This article has been written by Mansi Tyagi, a student at Symbiosis Law School, Pune. In this article, taking cognizance of the different sections of the Companies Act’ 1956, she has discussed the procedure and steps concerning a company meeting and the different types of company meetings.
What is a Company Meeting?
Generally, a meeting can be defined as “a gathering, assembling or coming together of two or more persons for the objective of discussing lawful business. Companies Act, 1956, nowhere defines a meeting. But, if we are to further define a company meeting on the pretext of the meaning of a meeting, then it is this gathering whose participants are the members of a company, a meeting is often a formal setting. For any company meeting to take place, it is important that there is a quorum of members who come together on a previous notice for discussing a lawful common business interest. Therefore we can conclude requisites for a valid company meeting as:
- Two or more than two members;
- With an objective of the meeting – discussion on common business interests;
- Through a previous notice;
- At a particular place, date and time;
- As per the provisions of the Companies’ Act.
However, it is important to note that in a few exceptional cases one member meetings are also declared to be valid. For example, where there is only a single shareholder in a company, he can alone hold a valid meeting. On similar lines, this goes for situations where there is a single creditor or board of director for the company. Except for these exceptions, the requisites cannot be compromised with.
What is the Procedure for any company meeting?
For any company meeting to validly happen it is important that the procedure laid down by the Companies’ Act is followed. Section 170 of the Companies Act’ 1956 states that the forthcoming sections i.e. Sections 171-186 shall apply to every general meeting of any public or private company. These steps can be briefly enlisted as:
- Notice (Sections 171-173)
- A Quorum (Section 174)
- A Chairman (Section 175)
- Proxies (Section 176)
- Voting procedure (Sections 177, 179-185)
- Result (Section 178)
- Power of Tribunal to call a meeting (Section 186)
Thus, now we will read into the detailed requirements of each step for a general meeting:
Notice prior to the meeting is the most important prerequisite for any meeting. Section 171 lays down that a notice is to be served to the joining members of a meeting twenty one days prior to such meeting. However the same can be reduced at the admissal of the members to such modification. Every notice by virtue of Section 172 of the act shall specify the itinerary of the meeting including the agenda for the meeting. These notices shall be served in writing to all the members of the company at their residences. Also in case any member’s death or insolvency, the same shall be addressed to the person entitled to such member’s shares. Section 173 requires such notices to be annexed with an explanatory note concerning the ‘special’ business to be discussed in the meeting. However, in case a member is ‘accidentally’ omitted this serving of notice, the meeting shall not get invalidated ipso facto.
2. Quorum and Chairman
Section 174 of the act constitutes a quorum of five persons in case of a public company and two when it is any other company. If within half an hour of the commencement of the meeting there is no quorum constituted, it will dissolve the meeting arranged for. Likewise, section 175 of the act lays down the requirement of a chairman for the meeting. The members present shall elect a chairman for the forthcoming meeting. This election shall be a simple show of hands. Once a member is thereof elected, he acts as the chairman for the whole meeting.
Every member by virtue of section 176 of the act is empowered to appoint any other person as his proxy for the meeting. However, such proxy’s powers are limited to voting on polls. He at no instance can speak his opinion at the meeting. Also, such empowerment is prohibited in case of companies with no share capital. Likewise, members of private companies are limited to use only one proxy per occasion. The member appointing any proxy has to provide a duly signed written proxy authorizing the proxy to vote in his place and be deposited to the company before forty-eight business hours of such meeting.
In case of companies with share capital, any member or proxy present in person can ask for voting on a particular motion; which the same section 179 lays that in companies with no share capital, one member or a proxy in presence of less than total seven members and two members or a proxy in presence of more than total seven members can ask for the voting initiation. After such demand is made under section 179, there shall be a polling procedure by show of hands by virtue of section 177. The Chairman shall then state conclusively if the resolution was to be carried out. The same is to be noted down in the minutes’ book of the company as per section 178. However, section 183 lays down that there is no hard and fast rule for the members or the proxies to use their multiple votes in the same manner. Later, section 180 lays down that in case of a decision on adjournment the polling shall be conducted instantaneously once asked for, while in any other cases such polling shall be conducted within forty-eight hours of such demand. Section 181 and 182 on the other hand put restrictions on these polling rights of the members. Through the former, the company can restrict the defaulter members from voting who are yet to pay on their shares or when their shares are under a right of lien by the company; while through the latter the company can restrict the members who did not hold shares preceding the voting or any other ground not specified in the former section. To scrutinize the votes, under section 184, the chairman is empowered to appoint two scrutineers amongst whom one has to be the member present at the voting.
