This Article is written by Ravi Kumar, an LLM student at Hidayatullah National Law University, Raipur. The purpose of this article is to know and understand the Significance of Meetings in the Effective Governance of Companies with Special Reference to AGM & EGM under the Companies Act 2013

ABSTRACT

The EGM (Extraordinary General Meeting) and AGM (Annual General Meeting) are crucial corporate meetings for governance and decision-making within a company. Annual General Meetings (AGMs) are held to discuss the company’s finances, board votes, and strategic plans. This promotes accountability and transparency among shareholders. When urgent issues arise outside of the AGM timeframe, EGMs are called. This enables stakeholders to address pressing problems quickly, ensuring efficient corporate decision-making and legal compliance.

INTRODUCTION AND SIGNIFICANCE OF COMPANY MEETING

A meeting is typically thought of as a get-together where people congregate for legitimate business, fun, or other similar purposes. Legally speaking, a company is considered to be separate from its members. The board of directors is responsible for directing operations while abiding by the authority the Articles of Incorporation granted to them. The directors have particular authority with the consent of the other members. The company holds “General Meetings” to obtain the members’ approval. During company meetings, the stockholders, also referred to as the company’s stockholders, rectify any mistakes made by the board. When shareholders meet the decisions and actions of the board can be discussed. “According to the Companies Act 2013, meetings are a crucial part of a company’s management”. Meetings give shareholders a chance to discuss specific issues and gain insight into the company’s ongoing operations. A business organises different kinds of meetings, each of which has unique requirements for initiation arrangements and conduct. The Companies Act of 2013 and accompanying regulations mandate that Meetings be scheduled in accordance with a set of guidelines and at predetermined intervals. This requirement results from the realisation of the crucial role meetings play in the management and operations of an organisation. Meetings are primarily held to ensure that the business gives eligible participants a fair opportunity to make decisions per established procedures. A company makes important decisions based on Resolutions passed by its Members at General Meetings because it is an artificial entity.

These Meetings are the main venue for directors to answer to shareholders about how they have managed the company, allowing for debates and questions. General Meetings, also known as Meetings of Members, are very important, and it is very important to understand what constitutes a properly conducted Meeting. From a sociological perspective, Boden has acknowledged that the “Annual General Meetings’ provide a stage for power plays where there is a discipline of the meeting, which results in some form of governance control over companies. Shareholders can exercise their fundamental right to vote at meetings on significant resolutions like director compensation. General Meetings can be divided into the  broad categories:

• “ANNUAL GENERAL MEETING”
• “EXTRAORDINARY GENERAL MEETING”
• “MEETING OF A CLASS OF MEMBERS”
• “MEETINGS OF DEBENTURE HOLDERS CREDITORS ETC”
• “OTHER MEETINGS”

1. Appropriate arrangements must be made for the meeting by those with the necessary authority.
2. All eligible attendees should have received adequate and proper notice.
3. The meeting must adhere to the law, which includes having a chairperson, maintaining a quorum in accordance with rules, and following the pertinent laws and articles.
4. The agenda and business of the meeting shall conform to the rules governing such meetings

TYPES OF GENERAL MEETINGS

General gatherings within a company can be broadly classified into the following categories:-

1.  “Annual General Meetings” is a requirement to discuss routine and unique issues relating to the company’s affairs. The role that its annual general meeting plays in the governance of the company is significant. If an AGM is not held, any member may ask the National Company Law Tribunal for assistance in enforcing it.

• General Meeting Extraordinary (EGM)To address urgent or particular business matters that come up between AGMs, an EGM is held in addition to the regular AGMs. At an EGM, every discussion and decision is categorized as special business.
• Meetings of a Particular Member Class: At these gatherings, members of a specific member class, such as preference shareholders, can vote on resolutions that are only applicable to their class. This is very important, particularly when changing the rights of a particular class of shares.
• Meetings for Debenture Holders, Creditors, etc.: These meetings are held so that creditors or debenture holders can make decisions affecting their interests. The rules governing general meetings also apply, with the necessary modifications.

