Extraordinary General Meeting – One Person Company Registration in Coimbatore
Companies Act, 1956: Section 169
Section 169 of the 1956 Act empowered the members to requisition the Board to call for an extraordinary general meeting. This section prescribed the minimum number of members in a company with share capital (members having not less than 10% of the paid up share capital carrying voting rights) as well a company without share capital (members having not less than 10% of the total voting power) who can petition to the Board for convening an extraordinary general meeting. The procedure to be followed and the time frame within which the meeting should be convened by the Board were stipulated in the section. If the Board did not within 21 days of the date of valid requisition convene the meeting to be held within 45 days of the date of deposit of requisition then the requisitionists themselves or the minimum number of members required to requisition an extra ordinary general meeting could call for an extraordinary general meeting and reasonable expenses incurred on convening and conducting such a meeting could be recovered from the directors in default. No such meeting called by the requisitionists could be held after three months from the date of the requisition. Where convening of the EGM in terms of the provisions of section 169 fails or the meeting does not take place for any reason and/or it is not practicable, only then do the provisions of s. 186 come into play and can be invoked and not otherwise.
Companies Act, 2013: Section 100
Section 100 of the 2013 Act was notified vide SO 2754(E) dated 12-09-2013 was effect from 12-09-2013. This section is based on Clause 10 of the Notes on Clauses, Companies Bill 2011.
Section 100 of the 2013 Act corresponds to section 169 of the 1956 Act with certain changes
The changes are as noted below:
1. In the 1956 Act, the powers of Board of directors to convince extraordinary general meeting was provided in Article 48 of Table A to 1956 Act. In 2013 Act, this power has been incorporated in sub-section (1) of section100 of the 2013 Act
2. The provision in the 1956 Act that a meeting held commenced within 3 months in a meeting convened by the requisitionists can be adjourned to a date after the expiry of three months. This has been omitted in 2013 Act.
3. As per section 169 of the 1956 Act, even if one or more of joint holders of shares signed the requisition, the same were to be considered to have been signed by all joint holders. This provision has been omitted in section 100 of 2013 Act.
Power of Board [Section 100(1) of Companies Act, 2013]
Section 100(1) of the 2013 Act, corresponds to section 169 of the 1956 Act and Regulation 48(1) of Table A of Schedule I to the 1956 Act. Section 100(1) of the 2013 Act empowers the Board of Directors to call an extraordinary general meeting as and when they deem fit. The power given to the Board of directors under sub-section (1) of section 100 of the 2013 Act is therefore discretionary in nature.
Duty of Board [Section 100(2) of Companies Act, 2013]
Sub-section (2) of Section 100 of the 2013 Act makes it obligatory on the part of the Board of Directors of the company to forthwith proceed to call an extraordinary general meeting.
Matters pertinent to extraordinary general meeting: [Section 100(3) of Companies Act, 2013]
Sub-section (3) of section 100 of the 2013 Act corresponds to section 169(2) of the 1956 Act and lays down that the requisition made under section 100(2) of the 2013 Act must clearly state the matters for consideration of which the extraordinary general meeting is to be called. Such requisition, as stated here above, must be signed by the requisitionists and sent to the registered office of the company. It must, however, be noted that section 169(8) of the 1956 Act which related to joint holdings was linked to section 169(2) of the 1956 Act. However, there is no similar provision in the 2013 Act, and hence in case of joint holding all joint holders need to sign the requisition or notice convening the meeting as the case may be. Article 52 of Table F of schedule 1 to the 2013 Act refers only to exercise of voting rights where there are joint holders and hence will not apply to section 100(3) of the 2013 Act.
Default by Board and remedy [Section 100(4) of Companies Act, 2013]
Where the Board after receipt the requisition does not within 21 days call for a meeting within 45 days of the date of the requisition then the requisitionists themselves can convene and hold the meeting. Such meeting needs to be held within 3 months from the date of the requisition. Section 100(4) of the 2013 Act can be compared with the provision of section 169(6) of the 1956 Act and it is worthwhile to note that the 2013 Act requires the requisitionists to convene and hold the meeting while section 169(6) additionally provided for a group of requisitionists having not less than 10% of paid up capital or 10% of total voting power to call for a meeting. This provision is not included in the 2013 Act and thereby all the requisitionists will jointly have to call for a meeting. It must, however, be noted that as per section 100(4) of the 2013 Act the only remedy that requisitionists have is that they can call the meeting on their own, in case the Board does not proceed in the matter. A view may be taken that since alternative remedy of convening the meeting lies with the requisitionists, no action can be taken for the default on the part of the Board of Directors of the Company.
Reimbursement of expenses: [Section 100(6) of Companies Act, 2013]
The expenses of the requisitionists, incurred by reason of the failure of the Board to call the meeting, will have to be paid to them by the company and the directors who are in default, will have to recoup the loss to the company in this connection. The sub-section provides only one mode of reimbursing the company the amount of the expenses paid by it to the requisitionists. The provision of one mode does not however debar the right to recover by other lawful means such as recovery by suit, or exercise of a power of lien over the shares of the defaulting directors, if such power is given by the articles.
