Legal Aspects of Business

Company Law
General Meetings and proceedings

PGDM (PT)-IIIrd Term

March, 2009
IMT-Ghaziabad
 General Meetings
• A company being an artificial legal person,
can only act through some human
intermediary. The various provisions of the
Act and rules empower members to do
certain things.
• All decisions of the company are taken in
meetings.
 General
• Requisites of a valid meeting: It must be
duly convened legally constituted and
properly conducted.
• Notice of meeting must be proper and
adequate: For general meetings at least
21 clear days notice must be given to
every member and auditor of the
company. It must specify the date, time
and place of meeting.
 General
• Chairman of the meeting: Every meeting is
presided over by the chairman who is to
conduct the proceedings of the meeting
properly. The chairman is either the
chairman of the board or elected for every
meeting. His main role is to maintain order
and decorum in the meeting.
 General
• Quorum: The quorum is generally laid
down in the articles. In the absence of any
provision in the articles, the quorum is 5
members for public and 2 members for
private company. The articles can not
provide for a smaller quorum.
 General
• Voting: To ascertain the sense of the house the
chairman of the meeting can use any of the
following:
– Acclamation
– Voice vote
– Division
– Show of hands
– Ballot which can be open or secret
– Poll: According to the number of shares held by a
member. A proxy can only vote on a poll, unless the
articles may provide otherwise, say permitting a proxy
to vote on a show of hands also.
 General
• Agenda: Every general meeting has an
agenda to be sent to every member. An
agenda is the statement of business to be
conducted in a meeting.
• Minutes: The decisions taken in a meeting
are recorded as minutes of the meeting.
These minutes shall be evidence of the
proceedings recorded therein.
 Kinds of Meetings
• Statutory Meeting:
– Object: The main purpose is to enable the
members to know at an early date the
financial position and prospects of the
company and also to provide them an
opportunity of discussion on various matters
arising out of promotion and formation of a
company;
 Statutory Meeting-1
• A public limited company having a share capital
is under a legal obligation to hold a statutory
meeting ( a general meeting of the company
within a period of not less than one month and
not more than six months from the date at which
it was allowed to commence business). A private
limited company, an unlimited company or a
public guarantee company having no share
capital are not required to hold any statutory
meeting;
 Statutory Meeting - 2
– When held: Only once in the life time of the
company. It is to be held within a period of not
less than one month but not more than six
months from the date the company is entitled
to commence business. This is the first
meeting of the shareholders;
– Not required when! : A private company is not
required to hold a statutory meeting. This
meeting is also required to be held by a public
company not having share capital or has
unlimited liability or a government company.
 Statutory Meeting - 3
• Notice: At least 21 days notice is to be given;
• Statutory report: Statutory report is presented in
this meeting. Its contents include total shares
allotted, total amount of cash received, an
abstract of receipts and payments, details of
contract, directors, brokerage and commission.
• In case of default by company in holding the
statutory meeting: Penalty is Rs 5000 and is also
a ground for winding up.
 Statutory Meeting - 4
• The statutory report must state the following facts
– The total number of shares allotted, distinguishing those allotted
as fully paid up otherwise than in cash, and the consideration for
allotment;
– The total amount of cash received by the company in respect of
all the shares allotted;
– An abstract of the receipts and the payments of the company up
to a date within seven days of the date of the report and the
balance in hand;
– The names, addresses and occupations of directors, auditors,
manager, and secretary and changes occurred in such names
since the date of the company’s incorporation;
– The extent to which any underwriting contract has been carried
out and the reasons thereof;
 Annual General Meeting
• Annual general meeting is a regular meeting of
the members of a company held annually for the
purpose of transacting company’s ordinary
business. Annual general meeting of the
members is called by the company for
– The passing of the annual accounts;
– Declaration of dividends;
– Election of directors in place of those who are retiring
by rotation;
– Appointment and the fixation of the remuneration of
auditors etc
 Provisions regarding holding of
Annual General Meeting
• Section 167, S 167, & S 168 impose
following obligations on a company as
regards convening of the annual general
meeting
– The power to convene the Annual General
Meeting vests with the Board of Directors.
Individual directors have no such power.
Secretary cannot issue any notice for the
Annual General meeting without the authority
of the Board;
 Provisions regarding holding of
Annual General Meeting
• A company must hold its first annual
general meeting within 18 months of its
incorporation. there can be no extension of
this period even by the Registrar. The
annual general meeting is to be held in
addition to any other general meeting that
might have been held during the year.
 Provisions regarding holding of
Annual General Meeting
• Subsequent Annual General Meeting must be
held by the company each year within six
months after the close of the financial year but
the interval between any two annual general
meetings should not be more than fifteen
months.
• Registrar may, however, for any special reason,
extend the time within which any general
meeting shall be held, by a period not exceeding