ANNUAL GENERAL MEETING

The “Annual General Meeting”  is a required yearly event for shareholders or members of a company. Its functions include holding various annual meetings, reporting on before and upcoming business activities, and giving shareholders financial results for the previous year. All corporations, with the exception of Person Companies, are required to hold an AGM annually under Section 96 of this  Act of 2013. For businesses incorporated under the 2013 Act and within 18 months for those under the 1956 Act, the first AGM must take place within “Nine months” of the end of the first financial year. There should be no more than a 15-month interval between each subsequent AGM. AGM failure may result in legal action. The registry office may increase the time for subsequent AGMs by up to three months for special reasons, but this extension doesn’t apply to the f

EXTRAORDINARY GENERAL MEETING (EGM)

In contrast, the “Annual General Meeting” and  “Extraordinary General Meeting” is a meeting of shareholders of a company. It is called when urgent matters affecting the company come up that demand immediate feedback from members and cannot wait until the following AGM. Shareholders are informed in advance of the purpose of the EGM, enabling them to prepare for substantive discussions and deliberate decision-making. Addressing urgent issues that cannot wait until the upcoming “Annual General Meeting” is the main goal of calling an EGM. “Extraordinary General Meetings” may be called to address certain crucial issues, such as amending the Articles of Association and Memorandum of the share capital, mergers and acquisitions, averting a hostile takeover, preventing oppression and mismanagement of the company’s affairs, issuing the appropriate number of shares, and modifying the compensation of the managing directors, whole-time directors, and similar positions.

According to subsection (1) of section 100, a board of directors has the power to organize “Extraordinary General Meetings” as and when it deems them necessary. Depending on the needs of conducting the company’s business, the board may call such an “Extraordinary General Meeting”. The Company’s “Extraordinary General Meetings” shall be held in India, except in the case of a fully-owned subsidiary of an enterprise incorporated outside of India.

The following number of members must request that the board call an “Extraordinary General Meeting” in accordance with subsection (2) of section 100: Members of a corporation with share capital who own 10% or more of the paid-up voting shares related to the proposed resolution as of the requested date Members who held at least ten per cent of the votes cast with regard to the planned subject matter on the date of the request receipt in the situation of an entity with no share capital.

As per under Section 100 of this Act permits a sole shareholder to call an annual general meeting if they have the necessary voting power or voting rights. Therefore, a legal entity may also make a request like that to the company if it has the required ability to vote or voting power. The requesting party must specify the meeting’s agenda, whether an individual or an organization. The appeal must be in writing, signed by the maker(s), and delivered to the company’s authorized office.

Section 100 of this Act permits a sole shareholder with the necessary voting power or rights to reach a meeting. A request made by a natural or legal person is treated equally under Section 100. So long as it has the necessary voting rights or voting power, a legal entity may also submit such a request to the company. The requesting party must specify the meeting’s agenda, whether an individual or an organisation. The request must be in writing, signed by the party or parties making it, and delivered to the business’s registered office.

Only when the requisitionists fall short of the eligibility requirements listed under Section 100 of this Act board declare a requisition invalid. However, It has been established that the board may decide not to call an “Extraordinary General Meeting” only if the request does not meet these predetermined standards. A single shareholder may also submit a request to call the Meeting if that shareholder possesses the necessary voting rights as described under Section 100 of the Act.

Requisitionists are not classified as either natural or artificial persons under Section 100. As a result, a fake person could also submit the request to the business.  A body corporate may submit the request to call a meeting if it is a Member of another company and has required voting rights or voting power. The requisitionists must specify the topics for discussion for which the meeting is to be called in response to the request.

The requisitionists must sign it before sending it to the company’s registered office. According to the ruling in “Life Insurance Corporation of India v. Escorts Ltd”, each company shareholder has the right to call an “Extraordinary General Meetings” per the Companies Act, subject to statutorily prescribed procedural and numerical requirements. He is not required to announce the gathering or to explain the reasons for the resolutions being put forward to be moved at the gathering. The motivations behind the resolutions are also not up for judicial review.

To convene an Extraordinary General Meeting, a written or electronic request must be made in accordance with “Rule 17(1) of the 2014 Companies (Management and Administration) Rules”. Within 21 days of receiving a valid requisition, the board must call the extraordinary general meeting in accordance with Section 100’s Subsection (4).