Section 169 of Companies Act, 1956
The following commentary and cases have been discussed in the context of section 169 of the 1956 Act which corresponds to section 100 of the 2013 Act, and as such are relevant in respect of section 100 of the 2013 Act also.
Extraordinary general meeting convened by directors
The directors have the power to convene an Extraordinary General Meeting on their own motion whenever they think it appropriate in the interests of the company. On the power of directors to call an extraordinary general meeting the following statement appears in SHACKLETON ON THE LAW AND PRACTICE OF MEETINGS, 119. The directors have the powers to convene an extraordinary meeting on their own motion whenever they think it appropriate in the interest of the company. Section 303 of English Companies Act, 2006 is on similar lines of calling a meeting at the request of members. Section 656 of the 2006 English Act also provides that where the net asset of a public company is half or less its called-up share capital, the director must call a general meeting of the company to consider whether any, and if so what, steps should be taken to deal with the situation. As per s. 169(1) of the 1956 Act, the Board of directors empowered to convene an Extraordinary General Meeting on receipt of a requisition and as per Article 48 (1) of Table A of Schedule I to the 1956 Act, the Board was empowered to convene an extraordinary general meeting as and when it thought fit. The power to convene an extraordinary general meeting is now covered under section 100(1) of the 2013 Act
Extraordinary General Meeting-Who are entitled to requisition
As per s. 169(4) of the 1956 Act, an extraordinary general meeting may be called on requisition of members holding at least one-tenth of the paid-up capital carrying voting rights or in the case of a company without share capital, one tenth of the voting power in respect of the matter for the consideration of which the meeting is to be called. The same position has been reiterated in section 100(2) of the 2013 Act. Every shareholder of the company has the right, subject to compliance with the provisions of the Act, to requisition an extraordinary general meeting. He cannot be restrained by injunction from calling the meeting and is not bound to disclose his reasons nor are the reasons of the resolutions subject to judicial review.
Where the articles of a company provided in accordance with the provisions of section 181 of the 1956 Act (corresponding to s. 106 of the 2013 Act) that members who had not paid calls on their shares would not be entitled to vote, it was held that they could not therefore requisition a meeting, nor vote at it and if they did so the proceedings would be invalid. For purpose of calculating the number of members required for signing a requisition or notice to call an extraordinary general meeting under section 169 of the 1956 Act, the signature of any one of joint holders would be sufficient and be treated as good as the signature of all of them [Section 169(8)]. It must be noted that sub-section (8) of section 169 of the 1956 Act has been omitted in section 100 the 2013 Act.
The documents for requisition need not be signed by all the requisitionists provided that they clearly indicate that the meeting is being called by all of them. A requisition for an extraordinary general meeting drafted by one shareholder who has the locus standi and signed by the prescribed number of shareholders has been held to be valid. The right of members to requisition a meeting is not lost only because a receiver has been appointed in respect of their shares. Although the section refers to “members” in the plural, the provisions of the section will be satisfied if one member holding the requisite number of shares or voting rights makes the requisition. (Under the General Clauses Act, words in the plural include the singular). Preference shareholders have voting power only as regards matters relating to the preference shareholders. They have no voting right and therefore no right to requisition in respect of other matters. Once a valid requisition has been submitted, the directors can act upon it and it remains their obligation to call the meeting even if some of the requisitionists have withdrawn their consent or ceased to be members. The requisition may consist of several documents in like form, each signed by one or more requisitionists, although very minor differences in language will not matter.
Right to requisition extraordinary general meeting
As held in LIC versus Escorts case, shareholders have the right to requisition an extra ordinary general meeting of a company for removal and appointment of directors and if the company does not issue a notice within 21 days convening the meeting within 45 days, the requisitionists have the right to convene the meeting. Therefore, when the requisitionists convened the EOGM in accordance with law, the said meeting cannot be impugned nor the decisions taken thereat for removal and appointment of directors.
Deposit of valid requisition-Requisition served by fax
A notice for requisition of an extraordinary general meeting was served on the company by fax. The question was whether it satisfied the requirement of deposit of valid requisition. The court said it was a valid service. An order was made under the Electronic Communications Act, 2000, and was primarily concerned with new electronic methods of communication such as e-mail. The fax had been in use for a long time prior to the introduction of the 2000 Act. It dealt with the use of fax, but it was not a new method of communication. Further, a fax can transmit the contents of a form and a signature and the fax received is instructed to duplicate its author’s signature, either by the author or on the author’s authority. Service by fax is also more reliable, speedier and attracts no greater risk of forgery than service by post, the latter being an accepted form of service. In this case, a hand copy of the required notice with the relevant signatures had been validly served by fax and, therefore, the requisitionists were entitled to requisition and convene a meeting.
