Shareholders Meetings And Its Provisions Under The Companies Act 2013

Coverage of this Article

Key takeaways

-A company's majority ownership and destiny tend to favour the shareholders.

Types Of Meetings

-Meeting and management are essential components of a company's operations. However, due to their distance from the Company's headquarters, a problem that also applies to limited liability partnerships is not able to immediately participate in meetings or other company matters. 

General Meetings

-The Companies Act of 2013 does not define a "general meeting." However, it could be characterised as any gathering that company members with the ability to vote could attend. 

Annual General Meeting (AGM)

-The annual general meeting is described in Section 96 of the Companies Act of 2013.

Extraordinary General Meeting (EGM)

-The provisions relating to extraordinary general meetings are listed in Section 100 of the 2013 Companies Act.

Class Meetings

-Class meetings are held only to approve resolutions that apply only to the holders of shares in that class. Only those who were a part of that specific class were permitted to attend and cast votes. 

Statutory Meetings

-Immediately following the Company's incorporation, a statutory meeting is held. Immediately upon the Company's incorporation, all public companies that are restricted by shares or by guarantee are required to hold a statutory meeting.

Conclusion

-Annual general meetings, extraordinary general meetings, and class meetings are crucial for safeguarding the rights and interests of a company's shareholders.

Key takeaways

• A company's majority ownership and destiny tend to favour the shareholders. The proper and effective conduct of these meetings assesses both the Company's current operations and its long-term goals
• The meetings give shareholders a chance to voice their opinions about the decisions and actions performed by the board of directors, which are most likely to have an impact on their interests.

A shareholder is any individual or entity that owns at least one share of the company. Profits generated by the company's success are also enjoyed by the shareholders.

A company is a separate legal entity that conducts all of its business through its board of directors. The Board of Directors performs its duties within the parameters of the authority granted to it by the Company's articles of association (AOA). Even so, the other Company members must approve of the directors' use of certain authorities and obligations outside the AOA by voting in favour of a resolution at a general meeting. The company's shareholders, who are essentially its owners, frequently correct the errors the board has made at meetings.

The meetings give shareholders a chance to voice their opinions about the decisions and actions performed by the board of directors, which are most likely to have an impact on their interests. Meetings give shareholders a chance to learn about the company's current operations and concentrate on some pressing topics, such as the company's and its investment prospects. Meetings of all kinds are held in a company.

Types Of Meetings

Meeting and management are essential components of a company's operations. However, due to their distance from the Company's headquarters, a problem that also applies to limited liability partnerships is not able to immediately participate in meetings or other company matters. Therefore, the Board of Directors must inform the shareholders of every meeting detail so that they can, if not actively, then at least passively, participate in the meetings and address issues relating to management and business practices that affect their interests.

General Meetings

The Companies Act of 2013 does not define a "general meeting." However, it could be characterised as any gathering that company members with the ability to vote could attend. Every resolution adopted at the general meetings is enforceable against all of the Company's members and even the Company itself. If no particular changes to the AOA or Memorandum of Associations are made, all members may attend and cast votes (MOA). There are two types of general meetings held by companies:

1. Annual General Meeting (AGM)

The annual general meeting is described in Section 96 of the Companies Act of 2013. Every company, whether private or public, is legally required to hold an annual general meeting of its shareholders each year to do business as usual. The Annual General Meeting is the name given to such a gathering. Every company, save One Person Companies, is required by Section 96(1) of the Companies Act 2013 to have an annual general meeting every year and to designate it as such in the notices. After the company is incorporated, the first annual general meeting must be convened within 18 months. If and when the time between two annual general meetings exceeds 18 months, it may be considered a default and subject to a fine.

However, the Company will not be required to hold an annual general meeting in the year of its incorporation if the first annual general meeting is held within nine months of the date the Company's first financial year ended and in any other cases within six months of the date the Financial Year ended.

The annual general meeting's holding period may be extended by the Registrar of Companies. despite not being the first AGM. The time limit will be extended by the Registrar for a maximum of three months. A company might be able to convene an AGM after the calendar year with the use of such an extension. If not, no such extension is offered. The Central Government has no power to extend the AGM of the Company.

According to Section 96(2) of the Companies Act of 2013, the meeting must take place at the company's registered office or any location where the registered office is located, during business hours, which are from 6 AM to 9 PM on a day that is not a national holiday.

However, a company is exempted from Section 96's requirements by the Central Government (2). Up until the first AGM, the Company is not required to hold any general meetings. The AGM must be convened no later than six months after the Company's balance sheet has been prepared. A resolution for choosing the time of future general meetings may also be approved at a general meeting. There is an exception for private companies, according to which the location of the general meeting for a private company may not be found within the territorial jurisdiction of the location of the company's registered office.