This meeting must take place no later than 45 days after receipt of the requisition. “The word or the adjective “valid” in section 169 has no reference to the object of the requisition but rather to the requirements in that section itself,” it was decided when interpreting the word “valid”

In the case of “Cricket Club of India v. Madhav Apte”, the court stated if the conditions outlined in the section’s earlier part are met, The board of directors of an organization must act in accordance with the request left with the company as it must be considered a legitimate requisition. Unless the respondents do not meet the criteria for eligibility outlined in Section 100 of the Act, the “Board of Directors” cannot dismiss a requisition as invalid. The Board, however, has been upheld as having the right to decline to call to hold an “Extraordinary General Meeting”. “

If the board does not schedule a special meeting within 21 days or takes more than 45 days to do so after receiving the request, the requesters may hold one themselves within three months. The requesters shall conduct the meeting in accordance with Section 100, Subsection (5), and shall comply with all applicable laws and the Secretarial Standard. All members listed in the company’s Register of Members must be informed about the meeting. Within 45 days of receiving a valid request, the requesters have the right to obtain a list of members, including their addresses and shareholdings, if the meeting is not called. The Board must provide the requesters with the necessary information from the Register of Members, such as registered email addresses of members and share amounts. The meeting’s location, date, time, and agenda should all be included in the notice. Special resolutions must adhere to the rules outlined in section 114’s subsection (2). Although they are not required to do so, the requisitionists can provide an explanation for the resolutions they intend to present in the Notice of the “Extraordinary General Meeting” they are planning. The Board may, however, include an Explanatory Note to describe its position on the suggested resolutions.

COMPARATIVE STUDY OF AGM AND EGM

Comparative analysis of the Annual General Meetings and Extraordinary General Meetings provisions of the Companies Act of 2013 and the “(Companies Management and Administration)” Rules of 2014 leads to the conclusion that both the substantive and procedural requirements are the same for both general meetings. The two different general meetings, however, differ in the following ways. The information provided here clarifies the distinctions between Extraordinary General Meetings and Annual General Meetings.

• At least once every calendar year, the company must hold an “Annual General Meeting” to discuss various business-related topics. On the other hand,  “Extraordinary General Meetings” is any Meeting other than the Annual General Meeting where urgent matters relating to the Company are discussed.
• AGMs are required to be held annually, with the first one taking place no later than 9 months following the conclusion of the fiscal year. In contrast, there is no such requirement for an extraordinary general meeting.
• At the AGM, both regular business and special business are conducted, but only special business is conducted at the EGM.
• Only on non-holiday days, during regular business hours, should an AGM be held. An EGM, on the other hand, can be held even on national holidays.

SUGGESTIONS

An annual general meeting is important for stakeholders because it gives everyone a chance to discuss future plans, elect directors, and review the company’s performance. It encourages openness and responsibility. An “Extraordinary General Meeting” is required for urgent matters that fall outside the annual general meeting’s purview. It enables stakeholders to make important choices like consenting to mergers or acquisitions, changing the company’s charter, or approving significant shifts in the company’s course. It guarantees prompt decision-making for important matters.

CONCLUSIONS

A company is a group of people working together. When making decisions, the general consensus is taken into account. There are a number of issues that require discussion and resolution. These conversations take place during the various meetings that directors and members hold. It goes without saying that the importance of meetings for businesses cannot be overstated. A natural person takes up its entire operation as a virtual being in each person’s eyes. The company’s directors can easily gain from working for the company’s management. General meetings are held to monitor pay increases, which must not be detrimental to the interests of the shareholders and board members. Meetings must be held at predetermined intervals, and the Companies Act of 2013 and its implementing rules specify the necessary rules and procedures. A general meeting discloses all pertinent information while maintaining an apparent equilibrium between the shareholders of the directors and the company members. This mandate recognizes the importance of meetings in a company’s management and governance.

The main goal of a meeting is to ensure that everyone eligible to participate has the best chance to influence decisions made in accordance with established procedures. It serves as a forum for the shareholders’ questions and comments as well as for the “Board of Directors” to address the shareholders. Shareholders have the chance to use their legal right to vote at meetings on significant decisions and director compensation. In situations where businesses regulate employee behaviour for the benefit of all parties involved in forming a company, the importance of the meeting cannot be overstated. Although the value of gural meetings cannot be disputed, there is a growing worry that they are losing their significance due to the way they are currently run, which is out of touch with modern realities. Farmers Kingsmill states AGMs are losing their significance because they are no longer consistent and effective. She tentatively suggests that it might be time to stop the expensive AGM and hold important meetings online, a technologically advanced virtual conference value.

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