Authorization by a company to requisition an EOGM of another company
Requisition for extraordinary general meeting under sub-section. (6) of section 169 of the 1956 Act [corresponding to section 100(2) of the 2013 Act] by a substantial corporate shareholder of a company with its board resolution for appointment of 4 new directors and for removal of one director cannot be held invalid on the ground that there are some infirmities in the authority. An order holding that the requisition was invalid had been passed purely based on surmises and presumptions and without any evidence and therefore, the order of the CLB was liable to be set aside.
Position of Institutional Shareholder
An institutional shareholder, like the Life Insurance Corporation, has the same rights as every other shareholder to requisition an extraordinary general meeting for the purpose of considering removal of a certain number of directors. The institution cannot be restrained from doing so on the ground that reasons for the proposed removals have not been stated, or that the institution being the “State” for the purposes of Part III of the Constitution or an instrumentality of the State it has not given reasons for moving the resolution.
The private company had not paid dividend for two years. The preference shareholders convened an extraordinary general meeting. The company had yet to commence business. No dividend was payable as yet. The preference shareholders were not entitled to voting rights under the company’s articles. The court held that the meeting was illegal and resolutions passed at it were ineffective.
Court not to order calling of EGM
A managing director was inducted by way of a family arrangement. A suit was filed for declaration that the appointment was not valid. The Single Judge refused to grant an interim injunction but directed the MD to call an extraordinary general meeting. It was held on appeal to the Bench that such direction should not have been issued. A general body meeting could be convened only in accordance with the provisions of the Act.
Meeting considered invalid
An extraordinary general meeting presided over by a person who was not a member of the company and which was not attended by at least two members was held to be not valid.
Evidence of holding of requisitioned meeting
After receiving the requisition, the company should call a Board meeting and the Board would call a general meeting in accordance with the requisition. Where a meeting of this kind was alleged to have been held but there was no reference as to when the requisition notice was received or when the Board meeting was convened for consideration of the requisition and how the company issued a notice, the minutes book showed no record, nor the company’s minutes book was produced before the court, the statutory presumption of validity under section 195 of the l 956 Act [corresponding to section 118(8) of the 2013 Act] was not available. It had, therefore, to be held that no meeting was at all held and the so-called appointments of directors at the time were not valid.
Explanatory statement not necessary in requisitionists’ notice
It is clear that the obligation to annex explanatory statement to the notice of the meeting is only on the company when it calls a meeting to transact special business. When requisitionists call for an extraordinary general meeting under section 169 of the 1956 Act there is no obligation on the requisitionists to annex an explanatory statement to the notice of the meeting. There is no warrant for imposing such an obligation on the requisitionists. Therefore, there is no merit in the contention that the requisition notice and the notice of the meeting were bad and that they contravened the provisions of the Companies Act. Where an extraordinary general meeting is called on requisition for proposing a resolution for removal of directors, the shareholders who requisition the meeting do not have to give any reasons for their resolution, nor do they have to attach any explanatory statement. The company also is not bound to attach any such explanation unless the company gives its own notice. As long as it merely forwards the requisitionists’ notice, it does not have to attach any explanatory statement. The role of the company on receiving a requisition is to act only as a channel of communication for convening the meeting. In convening a requisitioned meeting the company plays the limited role of forwarding the material as received by it from the requisitionists to all the members. The CLB found no legal infirmity in the notice issued by the company. So as to hold that when a meeting is requisitioned and the company forwards the requisitionists agenda to the members with the notice, the company has not to comply with the requirement of explanatory statement. It must, however, be noted that with respect to the 2013 Act, Rule 17(5) of the Companies (Management and Administration) Rules, 2014, specifically provides that in respect of requisitioned meetings, there is no need to annex explanatory statement.
Explanatory statement by banking company
In the case of a banking company, it has been held that the letter containing reasons sent to the Reserve Bank recommending removal should have been attached to the notice of the meeting containing the draft of the resolution for removing two directors. A notice of meeting without giving explanatory statement of the reasons for the proposed removal of the directors was held to be not valid. The meeting was restrained from being held. The court also found that the balance of convenience was in favor of the directors whose removal was proposed. The Supreme Court vacated the injunction on the holding of the meeting because the company undertook to circulate the necessary explanatory statement along with the notice of the meeting, that a single member present in person or by proxy would be deemed to constitute a valid quorum for an extraordinary general meeting.
Power of CLB to convene EGM
Provisions contained in section 169 of the Companies Act, 1956 stipulates requisitioning of extraordinary general meeting, where in normal course the meeting is to be convened where removal of directors is one of the subjects in the agenda of that meeting. Where convening of the EGM in terms of the provisions of section 169 fails or the meeting does not take place for any reason and/or it is not practicable, only then do the provisions of section 186 come into play and can be invoked and not otherwise.
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