three months;
 Provisions regarding holding of
Annual General Meeting
• Company must call the annual general
meeting on a working day during the
business hours either at the registered
office of the company or at some other
place within the city in which the registered
office of the company is situated.
• An adjourned annual general meeting can
be held on a public holiday.
 Provisions regarding holding of
Annual General Meeting
• Company must give at least 21 days
notice to call an annual general meeting of
the shareholders.
• An annual general meeting may be held
with a shorter notice if it is so agreed by all
members entitled to vote in the meeting.
• The notice must expressly specify the
meeting as annual general meeting.
 Extraordinary General Meeting
• All general meetings other than the
statutory meeting and the annual general
meetings shall be known as extraordinary
general meetings [Sec 169]
• All the general meetings of the members
held between two annual general
meetings are called extraordinary general
meetings.
 Extraordinary General Meeting
• Provisions regarding holding of Annual General Meeting:
• Called under Two circumstances
– (a) When the directors have to transact some immediate and
emergent business for which they cannot wait till the next annual
general meeting;
– (b) The directors shall call an extraordinary general meeting on
requisition by members holding not less than (i) one-tenth of the
paid up share capital of the company carrying voting rights
regarding that matter in the case of a company having share
capital; (ii) one-tenth of the total voting power of all the members
at the date of the deposit of the requisition regarding that matter
in those cases when the company has no share capital
 Extraordinary General Meeting
• A notice of 21 days is necessary for calling
the extraordinary general meeting. It may
also be called at a shorter notice when in
the case of companies having share
capital, members holding 95 percent of the
paid-up share capital carrying voting
rights; or in the case of companies not
having share capital members holding 95
percent of the voting power exercisable at
the meeting, have given their consent;
 Extraordinary General Meeting
• Matters for consideration of which the meeting is
called shall be stated in the requisition and those
matters alone shall be considered at the
meeting. Requisition must be duly signed by the
requisitionists and deposited at the registered
office of the company;
• Board of Directors must proceed to call a
meeting for the consideration of the matters
notified by the requisitionists within 21 days of
the deposit of a valid requisition;
Minutes of the Proceedings
 Minutes
• ‘Minutes’ means a written record of the
proceeding of a meeting. Section 193 to Section
196 provide the following rules regarding
recording of the minutes;
– Every company shall cause minutes of all the
proceedings of every general meeting and of all
proceedings of every meeting of its Board of Directors
or of every Committee of the Board, to be kept by
making within thirty days of the conclusion of every
such meeting concerned, entries thereof in bound
books kept for that purpose with their pages
consecutively numbered.
– Insistence is on the writing of the minutes within 30
days and not on their signing;
 Minutes
• Each page of every such book shall be initialed or signed
and the last page of the record of proceedings of each
meeting in such books shall be dated and signed
– By the Chairman of the said meeting or the chairman of the next
succeeding meeting - in case of minutes of proceedings of a
meeting of a Board or of a Committee thereof;
– In case of minutes of the proceedings of a general meeting by
the chairman of the same meeting within the aforesaid period of
thirty days or in the event of death or inability of the chairman
within that period by a director duly authorized by the Board for
the purpose;
• In no case the minutes of proceedings of a meeting shall
be attached to any such book as aforesaid by passing or
otherwise [ Section 193 (1-B)]
 Minutes
• The minutes of each meeting shall contain
a fair and correct summary of the
proceedings [ Section 193 (2)]
• All appointments of officers made at any of
the meetings aforesaid shall be included in
the minutes of the meeting [ Section 193
(3)].
 Minutes
• In the case of a meeting of the Board of
Directors or of a Committee of the Board,
the minutes shall also contain
– (a) the names of the directors present at the
meeting;
– (b) in the case of each resolution passed at
the meeting the names of the directors, if any,
dissenting from or not concurring in the
resolution [Section 193 (5)].
 Minutes
• The minutes need not contain such matters
which in the opinion of the chairman of the
meeting
– Is or could reasonably be regarded as defamatory of
any person;
– Is irrelevant or immaterial to the proceedings;
– Is detrimental to the interests of the company;
• The chairman shall exercise an absolute
discretion in regard to the inclusion or non-
inclusion of any matter in the minutes on the
grounds specified above;
 Minutes
• If a default is made in complying with the
foregoing provisions of sections in respect
of any meeting, the company and every
officer of the company, who is in default,
shall be punishable with fine which may
extend to five hundred rupees.
 Minutes
• Minutes of meetings kept in accordance with provisions
of section 193 shall be the evidence of the proceedings
recorded therein [Section 194].
• They shall also be proof of this fact, unless contrary is
proved, that the meeting has been duly called and held
and all proceedings thereat have duly taken place. All
appointments of directors or liquidators made at such a
meeting shall be deemed to be valid [Section 195].
• The minute books of the Board’s meetings are not open
to inspection to the shareholders or the public.
THANK YOU