Jul 22, 2020 10:30 UTC
Jul 22, 2020 at 16:47 UTC
What is the Procedure to Call Directors and Shareholders Meeting?
Chapter XII of the Companies Act of 2013 talks about the Meetings of the Board and its Powers. Sections 173 to 174 lays down the procedure to call such a meeting. And sections 96 to 103 talks about the shareholders meeting. The procedure to call a meeting is as follows:
When to organize?
As mentioned in Section 173 every company shall organize and hold the director’s meeting within 30 days of its date of incorporation. Every year a minimum of 4 meetings must be held but the gap between the two shall not exceed 120 days. The Central government through a notification can exempt any class or description of companies from the aforementioned provision. Also, the Central Government can make modifications, apply conditions or exceptions for certain companies. Whereas, in the case of One Person Company, Small Company and Dormant Company, the conduction of at least one meeting of the Board of Directors in each half of a calendar year is sufficient. The gap between these two meetings must not be less than ninety days. One Person Company with a single director on its Board of Directors is exempt from the aforementioned provision.
According to the notification dated 5th June 2015, Companies whose objective is to promote fields of arts, commerce, science, research, education, sports, charity, social welfare, religion, environment protection, or other similar objectives, also known as Section 8 companies shall hold at least one meeting within every six-calendar month. Further according to a notification dated 4th January 2017, Specified IFSC public company shall hold the first meeting of the Board of Directors within sixty days of its incorporation. And at least one such meeting shall take place in each half of a calendar year. The notification also states that a Specified IFSC private company must hold the first meeting within sixty days of its incorporation and thereafter hold at least one meeting of the Board of Directors in each half of a calendar year. In fact, according to a notification dated 13th June 2017, in case of a Private Company, a One Person Company, small company, dormant company and a private company (if it is a start-up) shall be deemed to have complied with the provisions of this section even if one meeting of the Board of Directors has been conducted in each half of a calendar year and the gap between the two meetings is not less than ninety days.
In case of a Shareholder’s meeting or the Annual General Meeting, as specified in Section 96, every company other than a One Person Company must hold a General Meeting every year in addition to any other meetings. Notices must be served for calling the same. A gap of not more than 15 months shall elapse between the date of one annual general meeting of a company and that of the next. First, such meetings shall be held within nine months from the date of closing of the first financial year and in any other case, within six months, from the date of closing of the financial year. In case, the company holds its first annual general meeting as aforesaid, it shall not be necessary for it to hold any annual general meeting in the year of its incorporation. The registrar has the liberty to extend the period by 3 months to extend the time of any general meeting other than the first annual general meeting.
Every Annual General Meeting (AGM) shall be called during business hours between 9 a.m. and 6 p.m. on any day that is not a National Holiday. Such a meeting shall be held either at the registered office of the company or another place but within the city, town, or village in which the registered office of the company is situated. In the case of an unlisted company, the meeting can take place anywhere in India subject to the prior consent of members either in writing or through electronic means. In the case of section 8 companies, the time, date, and place of each AGM shall be decided beforehand by the board of directors. Whereas in a Government Company, such meetings shall be held at the registered office or at such other place within the city, town or village in which the registered office of the company is situated or such other place as the Central Government may approve.
According to a recent notification dated 20th April 2020, the companies whose financial year (other than first financial year) ended on 31st December 2019, are allowed to hold their AGM for such financial year within nine months from the closure of the financial year (i.e. by 30th September 2020), the same shall not be viewed as a violation.
According to sections 97 and 98, even a tribunal can call for an AGM.
Medium of Meeting
The directors participating in the meeting can attend the same in two ways. Either by physical presence or by video conferencing including other audio-visual means. Such a medium should be capable of recording and storing the proceedings along with date and time. But in case of special matters, the Central Government by publishing a notification specifies the matters not to be dealt in such a meeting. According to circular dated 5th May 2020, even an Annual General Meeting can be convened through video conferencing or other electronic means.
