BL/U3 Topic 7 Essentials conditions for a Valid Meeting
1. Proper Authority:
The authority to call a general meeting is the board of directors of the company. The notice of the meeting should be issued under their authority, granted at a duly constituted meeting of the board or passing a resolution by circulation. A single director has no power to convene a meeting. The secretary of the company has no authority to call a general meeting unless the Board resolves and authorises him to do so.
In case the meeting of the Board of directors itself is unlawful e.g. where rightful directors are prevented from attending the directors’ meeting, the decision taken by the Board at such meeting to call the general meeting, shall also be unlawful.
Where, however, the meeting at which the directors decide to call a general meeting is not properly constituted (e.g. there is some defect in the appointment or qualification of the directors), and the Board acts bona fide, a general meeting called in pursuance of a resolution passed at such directors’ meeting, is not necessarily invalid.
However, under certain circumstances, the requisitionists, the Central Government or the Company Law Board (the Tribunal after its constitution) may call a general meeting in case of default by the directors.
Notice to whom? Notice of every general meeting should be given to the following persons:
(i) Every member of the company.
(ii) Every person entitled to a share in consequence of the death or insolvency of a member.
(iii) Auditor or auditors of the company [Sec. 172 (2)].
Deliberate omission to give notice to a single member may invalidate the meeting. However, an accidental omission to give notice to or non-receipt of it, by a member will not invalidate the meeting [Sec. 172 (3)].
Length of Notice:
A proper notice in writing to every member of the company is required by law for the holding of every valid meeting. Notice must be given even though a member has waived his right to have notice. It must disclose the purpose for which the meeting is called. It must be given at least 21 clear days before the date of the meeting.
In calculating 21 days, the date of receipt of notice and the date of the meeting should be excluded [Sec. 171 (1)]. Articles may provide for a notice longer than 21 days, but not shorter than 21 days. The notice shall be deemed to have been received by a member at the expiry of 48 hours from the time of posting [Sec. 53 (2) (b)].
A general meeting may be called at a shorter notice, if,
(i) In the case of an annual general meeting, all members entitled to vote thereat agree;
(ii) In the case of any other meeting (a) if the company has a share capital, members holding 95% of the paid-up share capital carrying voting rights exercisable at the meeting agree, (b) if the company does not have a share capital, members holding at least 95% of the total voting power exercisable at the meeting agree.
The consent of the members for shorter notice may be obtained either at the meeting or before the meeting. It may also be obtained after the meeting and the post consent will validate the resolution originally passed without sufficient notice. It is usual to obtain it by asking the shareholders to sign a form of consent.
Service of Notice:
Company may serve notice on the members either personally or by prepaid post or by advertisement in the newspaper. It must be properly addressed. Service of notice’ by advertisement shall be deemed to be complete the day when the advertisement appears in the newspaper on both resident and non-resident members.
Explanatory statement need not be advertised, but the fact that the same has been sent to the members through post shall be mentioned in the advertisement. In case of joint- holding of shares, notice to first named shareholder would be sufficient.
When the meeting is adjourned for 30 days or more and the new business is to be transacted at the adjourned meeting, a fresh notice has to be given.
Contents of the notice:
The notice must contain the following particulars:
(i) It should specify the name of the meeting, the place, day and hour of the meeting and the meeting to be valid must be held at the place and time specified. Annual General Meeting should be held on a working day during business hours. However, a meeting may continue beyond business hours. Extraordinary general meeting can be held on any day including a holiday and not necessarily during working hours.
(ii) It should also specify the nature of the business to be conducted at the meeting. Section 173 puts business into two categories:
(a) General business:
In case of annual general meeting, all business relating to : (i) the consideration of annual accounts, (ii) the declaration of a dividend, (iii) the appointment of directors in place of those retiring, and (iv) the appointment of, and the fixing of remuneration of the auditors, are considered as general business.
(b) Special business:
Any other business at an annual general meeting and all businesses in case of any other meeting are regarded as special business. If special business is to be transacted at a general meeting, an ‘explanatory statement’ giving all the material facts of the item of special business including the particulars of interest, if any, of every director or other managerial personnel, must be annexed to the notice.
Agenda gives guidance and information as to the business to be discussed and transacted in the meeting. It sets out the chronological sequence in which the various items of business shall be taken up in the meeting for discussion. The sequence should not be changed unless agreed to by the members present. Routine items should be put first and debatable items later. Similar items should be placed closer to each other.
Agenda is prepared by the Secretary in consultation with the Chairman or the Managing Director. Agenda must be clear and complete. A company may be restrained from transacting that business which is not mentioned in the agenda.
3. Place of the Meeting:
Annual General Meeting. The annual general meeting is to be held by a public company at its registered office or at some other place in the same city, town or village where the registered office of the company is situated. However, the Central Government has the power to grant exemption to any company from this provision.
A private company can hold its annual general meeting at any other place if:
(i) It has fixed the place of the meeting by the articles; or
(ii) It has fixed the place of the meeting by a resolution agreed by all the members.
A company registered under section 25 of the Companies Act can hold the annual general meeting at any place. In case of a Government company, meeting can be held at any other place with the approval of the Ministry of Corporate Affairs.
Other General Meetings:
There is no such provision in the Companies Act which requires that the general meetings of the company other than the annual general meeting must be held at some particular place. It, therefore, follows that the other general meetings can be held, subject to any specific provision in the articles at any other place. However, the directors must act reasonably in fixing the time and place of the meeting so that members get full opportunity in exercising their voting rights.
Minimum number of members required to constitute a valid meeting and to transact business therein is called ‘quorum’. No meeting can be valid without quorum. Any resolution passed at a meeting without quorum shall be invalid. Quorum is to be fixed by the Articles of Association. But unless the articles provide for a large number, 5 persons personally present in the case of a public company and 2 members personally present in the case of private company shall be the quorum for a meeting of a company. [Section 174 (2)]. Thus, articles cannot provide a smaller quorum than what has been provided in section 174 (1). Besides that, for the purpose of quorum, only members present in person and not by proxy are counted.
If within half an hour from the time appointed for holding a meeting of the company, a quorum is not present, the meeting, if called on the requisition of members, shall stand dissolved [Sec. 174 (3)]. In any other case, the meeting shall stand adjourned to the same day in the next week, at the same time and place, or to such other day and at such other time and place as the Board may determine [Sec. 174 (4)].
If at the adjourned meeting also a quorum is not present within half an hour from the time appointed for holding the meeting, the members present shall constitute quorum [Sec. 174 (5)]. However, the above provisions shall not be applicable if the articles of the company otherwise provide [Sec. 174 (2)]. But this does not mean that the number of members personally attending can be less than two. A single person cannot constitute a valid meeting except in certain cases only.
Can a single Member Constitute a Valid Meeting?
Ordinarily, a single member present cannot form a quorum, as a single member cannot constitute a meeting. This is because meeting prima facie means coming together of two or more than two persons. The Companies Act also uses the expression “members” which shows that more than one member is expected to be present.