Companies Act of 2013 specifically provides for the incorporation of entities established for charitable or not-for-profit purposes under Section 8. For a company to be incorporated as a Section 8 company, it must have been established for philanthropic objects like “promotion of commerce, art, research, social welfare, religion, science, sports, education,charity, protection of environment or any other such object”. To operate as a Section 8 company, it must obtain the requisite licence from the central government and such company shall be registered as a limited company. Once a company has been incorporated as a Section 8 company, it is prohibited from paying remuneration to members, promoters, directors or founders and dividends to its members. The income or profits generated by a Section 8 company can only be used to advance the charitable objects for which the company was established. In this blog, we will discuss Board Meetings and General Meetings in a Section 8 Company.
Companies have a legal identity which is separate and distinct from their members. Since it is an artificial person, it cannot act independently and take decisions or express its will except through the resolutions passed at meetings. The main object of conducting meetings is to ensure that a company provides reasonable opportunities for members to participate in the meetings and take necessary decisions as per prescribed norms. As per the Companies Act of 2013, every company is required to hold board meetings and general meetings, and extraordinary general meetings in accordance with the provisions of the Act.
Board Meetings – Board Meetings and General Meetings
The meeting of the board of directors of a company which the directors convene is referred to as a board meeting. As per the Companies Act, every company is required to hold its first board meeting within 30 days from the incorporation of the company. The Companies Act requires every company to conduct at least four board meetings every financial year and the gap between two consecutive board meetings must be at least 120 days.
The board meetings should always have a quorum of at least two directors or one third of the total strength, whichever is higher. If the board meeting is not convened due to the lack of quorum, it shall be held at the same time and same venue when such quorum is available. Section 173 of the Companies Act deals with board meetings, and Section 174 of the Companies Act deals with the quorum of directors for the board meeting.
Notice of board meetings must be sent to the directors seven days from when the board meeting is to be held. If board meetings are held without sending a notice to all the directors, such board meetings held shall be invalid, and any resolution passed in such board meetings shall be inoperative. Directors are prohibited from appointing proxies to attend on their behalf and cast their votes in such board meetings. Board meetings are convened to discuss matters about the issue of shares, the appointment of staff, calls on shares, and review the progress made by the company, amongst other things.
Annual General Meetings – Board Meetings and General Meetings
Annual general meetings are the meetings of the shareholders, members, directors, and company executives for conducting ordinary business. As the name suggests, annual general body meetings are held once a year, and it is mandatory to have such annual general meeting in a financial year. Every public or private company, limited by guarantee of shares, or an unlimited company or company with or without share capital are required to hold an annual general meeting every year. A company’s annual report must be presented at the annual general meeting to all the attendees.
The first annual general meeting of a company is required to be conducted within 18 months from the date of the company’s incorporation. It is mandated that the first annual general meeting must be held within nine months from the end of the financial year. The following annual general meetings must be held within six months from the end financial year or before the last day of the calendar year, whichever is earlier. The gap between two consecutive annual general meetings must be at most 15 months.
Before an annual general meeting is held, every member, trustee, and the auditor shall be sent a notice of at least 21 days before the date of such meeting, along with the company’s annual report. The date on which such notice is sent and the date on which such annual general meeting is to be held shall be excluded from the 21 day period mentioned above.
The quorum for annual general meetings differs for private and public companies. For a private company, at least two directors must be present. The quorum must be at least five members for a public company with at least 1000 members. For a public company with 1001- 5000 members, the quorum shall be at least fifteen members. For a public company with more than 5000 members, the quorum for the annual general meeting shall be at least thirty members. If the quorum is not present half an hour before the appointed time for holding the annual general meeting, the meeting shall be adjourned to the next week on the same day, same place, or same time or to any other time day and place as decided by the board of directors.
If a shareholder is not able to attend the annual general meeting, she can send a proxy to participate in the meeting on her behalf. The annual general meeting is often held to get the shareholders’ approval on matters like, among other things, the appointment of auditors or directors of a company or for the approval of an annual report or to inform them about the activities or progress made by the company.
Extraordinary General Meetings – Board Meetings and General Meetings
The directors of a company convene extraordinary general meetings to deal with matters relating to any special business. Every general meeting of the company other than the annual general meeting or a statutory meeting is referred to as the extraordinary general meeting. An extraordinary general meeting can be conducted by giving a notice of 14 days if there is an urgent matter to be discussed and the directors of the company cannot postpone discussing the matter until the next annual general meeting. There is no requirement for a time gap between two consecutive extraordinary general meetings.
