In case the meeting of the Board of directors itself is unlawful e.g. where rightful directors are prevented from attending the directors’ meeting, the decision taken by the Board at such meeting to call the general meeting, shall also be unlawful.
Where, however, the meeting at which the directors decide to call a general meeting is not properly constituted (e.g. there is some defect in the appointment or qualification of the directors), and the Board acts bona fide, a general meeting called in pursuance of a resolution passed at such directors’ meeting, is not necessarily invalid.
However, under certain circumstances, the requisitionists, the Central Government or the Company Law Board (the Tribunal after its constitution) may call a general meeting in case of default by the directors.
Notice to whom? Notice of every general meeting should be given to the following persons:
(i) Every member of the company.
(ii) Every person entitled to a share in consequence of the death or insolvency of a member.
(iii) Auditor or auditors of the company [Sec. 172 (2)].
Deliberate omission to give notice to a single member may invalidate the meeting. However, an accidental omission to give notice to or non-receipt of it, by a member will not invalidate the meeting [Sec. 172 (3)].
Length of Notice:
A proper notice in writing to every member of the company is required by law for the holding of every valid meeting. Notice must be given even though a member has waived his right to have notice. It must disclose the purpose for which the meeting is called. It must be given at least 21 clear days before the date of the meeting.
In calculating 21 days, the date of receipt of notice and the date of the meeting should be excluded [Sec. 171 (1)]. Articles may provide for a notice longer than 21 days, but not shorter than 21 days. The notice shall be deemed to have been received by a member at the expiry of 48 hours from the time of posting [Sec. 53 (2) (b)].
A general meeting may be called at a shorter notice, if,
(i) In the case of an annual general meeting, all members entitled to vote thereat agree;
(ii) In the case of any other meeting (a) if the company has a share capital, members holding 95% of the paid-up share capital carrying voting rights exercisable at the meeting agree, (b) if the company does not have a share capital, members holding at least 95% of the total voting power exercisable at the meeting agree.
The consent of the members for shorter notice may be obtained either at the meeting or before the meeting. It may also be obtained after the meeting and the post consent will validate the resolution originally passed without sufficient notice. It is usual to obtain it by asking the shareholders to sign a form of consent.
Service of Notice:
Company may serve notice on the members either personally or by prepaid post or by advertisement in the newspaper. It must be properly addressed. Service of notice’ by advertisement shall be deemed to be complete the day when the advertisement appears in the newspaper on both resident and non-resident members.
Explanatory statement need not be advertised, but the fact that the same has been sent to the members through post shall be mentioned in the advertisement. In case of joint- holding of shares, notice to first named shareholder would be sufficient.
When the meeting is adjourned for 30 days or more and the new business is to be transacted at the adjourned meeting, a fresh notice has to be given.
Contents of the notice:
The notice must contain the following particulars:
(i) It should specify the name of the meeting, the place, day and hour of the meeting and the meeting to be valid must be held at the place and time specified. Annual General Meeting should be held on a working day during business hours. However, a meeting may continue beyond business hours. Extraordinary general meeting can be held on any day including a holiday and not necessarily during working hours.
(ii) It should also specify the nature of the business to be conducted at the meeting. Section 173 puts business into two categories:
(a) General business:
In case of annual general meeting, all business relating to : (i) the consideration of annual accounts, (ii) the declaration of a dividend, (iii) the appointment of directors in place of those retiring, and (iv) the appointment of, and the fixing of remuneration of the auditors, are considered as general business.
(b) Special business:
Any other business at an annual general meeting and all businesses in case of any other meeting are regarded as special business. If special business is to be transacted at a general meeting, an ‘explanatory statement’ giving all the material facts of the item of special business including the particulars of interest, if any, of every director or other managerial personnel, must be annexed to the notice.
Agenda gives guidance and information as to the business to be discussed and transacted in the meeting. It sets out the chronological sequence in which the various items of business shall be taken up in the meeting for discussion. The sequence should not be changed unless agreed to by the members present. Routine items should be put first and debatable items later. Similar items should be placed closer to each other.
Agenda is prepared by the Secretary in consultation with the Chairman or the Managing Director. Agenda must be clear and complete. A company may be restrained from transacting that business which is not mentioned in the agenda.
3. Place of the Meeting:
Annual General Meeting. The annual general meeting is to be held by a public company at its registered office or at some other place in the same city, town or village where the registered office of the company is situated. However, the Central Government has the power to grant exemption to any company from this provision.
A private company can hold its annual general meeting at any other place if:
(i) It has fixed the place of the meeting by the articles; or
(ii) It has fixed the place of the meeting by a resolution agreed by all the members.
