General Meetings of a Company

General meetings are crucial events in the governance of a company. They provide a platform for shareholders and management to discuss the company’s performance, future strategies, and other important matters.

In general, there are three kinds of meetings of the company:

1. Statutory meeting

2. Annual general meeting

3. Extraordinary general meeting

 

1. Statutory Meeting

Every public company limited by shares and limited by guarantee and having share capital must hold a general meeting of its members within a period of not less than one month and more than six months from the date of commencement of business. At least 21 days before the day of the meeting, the Board has to forward to every member a report known as the statutory report along with the notice of the meeting. This meeting is termed statutory meeting.

Purpose

The Statutory Meeting is a mandatory meeting that a newly incorporated company must hold shortly after its formation. Its purpose is to provide shareholders with an update on the company’s initial activities, financial status, and any matters related to its formation and early operations.

Key Features and Agenda

i. Presentation of a Report

The company’s directors present a detailed report to the shareholders. This report typically covers the progress made since incorporation, including the company’s financial position and preliminary activities.

ii. Share Capital and Share Issues

Discussion of the company’s share capital, including the number of shares issued and the status of any shares that have been allotted or are pending.

iii. Preliminary Expenses and Contracts

Review of any preliminary expenses incurred during the company’s formation and details of any contracts entered into before the statutory meeting.

iv. Financial Statements

Presentation of the company’s initial financial statements or balance sheet to provide a snapshot of its financial position.

v. Other Matters

Any other relevant issues that need to be addressed as part of the company’s early governance.

 

Timing

The Statutory Meeting must be held within a specific period after the company’s incorporation. For example, in some jurisdictions, it must occur within a certain number of months from the date of incorporation (e.g., within 18 months or within a set period as per local regulations).

 

Requirements

i. Legislative Requirement

In many jurisdictions, holding a Statutory Meeting is a legal requirement. Failure to hold this meeting or comply with the requirements can lead to penalties or legal issues for the company.

ii. Notice

Proper notice must be given to all shareholders before the meeting, detailing the time, place, and agenda.

iii. Quorum

A minimum number of shareholders or their representatives must be present for the meeting to proceed.

 

Importance

The Statutory Meeting ensures transparency and provides shareholders with an early opportunity to review the company’s initial performance and operations. It also helps in establishing a formal record of the company’s initial financial status and management.

 

2. Annual General Meeting

The first general meeting must be held within 18 months of the incorporation of the company. Thereafter, it must be held every year but the interval between two annual general meetings must not be more than 15 months. The registrar is empowered to extend the time by 3 months. The meeting will be held, generally, at the place where the registered office is situated. It must not be held on public holidays. It must be held during normal business hours.

Purpose

The purpose of an Annual General Meeting (AGM) is to review and approve the company’s financial performance and annual accounts, elect or re-elect directors, and appoint or reappoint auditors. It also provides shareholders with a platform to discuss significant corporate decisions and receive updates on the company’s progress and future plans.

Key Features and Agenda

i. Financial Statements Presentation

• Reports: Presentation of the company’s annual financial statements, including balance sheet, income statement, and cash flow statement.
• Management Report: Overview of the company’s performance and significant developments.

ii. Director Elections

• Nominations: Presentation of nominees for election or re-election to the board of directors.
• Voting: Shareholders vote on these nominations.

iii. Auditor Appointment

• Appointment: Presentation of the auditors’ report and proposal to appoint or reappoint the auditors.
• Approval: Vote on the auditors’ remuneration.

iv. Dividend Declaration

• Proposal: Proposal to declare dividends and discussion on the distribution amount.

v. Special Business

• Resolutions: Discussion and voting on special resolutions or other significant matters as specified in the agenda.
• Shareholder Questions: Opportunity for shareholders to ask questions or raise concerns.

vi. Minutes of Previous AGM

• Approval: Review and approval of the minutes from the previous AGM.

 

Timing

• Annual Requirement: The AGM is typically held once a year, usually within a certain period after the end of the company’s financial year (e.g., within six months to twelve months, depending on local regulations).
• Notice Period: Shareholders must be notified of the AGM well in advance, often 21 to 28 days before the meeting.