Provided further that where there is quorum in a meeting through the physical presence of directors, any other director may participate through video conferencing or other audiovisual means in such meetings on any matter specified under the first proviso. According to Section 174, the quorum for a meeting of the Board of Directors of a company shall be 1one third of its total strength or two directors, whichever is higher. Whereas, in the case of section 8 company the quorum shall be eight members or 25% of its total strength, whichever is less. The quorum shall not be less than two members. In case the number of continuing directors is reduced below the quorum, the directors can call a general meeting for this specific purpose. In case the number of interested directors exceeds or becomes equal to 2/3rd of the total strength of the board of directors the number of directors who are not interested directors and present at the meeting, being not less than two, shall be the quorum during such time. But in the case of a Specified IFSC Public Company, the interested director may participate in such a meeting provided the disclosure of his interest is made by the concerned director either prior or at the meeting. Further, in the case of Private Company, the interested director may also be counted towards quorum in such a meeting after disclosure of his interest under section 184.
In case the meeting could not be held because of a quorum unless the articles of association provide otherwise, such a meeting shall be held next week at the same time and place. In case it happens to be a national holiday, then it shall be held on a succeeding day.
In a shareholders meeting in case of a public company, the quorum must be five members personally present if the number of members as on the date of the meeting is not more than one thousand, fifteen members personally present if the number of members as on the date of the meeting is more than one thousand but up to five thousand and thirty members personally present if the number of members as on the date of the meeting exceeds five thousand.
Whereas in the case of a private company, two members personally present, shall be the quorum for a meeting of the company. If the quorum is not present within half-an-hour from the time appointed for holding a meeting of the company, then the meeting shall stand adjourned to the same day in the next week at the same time and place, or to such other date and such other time and place as the Board may determine. In case it is called by requisitionists under section 100, shall stand canceled:
In situations of an adjourned meeting or where there is a change of day, time or place of meeting, the company must give not less than three days’ notice to the members either individually or by publishing an advertisement in the newspapers (one in English and one in vernacular language) which is in circulation at the place where the registered office of the company is situated. If at the adjourned meeting also, a quorum is not present within half-an-hour from the time appointed for holding a meeting, the members present shall be the quorum.
Circulation of Notice
A notice must be issued and circulated amongst board directors to intimate them regarding the happening of the meeting. Such notice must be sent before 7 days of the commission of such a meeting to every director at his address registered with the company. It shall be sent by hand delivery or by post or by electronic means.
In case of emergency, a board meeting can also be called at a shorter notice i.e. less than 7 days, the condition precedent being the presence of at least one independent director (if any) at the meeting. In case of the absence of independent directors from such a meeting, all the decisions taken during the concerned meeting shall be circulated to all the directors. These decisions are finalized only after obtaining ratification of at least one independent director, (if any).
In case of a shareholders meeting, it may be called by giving not less than twenty-one days‘ notice either in writing or through electronic mode in such manner as may be prescribed. The meeting can also be called on shorter notice in case it is consented by not less than ninety-five percent. The members entitled to vote thereat or in any other general meeting, by members of the company, holding, if the company has a share capital, the majority in several members entitled to vote and who represent not less than ninety-five percent, 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 ninety-five percent, of the total voting power exercisable at that meeting. Every such notice shall specify the place, date, day, and the hour of the meeting and must contain a statement of the business to be transacted. This notice must be served to every member of the company, legal representative of any deceased member or the assignee of an insolvent member, the auditor or auditors, and every director of the company.
Failure to serve Notice
In case the officer of the company who is allotted with the duty to serve notice for a board meeting section fails to do so shall be liable to a penalty of twenty-five thousand rupees.
In case of a shareholder meeting any accidental omission to give notice to, or the non-receipt of such notice by, any member or other person who is entitled to such notice for any meeting shall not invalidate the proceedings of the same.
Recently, the General Circular No. 11 /2020, dated 24th March 2020 given the COVID-19 outbreak extended the interval period of 120 days as specified in section 173 by 60 more days, making it a total of 180 days till next two quarters i.e., till 30th September. It further stated Independent Directors must hold at least one meeting without the attendance of Non- independent directors and members of management. For the financial year 2019-20, the Independent Directors who have not been able to hold such a meeting shall not be liable for the violation of the same. However, they may share their views amongst themselves through telephone or e-mail or any other mode of communication, if they deem it to be necessary. Newly incorporated companies are required to file a declaration for Commencement of Business within 180 days of incorporation under section 10A of the CA-13. An additional period of 180 more days is allowed for this compliance.
 Companies Act of 2013, Ministry of Corporate Affairs, Source Link.
 Notification dated 5th June, 2015, Source Link.
 Notification dated 4th January 2017, Source Link.
 Notification dated 13th June, 2017, Source Link.