A company registered under section 25 of the Companies Act can hold the annual general meeting at any place. In case of a Government company, meeting can be held at any other place with the approval of the Ministry of Corporate Affairs.
Other General Meetings:
There is no such provision in the Companies Act which requires that the general meetings of the company other than the annual general meeting must be held at some particular place. It, therefore, follows that the other general meetings can be held, subject to any specific provision in the articles at any other place. However, the directors must act reasonably in fixing the time and place of the meeting so that members get full opportunity in exercising their voting rights.
Minimum number of members required to constitute a valid meeting and to transact business therein is called ‘quorum’. No meeting can be valid without quorum. Any resolution passed at a meeting without quorum shall be invalid. Quorum is to be fixed by the Articles of Association. But unless the articles provide for a large number, 5 persons personally present in the case of a public company and 2 members personally present in the case of private company shall be the quorum for a meeting of a company. [Section 174 (2)]. Thus, articles cannot provide a smaller quorum than what has been provided in section 174 (1). Besides that, for the purpose of quorum, only members present in person and not by proxy are counted.
If within half an hour from the time appointed for holding a meeting of the company, a quorum is not present, the meeting, if called on the requisition of members, shall stand dissolved [Sec. 174 (3)]. In any other case, the meeting shall stand adjourned to the same day in the next week, at the same time and place, or to such other day and at such other time and place as the Board may determine [Sec. 174 (4)].
If at the adjourned meeting also a quorum is not present within half an hour from the time appointed for holding the meeting, the members present shall constitute quorum [Sec. 174 (5)]. However, the above provisions shall not be applicable if the articles of the company otherwise provide [Sec. 174 (2)]. But this does not mean that the number of members personally attending can be less than two. A single person cannot constitute a valid meeting except in certain cases only.
Can a single Member Constitute a Valid Meeting?
Ordinarily, a single member present cannot form a quorum, as a single member cannot constitute a meeting. This is because meeting prima facie means coming together of two or more than two persons. The Companies Act also uses the expression “members” which shows that more than one member is expected to be present.
Sharp v Dawes:
A meeting of a company was called to make a call. Out of several shareholders only one turned up. He had the proxies of other shareholders. He himself took the chair and passed a resolution making the call. He also proposed and passed a vote of thanks. It was held that the ‘call’ made was invalid since there was no meeting. The term meeting prima facie means the coming together of more than one person.
However, under the following circumstances even a single member present may constitute the quorum and, therefore, a valid meeting:
1. When the Central Government calls or directs the calling of an annual general meeting, it has the authority to direct that one member present in person or by proxy shall be deemed to constitute a valid meeting (Sec. 167).
2. When the Company Law Board (the Tribunal on its constitution) orders a meeting of a company (other than the annual general meeting) to be held, it can direct that one member present in person or by proxy shall be deemed to constitute a valid meeting
3. When a class of members or creditors consists of one person, that member alone can constitute the meeting of that class and can pass a resolution by signing it (Sec. 391), e.g., when all the shares of a particular class are held by one person only.
4. When the Articles have allowed the Board of Directors to delegate some of their functions to a committee, which may consist of one person only (Article 77 of Table A).
At what time quorum must be present? According to Article 49 of Table A, the quorum must be present at the time when the meeting begins and proceeds to take up business. It need not be present throughout or at the time of taking the vote on any resolution. Thus, once a meeting is organised and all the parties have participated, no person or faction, by withdrawing capriciously and for the sole purpose of breaking the quorum can render the subsequent proceedings invalid.
In case, a company is a member of another company, it may, by resolution of its Board of directors, authorise such person as it thinks fit to act as its representative at any meeting of the other company [Sec. 187 (2)]. Such person shall be considered as a member “personally present” for the purpose of counting the quorum.
In case the same person represents more than one company who are members of the company, his presence will be counted as two or more members as the case may be, for purposes of quorum. In case two or more persons are joint-holders of shares in a company, one or more of them will be counted as one member for the purposes of quorum.
A quorum is presumed unless it is questioned at the meeting or unless record itself shows that a quorum in fact was not present.
A general meeting of the company is to be presided over by a chairman who regulates and supervises the proper conduct of the business at a meeting. He decides all incidental questions arising in the course of the proceedings of the meeting. Chairman should act bonafide and in the best interest of the company as a whole. Articles usually provide the mode of appointment of the chairman of a meeting. If the articles do not provide otherwise, the members personally present at the meeting shall elect one of themselves to be the chairman thereof on a show of hands [Sec. 175 (2)].
If a poll is demanded on the election of the chairman, it must be taken forthwith and the chairman elected on a show of hands can exercise all the powers in this connection [Sec. 175 (2)]. If some other person is elected chairman as a result of the poll, he shall be the chairman for the rest of the meeting [Sec. 175 (3)].
