Business Law Notes #2 : Meetings & Resolutions

Business Law Notes by Ritu Khabia C.S.; LL.B.(Hons); M.A. & M.phil. (Economics) PGDTFM(ICFAI) 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 the company meet and discuss various matters. Members meetings are of the following types :A. Statutory Meeting : A public company limited by shares is required to hold a statutory meeting. Such a statutory meeting is held only once in the lifetime of the company. Such a meeting must be held within a period of not less than one month or within a period not more than six months from the date on which it is entitled to commence business i.e. it obtains certificate of commencement of business. The purpose of the meeting is to enable members to know all important matters pertaining to the formation of the company. The matters discussed include which shares have been taken up, what money has been received, what contracts have been entered into, what sums have been spent on preliminary expenses, etc. A notice of at least 21 days before the meeting must be given to members . The Board of Directors must prepare and send to every member a report called the Statutory Report at least 21 days before the day on which the meeting is to be held. B. Annual General Meeting Must be held by every type of company, public or private, once a year. Every company must in each year hold an annual general meeting. Not

more than 15 months must elapse between two annual general meetings. A notice of at least 21 days before the meeting must be given to members. The notice must state that the meeting is an annual general meeting. The time, date and place of the meeting must be mentioned in the notice. The notice of the meeting must be accompanied by a copy of the annual accounts of the company, directors report on the position of the company for the year and auditors report on the accounts. Companies having share capital should also state in the notice that a member is entitled to attend and vote at the meeting and is also entitled to appoint proxies in his absence. A proxy need not be a member of that company. A proxy form should be enclosed with the notice. The proxy forms are required to be submitted to the company at least 48 hours before the meeting. The AGM must be held on a working day during business hours at the registered office of the company or at some other place within the city, town or village in which the registered office of the company is situated. Business to be Transacted at Annual General Meeting : At every AGM, the following matters must be discussed and decided. Since such matters are discussed at every AGM, they are known as ordinary business. All other matters and business to be discussed at the AGM are special business. The following matters constitute ordinary business at an AGM :a. Consideration of annual accounts, directors report and the auditors report b. Declaration of dividend c. d. Appointment of directors in the place of those retiring Appointment of and the fixing of the remuneration of the statutory auditors.

In case any other business ( special business ) has to be discussed and decided upon, an explanatory statement of the special business must also accompany the notice calling the meeting

C. Extraordinary General Meeting Every general meeting (i.e. meeting of members of the company) other than the statutory meeting and the annual general meeting or any adjournment thereof, is an extraordinary general meeting. Such meeting is usually called by the Board of Directors for some urgent business which cannot wait to be decided till the next AGM. Every business transacted at such a meeting is special business. An explanatory statement of the special business must also accompany the notice calling the meeting. Notice of General Meeting A meeting cannot be held unless a proper notice has been given to all persons entitled to attend the meeting at the proper time, containing the necessary information. A notice convening a general meeting must be given at least 21 clear days prior to the date of meeting. Notice of every meeting of company must be sent to all members entitled to attend and vote at the meeting. Notice of the AGM must be given to the statutory auditor of the company. Where notice is sent by post, service is effected by properly addressing, pre-paying and posting the notice. A notice calling a meeting must state the place, day and hour of the meeting and must contain the agenda of the meeting. If the meeting is a statutory or annual general meeting, notice must describe it as such. Where any items of special business are to be transacted at the meeting, an explanatory statement setting out all materials facts concerning each item of the special business. Proxy Any member of a company entitled to attend and vote at a meeting of the company shall be entitled to appoint another person (whether a member or not) as his proxy to attend and vote instead of himself. Every notice calling a meeting of the company must contain a statement that a member entitled to attend and vote is entitled to appoint a proxy and that the proxy need not be member of the company. A member may appoint another person to attend and vote at a meeting on his behalf. Such other person is known as Proxy. The

