. Extraordinary General Meeting( Sec. 169)
Every general meeting (i.e. meeting of members of thecompany) other than the statutory meeting and the annualgeneral meeting or any adjournment thereof, is an extraordinarygeneral meeting. Such meeting is usually called by the Board of Directors for some urgent business which cannot wait to bedecided till the next AGM. Every business transacted at such ameeting is special business. An explanatory statement of thespecial business must also accompany the notice calling themeeting. The notice must should also give the nature andextent of the interest of the directors or manager in the specialbusiness, as also the extent of the shareholding interest in thecompany of every such person. In case approval of anydocument has to be done by the members at the meeting, thenotice mus also state that the document would be available forinspection at the Registered Office of the company during thespecified dates and timings.The Articles of Association of a Company may containprovisions for convening an extraordinary general meeting. Itmay provide that “the board may, whenever it thinks fit, call anextraordinary general meeting” or it may provide that “if at anytime there are not within India, directors capable of acting whoare sufficient in number to form a quorum, any director or anytwo members of the company may call an extraordinary generalmeeting”.
Extraordinary General Meeting on Requisition :
The members of a company have the right to require the callingof an extraordinary general meeting by the directors. The boardof directors of a company must call an extraordinary generalmeeting if required to do so by the following number of members :-a.Members of the company holding at the date of making the demand for an EGM not less than one-tenth of such of the voting rights in regard to thematter to be discussed at the meeting ; orb.if the company has no share capital, the membersrepresenting not less than one-tenth of the totalvoting rights at that date in regard to the said matter.The requisition must state the objects of the meetings andmust be signed by the requisitioning members. The requisitionmust be deposited at the company’s registered office. When therequisition is deposited at the registered office of the company,the directors should within 21 days, move to call a meeting andthe meeting should be actually be held within 45 days from thedate of the lodgement of the requisition. If the directors fail tocall and hold the meeting as aforesaid, the requisitionists or anyof them meeting the requirements at (a) or (b) above, as thecase may be, may themselves proceed to call meeting within 3months from the date of the requisition, and claim thenecessary expenses from the company. The company can makegood this sum from the directors in default. At such an EGM,any business which is not covered by the agenda mentioned inthe notice of the meeting cannot be voted upon.
Power of Company Law Board to Order Calling of Extraordinary General Meeting :
If for any reason, it is impracticable to call a meeting of acompany, other than an annual general meeting, or to hold orconduct the meeting of the company, the Company Law Boardmay, either i) on its own motion, or ii) on the application of any director of the company, or of any member of the com-pany, who would be entitled to vote at the meeting, order ameeting to be called and conducted as the Company Law Boardthinks fit, and may also give such other ancillary and consequen-tial directions as it thinks fit expedient. A meeting so called andconducted shall be deemed to be a meeting of the companyduly called and conducted.
Procedure for Application under Section 186 :
An application by a director or a member of a company for thispurpose is required to be made to the Regional Bench of theCompany Law Board before whom the petition is to be madein Form No 1 specified in Annexure II to the CLB Regulationswith a fee of Rs200. The petition must e accompanied with thefollowing documents -a.Evidence in proof of status of the applicant.b.Affidavit verifying the petition.c.Bank draft evidencing payment of application fee.d.Memorandum of appearance with copy of the Board’sresolution or executed vakalat nama, as the case may be.
D. Class Meeting
Class meetings are meetings which are held by holders of aparticular class of shares, e.g., preference shareholders. Suchmeetings are normally called when it is proposed to vary therights of that particular class of shares. At such meetings, thesemembers dicuss the pros and cons of the proposal and voteaccordingly. (See provisions on variations of shareholder’srights). Class meetings are held to pass resolution which willbind only the members of the class concerned, and onlymembers of that class can attend and vote.Unless the articles of the company or a contract binding on thepersons concerned otherwise provides, all provisions pertainingto calling of a general meeting and its conduct apply to classmeetings in like manner as they apply with respect to generalmeetings of the company.
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Lecture 34
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