Articles 50, 51 and 52 of Table A provides on the appointment of a chairman:
50. The chairman, if any, of the Board shall preside over as chairman at every general meeting of the company.
51. If there is no such chairman, or if he is not present within fifteen minutes after the time appointed for holding the meeting, or is unwilling to act as chairman of the meeting, the directors present shall elect one of their members to be the chairman of the meeting.
52. If at any meeting no director is willing to act as chairman or if no director is present within fifteen minutes after the time appointed for holding the meeting, the members present shall choose one of their members to be the chairman of the meeting.
Chairman of the original meeting shall be the chairman of the adjourned meeting also unless validly removed. The chairman of a meeting may be appointed by the Company Law Board/Tribunal in cases where there are differences among the shareholders, and a peaceful meeting under the chairmanship of a person appointed by either group is impossible.
Powers of a Chairman:
1. The chairman has prima facie authority to decide all questions which arise at a meeting and which require decision at the time.
2. The entry in the minute’s book of the chairman’s decision is evidence of the decision of the meeting.
3. The chairman has a right to decide priority amongst speakers, to demand poll, to exercise casting vote, to expel an unruly member and he may, with the support of the majority, apply closure to a discussion after it has been reasonably debated.
4. He can adjourn a meeting when it is impossible, by reason of disorder or other like causes, to conduct the meeting and complete business.
Articles of Association may give an additional or second vote to the chairman of the company, over and above his right to vote as an ordinary member. In the case of a tie, i.e. equality of votes, chairman may use the casting vote to decide the matter in one way or the other.
Duties of a Chairman:
The chairman must take care to see that proper discipline is maintained at the meeting, that the proceedings are conducted in a proper manner, that proper opportunity is given to the members to express their views, that the voting is fair, and that the proceedings of the meeting are properly and correctly recorded in the minutes book.
The chairman should act bona fide according to his best ability and judgment and without any prejudices. He should see that the meeting is duly convened and properly held.
The term proxy has two meanings:
(a) A personal representative of the member at a meeting i.e. the person authorised to act or vote for another at a meeting of the company, and
(b) The instrument by which a person is appointed to act for another at a meeting of the company, since a representative can be appointed only in writing.
The following are the provisions of the Companies Act regarding appointment and rights of proxy:
(1) Law entitles every member of a company to appoint a person as his proxy to attend and vote at company meeting instead of himself [Sec. 176 (2)]. However, a member of a company having no share capital does not have this right unless its articles provide otherwise [Sec. 176 (4)].
(2) A member of a private company is not entitled to appoint more than one proxy to attend on the same occasion unless its articles provide otherwise. But a member of a public company may appoint more than one proxy i.e., he may appoint one proxy in respect of certain shares held by him and a different proxy for other shares held by him.
(3) Any person can be appointed as a proxy whether he is a member of the company or not. In case the proxy is not a member of the company, he shall have no right to speak at the general meeting unless the articles otherwise provide. There is, however, no provision preventing a proxy putting questions in writing and sending the same to the chairman for answer.
(4) A proxy is ordinarily entitled to vote only on a poll. But he may vote on voting by show of hands if the articles provide. Besides that, he may demand or join in demanding a poll [Sec. 176 (1) (n)]. However, he shall have no right to inspect proxy forms or the minutes of the meeting.
(5) Proxy must be appointed by an instrument in writing, duly stamped and signed by the member of the company. A blank but stamped proxy is valid and may be completed by the person authorised to do so.
Proxy must be deposited with the company at least 48 hours before the commencement of the meeting. A company, however, cannot legally require proxies to be deposited with it earlier than 48 hours before the time of the meeting.
After giving 3 days’ notice to the company, members may inspect during business hours the proxies lodged with the company at any time during the period commencing 24 hours before the time fixed for the commencement of the meeting and ending with the conclusion of the meeting [Sec. 176 (7)]. Proxy lodged for the original meeting remains valid for the adjourned meeting also.
(6) Every notice of a meeting must appropriately mention that a member is entitled to appoint a proxy and that the proxy need not be a member [Sec. 176 (2)]. A company cannot send invitation to members to appoint any one or more persons as proxies.
(7) A proxy is revocable. It can be revoked at any time. Death of the shareholder appointing a proxy will, in the absence of provisions in the Articles revoke the authority of the proxy. Shareholder may himself attend and vote in the meeting. Vote tendered by the proxy in such a case will not be accepted because the need for exercising the proxy had never arisen. Proxy in this case shall stand revoked impliedly.
However, the mere presence of a member at the meeting does not imply the revocation of the authority of the proxy. When both the member and the proxy are present at the meeting, the member’s absence from voting on the resolution on which the proxy casts his vote does not imply the revocation of the authority of the proxy. A proxy appointed later revokes the proxy appointed earlier.