member appointing a proxy must deposit with the company a proxy form at the time of the meeting or prior to it giving details of the proxy appointed. The proxy form must be in writing and be signed by the member. A proxy is not entitled to vote except on a poll. Therefore, a proxy cannot vote on show of hands. Quorum Quorum refers to the minimum number of members who must be present at a meeting in order to constitute a valid meeting. A meeting without the minimum quorum is invalid and decisions taken at such a meeting are not binding. The articles of a company may provide for a quorum without which a meeting will be construed to be invalid. Unless the articles of a company provide for larger quorum, 5 members personally present (not by proxy) in the case of a public company and 2 members personally present (not by proxy) in the case of a private company shall be the quorum for a general meeting of a company. It has been held by Courts that unless the articles otherwise provide, a quorum need to be present only when the meeting commenced, and it was immaterial that there was no quorum at the time when the vote was taken. Further, unless the articles otherwise provide, if within half an hour from the time appointed for holding a meeting of the company, a quorum is not present in the person, the meeting :a. if called upon the requisition of members, shall stand dissolved; b. in any other case, it shall stand adjourned to the same day in the next week, at the same time and place, or to such other day and time as the Board of Directors may determine. If at the adjourned meeting also, the quorum is not present within half an hour from the time appointed for holding the meeting, the members present shall a quorum. Kinds of Resolutions Resolutions mean decisions taken at a meeting. A motion, with or without amendments is put to vote at a meeting. Once the motion is passed, it becomes a resolution. A valid resolution can be passed at a

properly convened meeting with the required quorum. There are broadly three types of resolutions :1. Ordinary Resolution : An ordinary resolution is one which can be passed by a simple majority. I.e. if the votes (including the casting vote, if any, of the chairman), at a general meeting cast by members entitled to vote in its favour are more than votes cast against it. Voting may be by way of a show of hands or by a poll provided 21 days notice has been given for the meeting. 2. Special Resolution : A special resolution is one in regard to which is passed by a 75 % majority only i.e. the number of votes cast in favor of the resolution is at least three times the number of votes cast against it, either by a show of hands or on a poll in person or by proxy. The intention to propose a resolution as a special resolution must be specifically mentioned in the notice of the general meeting. Special resolutions are needed to decide on important matters of the company. Examples where special resolutions are required are :a. To alter the domicile clause of the memorandum from one State to another or to alter the objects clause of the memorandum. b. To alter / change the name of the company with the approval of the central government c. To alter the articles of association d. To change the name of the company by omitting Limited or Private Limited. Adjournment Adjournment means suspending the proceedings of a meeting for the time being so that the meeting may be continued at a later date and time fixed in that meeting itself at the time of such adjournment or to decided later on. Only the business not finished at the original meeting can be transacted at the adjourned meeting. The majority of members at a meeting may move an adjournment motion at a meeting. If the chairman adjourns the meeting, ignoring

the views of the majority, the remaining members can continue the meeting. The chairman cannot adjourn the meeting at his own discretion without there being a good cause for such an adjournment. Where the chairman, acting bona fide within his powers, adjourns the meeting as per the view of the majority, the minority members cannot to continue with such meeting and, if they do the proceedings there will be null and void. An adjourned meeting is merely the continuation of the original meeting and therefore, a fresh notice is not necessary, if the time, date and place for holding the adjourned meeting are decided and declared at the time of adjourning it. If a meeting is adjourned without stipulation as to when it will be continued, fresh notice of the adjourned meeting must be given. Postponement Postponement of a meeting means defering the holding of the meeting itself at a later date. Postponement is done by the Board of Directors or by the person convening the meeting. In case of adjournment, it is the decision of the majority of the members present at the meeting itself. 189. ORDINARY AND SPECIAL RESOLUTIONS. (1) A resolution shall be an ordinary resolution when at a general meeting of which the notice required under this Act has been duly given, the votes cast (whether on a show of hands, or on a poll, as the case may be), in favour of the resolution (including the casting vote, if any, of the chairman) by members who, being entitled so to do, vote in person, or where proxies are allowed, by proxy, exceed the votes, if any, cast against the resolution by members so entitled and voting. (2) A resolution shall be a special resolution when (a) the intention to propose the resolution as a special resolution has been duly specified in the notice calling the general meeting or other intimation given to the members of the resolution; (b) the notice required under this Act has been duly given of the general meeting; and

