Key Provisions for Calling a General Meeting as per Companies Act, 2013

The Companies Act, 2013 governs the execution of general meetings by companies in India, stipulating precise provisions on the notice of meetings, their mode of delivery, requirements for holding meetings at shorter notice, and penalties for non-compliance. This article provides an in-depth analysis of these provisions.

PROVISIONS RELATING TO CALLING A GENERAL MEETING – NOTICE OF MEETING

Notice of Meetings

Under section 101 of the Companies Act, 2013, a general meeting can be properly convened by giving a notice of at least 21 clear days before the meeting to the individuals entitled to receive such notice, viz.:-

• Members of the company;
• Legal representatives of any deceased member; or
• The assignee of an insolvent member;
• The Auditors and the Directors of the company.

The Notice of a general meeting can be in writing, electronic mode, or other prescribed modes.

According to subsection (2) of section 101 of the Companies Act, 2013, the notice must state the day, date, hour, place of the meeting and contain a statement of the business to be transacted at that meeting.

21 clear days means that the 21 days do not include the day on which the notice is served or the day of the meeting.

For example, if a company sends a notice of a general meeting on Monday, the notice must be served at least 21 clear days before the meeting, which means that the meeting cannot be held before the following Wednesday.

A company cannot reduce the notice period to less than 21 clear days, even if its Articles of Association allow for it.

Mode of Sending The Notice

Notice sent by post:

Rule 35(6) of the Companies Incorporation Rules, 2014, states that if a notice of a general meeting is sent by post, it will be deemed to be served at the expiration of 48 hours after the letter containing the notice is posted.

This means that if you send a notice of a general meeting by post on Monday, it will be deemed to be served on Wednesday. The 48-hour period begins at the time the letter is posted, not the time it is received by the recipient.

This rule is important because it ensures that all members have sufficient time to receive and consider the notice of a general meeting before the meeting takes place.

Notice sent by “electronic mode”:

According to Rule 18 of the Companies (Management & Administration) Rule, 2014, sending of notices through electronic mode has been statutorily recognized.

In the context of a general meeting “electronic mode” means; –

• Any communication sent by a company through its authorized and secured computer program;
• The communication must be capable of producing confirmation and keeping a record of the communication;
• The communication must be addressed to the person entitled to receive it at the last electronic mail address provided by the member.

Rule 18 of the Companies (Management & Administration) Rule, 2014 mentions that

a notice may be sent through e-mail as a;-

• Text; or
• As an attachment to e-mail; or
• As a notification providing an electronic link; or
• Uniform Resource Locator (“URL”) for accessing such notice.

The e-mail shall be addressed to the person entitled to receive such e-mail as per the records of the company as provided by the person.

The subject line of the email should be clear and concise, and it should include the following information:

• The name of the company;
• The type of meeting;
• The place where the meeting will be held;
• The date of the meeting.

The notice shall be placed simultaneously on the website of the company, if any, and on the website as may be notified by the Central Government.

In other words, the company must ensure that the notice of a general meeting is available on the internet as soon as it is sent to the members. This allows members to access the notice quickly and easily, even if they do not receive the notice by post or electronic mode.

Meetings Held At Shorter Notice

Generally, a meeting needs to be called by giving 21 clear days’ notice. However, a general meeting may be called after giving shorter notice than that specified in subsection (1) of section 101 of the Companies Act, 2013;

In the case of an Annual General Meeting (“AGM”), by consent of not less than 95% of the members entitled to vote thereon. This means that if at least 95% of the members who are entitled to vote at the AGM agree to it, the meeting can be called with a shorter notice period.

In the case of any other general meeting, by the consent of members of the company;

• Holding, if the company has a share capital, a majority in number of members entitled to vote and who represent not less than 95% of such part of the paid-up share capital of the company as gives a right to vote at the meeting; or
• Having, if the company has no share capital, not less than 95% of the total voting power exercisable at that meeting.

Business to be Transacted

With reference to subsection (2) of section 101 of the Companies Act, 2013, there are two types of businesses transacted in a general meeting, which are –

• Ordinary business; and
• Special business.

Ordinary business are the businesses which are transacted at the annual general meeting of the company [Section 102(2)] viz.; –

• Consideration of financial statements and the report of Board of Directors and Auditors;
• Declaration of dividend;
• Appointment of a Director other than a retiring director;
• Appointment of an Auditor and fixing of the remuneration of the Auditor.

In the case of an Annual General Meeting (“AGM”), all business to be transacted except ordinary business are special business.

In the case of an Extraordinary General Meeting (“EGM”), every business transacted is special business.

Explanatory Statements to be Annexed to Notice

According to section 102 of the Companies Act, 2013, if any business is to be transacted at the company’s general meeting, then an ‘Explanatory Statement’ should be ANNEXED to the notice calling such general meeting.

According to section 102 ‘Explanatory Statement’ must specify: –

• The nature of concern or interest, financial or otherwise, if any, in respect of each item of –
  • Every director and the manager, if any;
  • Every other key managerial personnel; and
  • Relatives of the person mentioned in sub-clause (i) and (ii);
• Any other information and facts that may enable members to understand the meaning, scope, and implications of the items of business and to take decisions thereon.

The purpose of the explanatory statement is to provide shareholders with information about the interests of directors and other key personnel in the items of business that will be considered at the general meeting. It ensures that shareholders have all the information they need to make informed decisions about the items of business that will be considered at the general meeting. This is important because shareholders have a right to vote on these items of business, and they need to be able to make informed decisions in order to protect their interests.

Penalty for Contravention

According to subsection (5) of section 102 of the Companies Act, 2013,

If any default is made in complying with the provisions of Section 102, which requires a company to annex an explanatory statement to the notice of a general meeting, every promoter, director, manager, or other key managerial personnel of the company who is in default shall be liable to a penalty.

The penalty shall be either

• Fifty thousand rupees;
• Five times the amount of benefits accruing to the promoter, director, manager, or other key.

General Rules Regarding Notice

According to the provisions of the Companies Act, 2013, the following general rules are applicable to notices for general meetings:

Notice of every meeting should be given to every member of the company, legal representatives of any deceased member, the assignee of an insolvent member, auditors, and directors of the company. The notice must state the day, date, hour, and place of the meeting and contain a statement of the business to be transacted at the meeting. The notice can be given in writing or in electronic mode. The notice should be given at least 21 clear days before the date of the meeting. The notice period can be shortened if the members who have the right to attend and vote at the meeting agree. The notice should contain an explanatory statement if any special business is to be transacted at the meeting. Any default in complying with the notice requirements can lead to penalties for the company’s promoters, directors, managers, and other key managerial personnel.

Conclusion: Understanding and adhering to the provisions of the Companies Act, 2013 regarding calling a general meeting is crucial for the smooth functioning of a company. It ensures transparency, gives members sufficient notice, and provides them with all the necessary information to make informed decisions. Non-compliance with these provisions could lead to hefty penalties, further emphasizing their importance.