An extraordinary general meeting can be conducted by the board of directors on its own motion, on the requisition of members in accordance with the Companies Act or by the tribunal or company law board. For the extraordinary general meeting to be convened on the requisition of members, such requisition must be signed by members holding at least 1/10 of the paid-up share capital. The requisition for the extraordinary general meeting is required to be submitted 21 days from the date of the extraordinary general meeting. Suppose the company needs to call such extraordinary general meeting within 45 days of receiving such requisition. In that case, the members have the power to call a meeting within three months from when the requisition was submitted to the company and a period of 45 days from such submission.
The extraordinary general meeting is usually held to inform the members about important matters connected with the company. The notice of the extraordinary general meeting is required to be attached with an explanatory statement which shall contain details about the nature of financial interest or concern or any other such interest, any additional information which may enable the members to understand the scope, meaning and implications of the business decisions to be taken.
Board Meetings and General Meetings in a Section 8 Company
The Companies Act of 2013 provides many privileges, benefits, exemptions, and concessions to charitable organisations incorporated as Section 8 companies. These exemptions extend to the requirements pertaining to the appointment of directors and company secretaries, audit remuneration committee period of notice for meetings, disclosure of directors’ interest, holding of Board meetings and general meetings. Discussed below are the exemptions granted to Section 8 companies concerning board meetings and general meetings of the company.
General Meeting of a Section 8 Company
Section 101 of the Companies Act requires every company to send a notice to call for a general meeting to its members, trustees, and auditors at least 21 days before such an annual general meeting is to be held. However, Section 8 companies are only required to send a notice of at least 14 days from the date of the annual general meeting to the members, trustees, and auditors. The directors have the freedom to decide the date, venue, and time of the annual general meeting. The directors can hold the annual general meeting at any venue other than the company’s registered office. However, the board of directors are required to decide the date, venue, and time of such meeting beforehand as per the directions, if any, as mandated by the company in a general meeting. A copy of the company’s financial statements must be sent to the stakeholders 14 days before the date of such an annual general meeting.
A Section 8 company is not required to record minutes of the annual general meeting unless the company’s articles of association require such recording. If the articles of association of the company require the recording of meetings, then the minutes may be recorded after the conclusion of the meeting within 30 days.
As per Section 108 of the Companies Act of 2013 and Rule 20 of the Companies (Management and Administration) Rules of 2014, a Section 8 company with 1000 members or more is required to provide e-voting facilities at the general meeting to its members.
As per Rule 19 of the Companies (Management and Administration) Rules of 2014, a member of a company registered as a Section 8 company is prohibited from appointing another person as a proxy to attend the general meeting unless such person is also a member of the Section 8 company.
Board Meetings of a Section 8 Company
Section 173 of the Companies Act 2013 requires every company to conduct at least four board meetings in every financial year, and the gap between two consecutive board meetings must not be less than 120 days. However, a Section 8 company is exempted from this requirement and is only required to conduct at least one meeting within every six months. Moreover, a Section 8 company is only required to hold its first board meeting within six months from the date of incorporation of the company as opposed to 30 days which applies to other types of companies.
Following the exemption provided under section 174 of the Companies Act, the quorum required to hold board meetings for Section 8 companies is 25 % of the total strength or eight directors, whichever is less. However, the quorum must be at least two members.
A Section 8 company is not required to record minutes of the meeting, or the resolutions passed unless the company’s articles of association need such recording. If the articles of association of the company require the recording of meetings, then the minutes may be recorded after the conclusion of the meeting within 30 days.
The board of directors of a Section 8 company are not required to pass resolutions in board meetings to borrow money, invest funds provide guarantees, grant security for a loan, or provide loans. The same can be passed by circulation.
A Section 8 company is established to advance social welfare and other charitable and not-for-profit purposes. The central government grants many exemptions, benefits, privileges, and concessions to a Section 8 company to encourage entrepreneurs to establish organisations that work for public benefit. Since the company is an artificial person, it cannot act independently and take decisions except through the resolutions passed at meetings. Among the many exemptions granted to a Section 8 company, it is exempted from specific requirements about board meetings and general meetings, among other things, to reduce the compliances to be followed by such companies so that they can work towards their charitable goals efficaciously.
Read Our Article: Board Meeting – Meaning, Quorum, Notice And Requirements