(8) The relationship between the member and the proxy is that of principal and agent. A minor member has no capacity to appoint a proxy. He can act only through his guardian. However, a minor can be appointed a proxy.
In the case of joint holders of shares, proxy appointed by the first named joint holder will have precedence over the proxy appointed by second joint holder. Proxy appointed by first joint holder will exercise voting right to the exclusion of the joint holders who may be present in the meeting. There is no need to obtain prior consent of the proxy to his appointment as such.
7. Voting at General Meeting:
The decisions at the meetings are taken by way of passing the resolutions. Every proposed resolution is discussed by the members of the company. Members have the right to move amendments to the proposed resolutions provided the amendments are germane to the proposed resolution.
After a proposed resolution has been discussed it is put to vote. Every member has a right to vote on such resolutions. Shareholders may exercise their voting rights in their best interests with complete freedom.
They are allowed to vote even if their interest is in conflict with the interest of the company. A director may vote in the shareholders’ meeting even though his interest in the subject matter is opposed to the interest of the company. Only members whose names appear in the Register of Members shall have the right to vote.
Share warrant holders, executor of a deceased member, receiver of an insolvent member cannot exercise any right to vote, unless registered as a member. However, a person who becomes a member between the date of original meeting and the adjourned meeting may vote at the adjourned meeting. Members who were not present at the time of voting by show of hands may vote at a poll.
A company cannot prohibit any member from exercising his voting right on the ground that he has not held his shares or other interests in the company for any specified period before the meeting or on any other ground (Sec. 182).
However, the articles may provide that a member shall not be entitled to exercise any voting rights, in respect of any shares registered in his name on which he has not paid all calls or other sums presently payable by him or in regard to which the company has exercised any right of lien (Sec. 181).
The preference shareholders have right to vote only on such resolutions which directly affect them; and when their dividends are in arrears for a specified number of years [Sec. 87(2)].
Voting may be either by a show of hands or by a poll.
Voting by show of hands:
In the first instance, at any general meeting, voting takes place by a show of hands (Sec. 177). On a show of hands, each member has only one vote. Proxies are not entitled to vote in case of such a voting unless the articles otherwise provide. The chairman’s declaration on the result of voting by show of hands is conclusive.
Voting by poll:
Voting in accordance with the voting rights given to the members by the Articles of Association is called a ‘Poll’. Proxies are allowed to vote in case of voting by poll. There is a counting of votes cast in favour and against the resolution in case of a poll.
Ordinarily, it implies exercise of voting rights by members in proportion to their share of the paid up equity capital of the company [Sec. 87 (l) (b)]. All decisions taken on voting by show of hands will stand cancelled as soon as a demand for voting by poll is made. It is the demand for poll and not its result which will eradicate the decision by show of hands.
A poll can be demanded either before or after the declaration of the result of voting on a show of hands. A poll may be demanded by either of the following:
(a) Chairman, on his own motion, or
(b) In the case of a public company having share capital, by any member or members, present in person or by proxy holding shares carrying not less than 1/10 of the total voting power in respect of the resolution or having paid up share capital of not less than f 50,000.
(c) In the case of a private company having share capital, by at least one member present in person or by proxy, if not more than 7 members are personally present, and by 2 members present in person or by proxy, if more than 7 members are personally present.
(d) In the case of any other company, by any member or members present in person or by proxy and having not less than 1/10 of the total voting power.
The demand for poll may be withdrawn at any time by the person or persons who made the demand (Sec. 179).
A poll on a resolution for the adjournment of the meeting or for the appointment of the chairman must be immediately taken. Chairman, in all other cases, must take poll at any suitable time but not later than 48 hours of the demand for poll (Sec. 180).
If a poll is not completed on the same day, it will be continued on the next day and the chairman will not be entitled to close the poll. When more than one resolution is to be passed, poll should be taken on each of the resolutions separately.
Poll must be held according to the provisions of the Articles of Association. The manner of taking the poll is to be decided by the chairman. It is the duty of the chairman to demand poll when he knows that proxies have been lodged and that on a poll the decision on a show of hands is likely to be reversed.
The chairman of the meeting shall have the power to regulate the manner in which a poll shall be taken (Sec. 185). It need not necessarily be by ballot. It may be by show of hands. But it cannot be by secret ballot because secret ballot polling is possible where each member has one vote to cast. In case of voting by poll, members have the votes in accordance with the shares held by them. The chairman shall appoint two scrutineers to scrutinise the votes given on a poll and to report thereon to him.
Out of the two scrutineers, at least one shall be a member (not being an officer or employee of the company) present at the meeting, provided such member is available and willing to be appointed (Sec. 184).