All about General Meetings under Companies Act, 2013

NOTICE OF GENERAL MEETING

Purpose and importance of the Proper Notice

Ø  The purpose of the Notice with specified length is to enable a member of the company to read, understand the financial statements, performance and to raise any questions on the state of affairs and to enable members to issue special notice to the company for certain resolutions as per provisions of Section 115.

Ø  Any improper notice invalidates proceedings of General meetings and puts the approvals at the General meetings to nullity for want of proper notice.

Ø   However any accidental omission to give notice or non receipt by any member or any other person entitled to receive notice shall not invalidate the proceedings – Sec.101 (4) or Section 111 for circulation of members’ resolutions.

Exceptions

• In case of Private Company- Section 101 shall apply,unless otherwise specified in the articles of the company.
• In case of Section 8 Company, a general meeting of a company may be called by giving not less than clear fourteen days’ notice either in writing or through electronic mode in such manner as may be prescribed.

The above mentioned exception shall be applicable to the company which has not committed a default in filling its financial statements under section 137 or annual return under section 92 of the said Act with the Registrar.

• In case of Specified IFSC Public Company- Section 101shall apply, unless otherwise specified in the articles of the company.

The Length of notice and Shorter Notice

 A notice calling a General meeting has to be in writing and to be given at least 21 Clear Days before the meeting date. The new Act has added the expression “clear days”. It means day of giving of notice and day of the meeting are to be excluded.

The new Act permits issuance of notice by electronic mode. Sec.101 (1)

A shorter notice of less than 21 Clear Days is valid for calling a General Meeting if consent is given by not less than 95% of the members entitled to vote at such meeting and such consent can be either in writing or by electronic mode. Sec.101(1)

Contents of the notice and Statements to be annexed to the Notice:

Section 101(2) provides that every valid notice calling the meeting shall specify the place, date, day and time

and it should contain a statement of the business to be transacted at such meeting.Notice of Annual General Meeting shall also specify the serial number of the Meeting.

Section 102 provides that a statement setting out material facts for each item of special business to be transacted at the General meeting shall be annexed and contain the following particular details:

• Nature of concern or interest whether financial or other wise of every director, Manager, Key Managerial personnel (KMP) and their relatives
• Any other information which facilitates better understanding of the businesses to be transacted
• In the case of special business to be transacted relates to or affects any other company, then the extent of shareholding in that other company of the promoters, directors, Manager, KMP of the company, if the extent of such shareholding is not less than 2% (earlier it was 20% ).

Section 102(2) clarifies in the case of AGM any business other than the Ordinary Business shall be Special Business. Ordinary Business is:-

• Considering the financial statements with Auditors’ report & Directors’ report
• Declaration of dividend
• Appointment of directors retiring by rotation
• Appointment of Auditors and fixation of their remuneration

Connectivity of Section 101 with Section 136

Section 136 of the Companies Act 2013, talked about right of member to copies of audited financial statements. As per section 136(1), without prejudice to the provisions of section 101, a copy of the financial statements, including consolidated financial statements, if any, auditor’s report and every other document required by law to be annexed or attached to the financial statements, shall be sent to every member of the company along with other specified persons, not less than twenty-one (21) days before the date of the meeting. Both section 101 and 136 prescribed the limit of 21 days. Accordingly most of the Companies send notice of AGM along with Financial Statements together to comply with the time line of 21 days.

Consequences of non disclosure of material facts in Notice

Any benefits which accrued as a result of such non disclosure/insufficient disclosure toPromoter, Director, Manager or any other KMP who are in fiduciary position will not only be liable to compensate the company for the loss but also be liable for the consequences under other acts.

A criminal/civil action can be launched for breach of trust/misappropriation/cheating etc.

Section 102(5) provides a fine up to Rs. 50,000/- or 5 times of the profit accruing to promoter, director, manager or an KMP whichever is more can be levied on the defaulting officer in case of failure to comply with the provisions of section 102(1).

