Company Meetings: Statutory, Annual general meeting, Extraordinary Meeting10/07/2020
Statutory Meeting is the first meeting of the shareholders of a public company. It must be held within a period of not less than one month nor more than 6 months from the date at which the company is entitled to commence business. It is held only once in the lifetime of a company. A private company and a company limited by guarantee and not having a share capital need not hold such a meeting.
The purpose of the statutory meeting with its statutory report is to put the shareholders of the company in the possession of all the important facts relating to the new company, what shares have been taken up, what the moneys received etc. This also provides an opportunity to the shareholders of meeting to discuss the whole situation, the management and prospects of the company.
The Board of Directors must, atleast 21 days before the day on which the meeting is to be held, A forward a report, called the â€˜statutory reportâ€™ to every member of the company. This report contains all the necessary information relating to formational aspects of the company for the information of the shareholders.
Contents of Statutory Report
- The total number of shares allotted, distinguishing those allotted as fully or partly paid up otherwise than in cash, the extent to which they are partly paid up, the consideration for which they have been allotted and total amount received in cash;
- An abstract of the receipts and payments under distinctive heads upto a date within seven days ofÂ the date of report;
- An account of estimate of the preliminary expenses of the company.
- The names, addresses and occupations of the managing director, director, and also its secretary andÂ auditors of the company;
- The particulars of any contract which, and the modification or proposed modification of which, areÂ to be submitted to the meeting for approval;
- The extent to which underwriting contracts, if any, have not been carried out and the reasonÂ therefor;
- The arrears, if any, due on calls from directors, managing director or manager; and
- The particulars of any commission or brokerage paid, or to be paid, in connection with the issue orÂ sale of shares to any director, managing director or manager.
Annual General meeting
Annual General Meeting (AGM) is a yearly meeting of stockholders or shareholders, members of company, firm and organizations. Annual General Meeting is held every financial year and it is mandatory for everyone. In AGM functions like reviewing company account, approving audited accounts, elections, fiscal records of the past year are discussed.
As per Companies Act, an annual general meeting must be held by every company once a year without fail. There cannot be a gap of more than 15 months between two AGMs.
However, the first AGM of a company can be held at any date, within a period of 18 months, since the date of incorporation of the company. Annual general meetings help members understand the company’s rate of growth and potential for improvement.
An AGM gives insights into what steps made the company more successful and which steps caused loss. it helps the members and the board to decide the future course of action. An AGM must be held on a working day.
If the Government declares a public holiday on the day of the meeting, it will be considered a working day by the members attending the meeting. The annual general meeting can be held at the registered office of the company.
Legal Requirements for holding an Annual General Meeting
Legally, a notice period of 21 days must be given to all the members before the meeting. However, there is an exception to this rule. If all the voting members consent, the meeting may be held at an earlier date. Further, the following documents are also to be sent with the notice. Articles of Association, company bylaws, and jurisdiction specifies the rules that govern annual general meeting.
- Copy of annual accounts of the company
- Director’s report on the company’s position for the given year
- Report by the Auditor of the annual accounts.
Members are allowed to use proxies in their absence. The proxy does not need to be a member of the company. However, the proxy forms have to be submitted to the company at least 48 hours before the meeting.
Quorum for Annual General Meeting
Unless the articles of the company state otherwise, the quorum for an Annual General Meeting is as follows
- Public companies: At least 5 members must be present.
- Other companies:At least 2 members must be present within half an hour of the commencement of the meeting.
Issues Undertaken at Annual General Meeting
The functions of business undertaken at a typical annual general meeting are listed as follows:
- The declaration of dividend among shareholders
- Consideration of annual accounts
- Discussion of the director’s report and the auditor’s report
- Appointment and fixing of the remuneration of the statutory auditors
- Appointing replacement directors in place of existing directors retiring
An Extraordinary General Meeting (an EGM) can be defined as a meeting of shareholders which is not an Annual General Meeting (an AGM). It is held when some urgent issue becomes about the company arises or any situation of crisis and it requires the input of all senior executives and the Board.
As we know, an EGM is held in case of emergency situations and requires the attention of senors execs and the Board. Members, shareholders, and execs must be instructed on the purpose of the meeting so they have time to prepare their valuable input and then, collectively decide further course of action.
Who can Call for an EGM
The members/shareholders of a company can call for an extraordinary general meeting. However, only certain members with a significant stake in the company are allowed to call for an EGM. They are listed in the Companies Act,2013 as follows.
- In the case of a company having a share capital, members holding not less than one-tenth of such paid-up capital of the company that carry voting rights in regard to that matter as on the date of depositing the requisition;
- In the case of a company not having a share capital, members holding not less than one-tenth of the total voting power in regard to that matter as at the date of deposit of the requisition.
- EGM called by Board. Upon the receival of a valid requisition, the Board has a period of 21 days to call for an EGM. The EGM must be then held with 45 days from the day of the EGM being called.
- EGM called by the requisitionists: In case the Board fails to call for an EGM, it can be called for by the requisitionists themselves during a period of 3 months from the day the requisition was deposited. If the EGM is held within this specified period of 3 months, it can be adjourned to any day in the future after the 3 months.
Essentials of a Valid Requisition
- Specify the issue for which the meeting is called
- Signed by requisitionists
- Must be deposited at the company’s registered office.
Requirements for holding an EGM
A notice period of 21 days must be given to the members. However, there is an exception to this rule. Where if 95% of the voting members consent, the EGM can be held at a shorter notice.
Quorum Required for EGM
Unless the company’s Articles state otherwise, the following number of members are required for a quorum.
- In the case of a public company: Five(5) members personally present
- In the case of any other company: Two (2) members personally present