 

Requirements

i. Notice of Meeting

A formal notice must be sent to all shareholders, including the date, time, venue, and agenda of the meeting. The notice period is governed by local regulations and the company’s articles of association.

ii. Quorum

A minimum number of shareholders must be present for the meeting to proceed. The quorum requirement is defined by the company’s articles or local laws.

iii. Voting Procedures

Shareholders vote on various matters, either in person, by proxy, or electronically, depending on the company’s provisions. Decisions are typically made by a simple majority, though some resolutions may require a special majority.

iv. Minutes

Accurate minutes of the meeting must be recorded and maintained. These serve as an official record of the discussions and decisions made.

 

Importance

i. Transparency and Accountability

It provides a formal mechanism for disclosing the company’s financial performance and operational details. Holds the board of directors accountable for their management and decisions.

ii. Shareholder Engagement:

It offers shareholders a platform to participate in decision-making and influence key corporate actions. Shareholders can raise questions and express concerns about the company’s performance and strategy.

iii. Regulatory Compliance:

It ensures the company complies with legal and regulatory requirements regarding corporate governance and financial disclosure. It also helps avoid legal penalties and maintain good corporate governance practices.

iv. Strategic Direction:

It provides an opportunity to discuss and approve strategic decisions and corporate actions, guiding the company’s future direction.

3. Extraordinary general meeting

Other than the statutory meeting and the annual meeting, any general meeting of the company is called as an extraordinary general meeting. This meeting is called by the directors if there is any urgent business that has to be done before the next general meeting. Only special matters can be transacted in this type of meeting.

Extraordinary general meeting may also be called by the Board at the request of members (written requisition). This meeting must be called within 21 days of the deposit of the requisition to be held on a day not later than 45 days from such date. The notice should contain the matter to be transacted in the meeting.

In case the Board does not convene the meeting within 45 days of the requisition, the concerned members (requisitionists)  may hold the meeting within 3 months of the date of requisition. However, all the statutory formalities should be adhered to strictly in the same manner as that of the regular meetings. The National Company Law Tribunal may order a meeting of the company to be held either on its own accord or on the application of a director or a member entitled to note.

Purpose

An Extraordinary General Meeting (EGM) is held to address urgent or critical matters that arise unexpectedly and require immediate shareholder approval, such as significant business transactions, amendments to the company’s articles of association, or major corporate decisions. It allows the company to respond promptly to pressing issues outside the regular Annual General Meeting schedule.

Key Features and Agenda

i. Urgent or Specific Matters

Discuss and vote on issues such as mergers, acquisitions, significant capital expenditures, or amendments to the company’s articles of association.  Approval of major structural changes or strategic shifts.

ii. Detailed Agenda

Presentation of specific resolutions that require shareholder approval. It provides opportunity for shareholders to discuss the proposed resolutions and any relevant details.

iii. Voting

Voting on resolutions as per the agenda. Special resolutions often require a higher majority than ordinary resolutions.

 

Timing

• As Needed: EGMs are convened as necessary when specific issues arise that cannot wait until the next AGM.
• Notice Period: The meeting must be announced with proper notice, typically a few weeks in advance, depending on local regulations and the company’s articles of association.

 

Requirements

i. Notice of Meeting

Formal notice must be given to all shareholders, including the date, time, location, and agenda of the meeting. Notice period varies but is usually a minimum of 14 to 21 days.

ii. Quorum

A minimum number of shareholders must be present to hold the meeting, as specified in the company’s articles of association or local laws.

iii. Voting Procedures

Shareholders vote on resolutions, which may be done in person, by proxy, or electronically. Special resolutions often require a supermajority (e.g., 75%) to pass.

iv. Minutes

Accurate minutes of the meeting must be recorded and kept as an official record of the decisions made.

 

Importance

i. Timely Decisions

Allows the company to address important and urgent matters in a timely manner, ensuring swift decision-making.

ii. Flexibility

Provides flexibility to make significant changes or take actions that cannot wait until the next AGM.

iii. Shareholder Engagement

Engages shareholders in important decisions that may affect the company’s strategy, operations, or structure.

iv. Regulatory Compliance

Ensures that significant decisions are made in accordance with legal and regulatory requirements, maintaining good governance.

In summary, general meetings are crucial for maintaining effective corporate governance, engaging shareholders in decision-making, and ensuring transparency and accountability within a company. General meetings are an essential aspect of corporate governance, providing a platform for shareholder engagement and decision-making.