2. Extraordinary General Meeting (EGM)

The provisions relating to extraordinary general meetings are listed in Section 100 of the 2013 Companies Act. The term "extraordinary general meeting" refers to all general meetings of a company that are not the AGM or statutory meetings. Either the Board of Directors willingly calls the EGM in response to an urgent business matter, or a predetermined number of members request it. The requisition must be signed by shareholders who own at least one-tenth of the paid-up capital. The requisition must be signed by the members holding one-tenth of the total voting power, however, if a company has no share capital.

The EGM could also be called by the Company Law Board. The requisitionists may call the meeting by giving at least 21 days written notice, and it must take place within 45 days after the date of the requisition. However, provided approval is received from the members owning at least 95% of that portion of the paid-up share capital and in the case of companies without share capital, approval from the members holding at least 95% of the voting power, the meeting may be held with even less notice. The issue for deliberation for which the meeting has been convened must be stated by the requisitionists. The requisitionists must sign it, and it must be deposited at the company's registered office. Except for the specific reason for which the EGM has been cancelled, no other topics could be considered at the meeting.

The requisitionists could summon the meeting and seek the appropriate reimbursement of the meeting expenses from the Company if the directors fail to hold the EGM within 45 days of the date of the requisition. From the compensation of the directors in default, the Company shall indemnify the requisitionists. The meeting must be held at the Company's registered office by the requisitionists no later than three months after the requisition was submitted.

According to Section 186 of the Companies Act, the Company Law Board may order the cancellation of a meeting upon the director of the Company's request or voluntarily. The Company Law Board cannot convene a meeting without a petition being submitted in accordance with Section 186.

Class Meetings

Class meetings are held only to approve resolutions that apply only to the holders of shares in that class. Only those who were a part of that specific class were permitted to attend and cast votes. The main purpose of the class meetings is to get the permission of the affected class members about any changes made to the rights of the class to which they belong in accordance with the MOA and AOA. Additionally, consentis obtained for any agreements or concessions that might primarily impact the interests of the class members. According to Section 48 of the Companies Act 2013, a firm must summon a meeting of those shareholders and adopt a resolution to cancel dividend arrears on cumulative preference shares.

To overturn a resolution, the holders of at least three-fourths of the outstanding shares of a specific class must notify the Tribunal of their disapproval within 21 days of the day the resolution or consent was granted.

Statutory Meetings

Immediately following the Company's incorporation, a statutory meeting is held. Immediately upon the Company's incorporation, all public companies that are restricted by shares or by guarantee are required to hold a statutory meeting. A statutory meeting must take place between a minimum of one month and a maximum of six months after the Company's operations begin.

A meeting held before a month has passed, however, cannot be regarded as a statutory meeting. Companies, both public and private, are not required to hold any required meetings.

Within 21 days of the meeting, the Board of Directors must send a statutory report to each Company member. The present members could discuss the statutory report and the company's formation. However, at a statutory meeting, no resolution is adopted. The major goal of such a gathering is to familiarise the members with issues about the promotion and establishment of the Company.

Details on the shares purchased, funds received, contracts signed, and related upfront costs are provided to the shareholders. The shareholders will get the chance to talk about business concepts and strategies as well as the company's future during this meeting. If the statutory meeting does not conclude, another meeting is held.

According to Section 433 of the Companies Act of 1956, a company may enter the winding-up phase if it misses the deadline for submitting a statutory report or holding a statutory meeting. Instead of dissolving the company, the court could order the Company to file the required report and have a meeting by fining the defaulters.

According to Section 165(8) of the Companies Act of 1956, a statutory meeting may be adjourned occasionally. The only items that could be completed at the adjourned meeting were those that were unfinished at the initial meeting. The sole distinction is that resolutions brought up before or after the previous meeting may still be passed at adjourned meetings. In contrast, a statutory meeting does not qualify for such a reward.

The Companies Act of 2013 omits Section 165 of the Companies Act of 1956, which dealt with the requirements for statutory meetings and reports.

Conclusion

Annual general meetings, extraordinary general meetings, and class meetings are crucial for safeguarding the rights and interests of a company's shareholders. A company's majority ownership and destiny tend to favour the shareholders. Therefore, it is essential for the proper and effective conduct of these meetings to assess both the Company's current operations and its long-term goals. Such a chance to review is considerably made possible by successful shareholder meetings. The shareholders of a company can exercise their right to elect and re-elect the directors at these meetings.