5. Result of the voting
Finally, section 185 of the act lays that firstly, it is the chairman who decides the manner of polling. Secondly, he then declares the result of the polling. And finally, the result of the polling shall be deemed to have been the result upon the proposed resolution in the meeting.
However, an exception to this usual procedure is section 186 where instead of the board, the tribunal calls for the meeting. As empowered by Section 186 and solidified by cases like ‘R. Rangachari vs. S. Suppiah and Ors.’ in situations where it is ‘impracticable’ for the board to call for meetings other than annual general meetings, the National Company Law Tribunal has the power to call for such meetings either at its own, or on the requisition of a director or even a single eligible member to ask for a requisition. Such meetings will also have a status similar to those held on requisitions by members of the board.
What are the types of company meetings?
Company meetings can be divided into three: Shareholders’, directors’ and special. These three categories further diversify into eight more. Firstly, Shareholders’ meetings consist of Statutory meetings, Annual general meeting and Extraordinary general meeting. Secondly, the Directors’ meetings consist of Board meetings and Committee meetings. Lastly, Special meetings are made of Class meetings, Creditors’ meetings and Debenture Holders’ meetings.
1. Statutory Meetings
Statutory meetings are the first general meetings of any public company after they become entitled to business. Section 165 of the Companies Act, 1956, defined statutory meetings as the one which shall be conducted between one to six months from the date of commencement of business. Additionally, such a company shall be one limited by shares or guarantee with a share capital. Also, the nature of such meetings is to be general. The section further puts down the requirement of a statutory report which needs to be forwarded to all the members twenty one days before the meeting is held. This report is required to have all the information related to the companies’ shares. For eg. the distribution of shares, payments made against each share sold, etc. The members can cast their votes and discuss matters enlisted in the notice served prior to the meeting. However, in no case can there be a discussion on matters not enlisted in such notice. Also, statutory reports are supposed to be registered with the registrar office after its copies are sent off to all members. However, none of these requirements is imposable on private companies or public companies which are not limited by shares or guarantees with shares.
2. Annual General Meeting
Annual general meetings, as the term suggests, are held once in a year by companies irrespective of having a share capital. Section 166 of the Companies’ Act, 1956 lays down that apart from other meetings, an annual general meeting should take place in every company irrespective of its nature, whether public or private. Additionally, there must not be a gap of more than fifteen months between two annual general meetings. However, there are two exceptions to this condition. Firstly, if it is the first annual general meeting after the inception of the business, the fifteen-month gap can be extended to an eighteen-month gap. Secondly, this period can be relaxed for another three months if the registrar office permits owing to special reasons. There is one more facet to such meetings: Annual Returns. In the case of ‘Anita Malhotra vs. Apparel Export Promotion Council and Ors.’ section 159 was given clarity in the sense that it required companies with share capital to submit their annual returns within sixty days of their annual general meetings to the registrar office. Such returns shall include details of directors, shareholders, debts, debenture-holders, other members and the registered office. Generally, such meetings are to be held on an official day during business hours in the registered office or anywhere in the city where such office was located. Section 168 of the act imposes fine in case there is a default in complying with annual general meetings despite the instructions and notice being served without a reasonable cause.
3. Extraordinary General Meeting
Section 169 of the Companies Act, 1956 lays down the rules for an Extraordinary meeting. Meetings held between two annual general meetings are called Extraordinary general meetings. These meetings are called upon by members for discussing urgent matters that fall outside the general scope and cannot wait until the next annual general meeting. In companies with share capital members holding one-tenth paid-up share capital can send a requisition for convening the meeting to the board of directors. And, in companies with no share capitals, one-tenth of members having the right to vote can ask for similar requisition. For any or every matter to be taken up in the meeting, the requisitioners must sign the requisition and send it off to the registrar office. If a meeting is not called within twenty-one days of such requisition submission, the requisition makers can themselves call the meeting.