Listing agreement Requirements

Listed companies have to submit 6 copies of notices together with Directors’ report, auditors report and other information as they are sent to shareholders. Three copies of advertisement released for communicating to shareholders about dispatch of notice.

Secretarial Standards to be observed

As per Section 118 of the Act, 2013, every company shall observe the Secretarial standards (SS) issued by Council of ICSI and approved by the central government. Secretarial Standard-2 (SS-2) on “General Meetings” is mandatory for the convening and conducting of General Meetings and matters related thereto. It also deals with conduct of e-voting and postal ballot.

Notice shall be sent by hand or by ordinary post or by speed post or by registered post or by courier or by facsimile or by e-mail or by any other electronic means.Notice shall not be sent by ordinary post in the following cases:

(a) if the company provides the facility of e-voting;

(b) if the item of business is being transacted through postal ballot.

In case of companies having a website, the Notice shall simultaneously be hosted on the website till the conclusion of the Meeting.It shall be accompanied, by an attendance slip and a Proxy form with clear instructions for filling, stamping, signing and/or depositing the Proxy form.

Notice shall clearly specify the nature of the Meeting and the business to be transacted thereat. In respect of items of Special Business, each such item shall be in the form of a Resolution and shall be accompanied by an explanatory statement which shall set out all such facts as would enable a Member to understand the meaning, scope and implications of the item of business and to take a decision thereon. In respect of items of Ordinary Business, Resolutions are not required to be stated in the Notice.

A Meeting convened upon due Notice shall not be postponed or cancelled. If, for reasons beyond the control of the Board, a Meeting cannot be held on the date originally fixed, the Board may reconvene the Meeting, to transact the same business as specified in the original Notice, after giving not less than three days intimation to the Members.The intimation shall be either sent individually or published in a vernacular newspaper of the district in which the registered office of the company is situated and in an English newspaper in English language, both having a wide circulation in that district.

Precaution

Penal provisions in the New Companies Act 2013 provide for strict abeyance of provisions and ensure transparency from the promoters/directors/Mangers/ Key Managerial Personnel in drafting of notice and disclosure of material facts of any item of special business to be transacted.

Special Notice (Section 115)

It requires certain business to be transacted in general meeting only after a special notice of the resolution.

There are certain businesses under the Act and may be some additional businesses in the articles of the company, which requires special notice for resolution. The notice of the intention to move such resolution shall be given to the company by prescribed number of members holding not less than one percent voting power or holding shares of paid – up value of five lakh rupees. On receipt of such notice from these members, the company shall give notice in prescribed manner to its members.

The Act has provision for special notice in following cases:

(a)  Resolution for appointment of an auditors other the retiring auditor at an annual general meeting [Section 140(4)].

(b)Resolution at an annual general meeting to provide that a retiring auditor shall not be re-appointed [Section 140].

(c)  Resolution to remove a director before the expiry of his period of office [Section 169(2)]

(d)  Resolution to appoint another director in place of the removed director [(Section 169(5)]

According to the Rule 23 of the Companies (Management and Administration) Rules 2014

The notice shall be sent by members to the company not earlier than three months but at least fourteen days before the date of the meeting at which the resolution is to be moved, exclusive of the day on which the notice is given and the day of the meeting. [Rule 23(2)]

The company shall immediately after receipt of the notice, give its members notice of the resolution at least seven days before the meeting , exclusive of the day of dispatch of notice and day of the meeting , in the same manner as it gives notice of any general meetings. [Rule 23(3)]

Where it is not practicable to give the notice in the same manner as it gives notice of any general meetings, the notice shall be published in English language in English newspaper and in vernacular language in a vernacular newspaper, both having wide circulation in the State where the registered office of the Company is situated and such notice shall also be posted on the website, if any, of the Company. [Rule 23(4)]

The notice shall be published at least seven days before the meeting, exclusive of the day of publication of the notice and day of the meeting. [Rule 23(5)].