(c) the votes cast in favour of the resolution (whether on a show of hands, or on a poll, as the case may be) by members who, being entitled so to do, vote in person, or where proxies are allowed, by proxy, are not less than three times the number of the votes, if any, cast against the resolution by members so entitled and voting.

The Companies (Passing of the Resolution by Postal Ballot) Rules, 2001 Postal Ballot includes voting by share holders by postal or electronic mode instead of voting personally by presenting for transacting businesses in a general meeting of the company, (c) Requisite majority with regard to Special Resolution means votes cast in favour of the business is three times more than the votes cast against, with regard to ordinary resolution, votes cast in favour is more than the votes cast against. *2A. Method for sending notice,(a) The company may issue notices either,(i) under Registered Post Acknowledgement Due; or (ii) under certificate of posting; and (b) with an advertisement published in a leading English Newspaper and in one vernacular Newspaper circulating in the State in which the registered office of the company is situated, about having despatched the ballot papers. 3. Applications:These Rules shall be applicable to listed companies and in case of resolutions relating to such businesses as are specified under rule 4.

4. List of businesses in which the resolutions shall be passed through Postal Ballot. (a) alteration in the Object Clause of Memorandum; (b) alteration of Articles of Associations in relation to insertion of provisions defining private company; (c) buy-back of own shares by the company under sub-section (1) of section 77A; (d) issue of shares with differential voting rights as to voting or dividend or other wise under sub-clause (ii) of clause (a) of section 86; (e) change in place of Registered Office out side local limits of any city, town or village as specified in sub-section (2) of section 146; (f) sale of whole or substantially the whole of undertaking of a company as specified under sub-clause (a) of sub-section (1) of section 293; (g) giving loans or extending guarantee or providing security in excess of the limit prescribed under sub-section (1) of section 372A; (h) * election of a director under proviso to sub-section (1) of section 252 of the Act ; (i) * deleted w.e.f. 11/10/2001 (j) variation in the rights attached to a class of shares or debentures or other securities as specified under section 106. 5. Procedure to be followed for conducting business through Postal Ballot:(a) The company may make a note below the notice of General Meeting for understanding of members that the transaction(s) at Sl. No. requires consent of shareholders through postal ballot;

(b) The board of directors shall appoint one scrutinizer, who is not in employment of the company, may be a retired judge or any person of repute who, in the opinion of the board can conduct the postal ballot voting process in a fair and transparent manner; (c) * The scrutinizer shall submit his report as soon as possible after the last date of receipt of Postal Ballots.; (d) The scrutinizer will be willing to be appointed and he is available at the Registered Office of the company for the purpose of ascertaining the requisite majority; (e) The scrutinizer shall maintain a register to record the consent or otherwise received, including electronic media, mentioning the particulars of name, address, folio number, number of shares, nominal value of shares, whether the shares have voting, differential voting or non-voting rights and the Scrutinizer shall also maintain record for postal ballot which are received in defaced or mutilated form. The Postal Ballot and all other papers relating to postal ballot will be under the safe custody of the Scrutinizer till the Chairman considers, approves and sign the minutes of the meeting. Thereafter, the Scrutinizer shall return the ballot papers and other related papers/register to the company so as to preserve such ballot papers and other related papers/register safely till the resolution is given effect to;

(f) * The consent or otherwise received after thirty days from the date of issue of notice shall be treated as if reply from the member has not been received. Business Law Notes by Ritu Khabia C.S.; LL.B.(Hons); M.A. & M.phil. (Economics) PGDTFM(ICFAI)