1. Board Meetings
Section 285 of the Companies Act, 1956 rules out that every company shall have a board of directors’ meeting every three months annually. Thus, each company is required to observe four board meetings each year with a three-month gap in between. The notice of every such meeting shall be given to each director in writing at his place of residence. Such notices are to have the specified businesses to be discussed in the forthcoming meeting. In no case can a director waive this requirement. The objective of such meetings is to ensure that the directors are well-aware of the business proceedings going on in the company. However, the requirement of four meetings yearly can be relaxed by the central government for certain classes of companies. Also, the act under section 287 requires for a formation of a quorum of either minimum of two directors or one-third of the total strength, whichever is higher. Usually known as ‘Standing orders’, each company has the power to lay down rules concerning the itineraries of the Board meetings. These meetings are generally held to discuss the development of the company and any other major issue of the company.
2. Committee Meetings
Committee meetings are a dilute form of board meetings. Here instead of the board of directors, the committee of directors made in the board come together for a meeting. Generally, the board delegates the powers to its committees to organize work. For eg., a board might consist of one committee that solely takes care of finances and another that takes over completely of workforce issues. These committees are formed on the lines of the articles of the company and follow the same procedure as that of the board for meetings.
1. Class Meetings
The shares that a company holds are all of the different kinds. So when shareholders of a particular class arrange for a meeting, it is called a class meeting. So when a company decides to give the bonus only to the equity holders of the company, the meeting that will be convened for the equity holders will be an example of a class meeting.
2. Creditors’ Meetings
These types of meetings are called by the directors when they propose to set a scheme for arrangement and compromise with its creditors. Section 391 of the act empowers the company or the liquidator in case of winding up of the company to ask the tribunal to call for a meeting of creditors. In such meetings, if any proposal is passed with a three-fourth majority of the creditor value, then the same is held to be binding on all the creditors and the company. For the final order to be effectual, it has to be submitted to the registrar. In case the tribunal observes the impracticability to implement the order, it can ask for modifications by virtue of section 392. The peculiar feature of such kinds of meetings is that the procedure is directed by the National Company Law Tribunal directly.
3. Debenture Holders’ Meetings
The debenture trust deed lays down the procedure and principles concerning the debenture holders’ meetings. These meetings are arranged by debenture holders of a particular class. Also, these meetings are held whenever there is a concern regarding the rights and interests of the debenture holders.
Every general meeting has to undergo
a specified procedure either mentioned in the Companies Act, 1956 or the
articles of the particular company. There are as many as eight kinds of company
meetings. And interestingly, any company meeting does not end in the meeting
room with the polling rule. Instead, all the proceedings of the meetings are
laid down in the minutes of the meetings’ book of the company. All such minutes
are duly signed by the chairman present in the meeting. This helps in recording
all the resolutions passed, motioned down or other details of the meetings for
future reference of the company.
 COMPANIES ACT, 1956 Section 186 – Power of Tribunal to order meeting to be called.
 R. Rangachari vs. S. Suppiah and Ors., (1975) 2 SCC 605.
 COMPANIES ACT, 1956 Section 165 – Statutory meeting and statutory report of company.
 COMPANIES ACT, 1956 Section 166 – Annual general meeting.
 Anita Malhotra vs. Apparel Export Promotion Council and Ors., (2012) 1 SCC 520.
 COMPANIES ACT, 1956 Section 159 – Annual return to be made by a company having a share capital.
 COMPANIES ACT, 1956 Section 168 – Penalty for default in complying with section 166 or 167.
 COMPANIES ACT, 1956 Section 169 – Calling of extraordinary general meeting on requisition.
 COMPANIES ACT, 1956 Section 285 – Board to meet at least once in every three calendar months.
 COMPANIES ACT, 1956 Section 286 – Notice of meetings.
 COMPANIES ACT, 1956 Section 287 – Quorum for meetings.
 COMPANIES ACT, 1956 Section 391 – Power to compromise or make arrangements with creditors and members.
 COMPANIES ACT, 1956 Section 392 – Power of Tribunal to enforce compromise and arrangement.
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