Compliances

Extraordinary General Meeting: Provisions under Companies Act, 2013

calendar15 Feb, 2022
timeReading Time: 3 Minutes
extraordinary general meeting

An extraordinary general meeting (aka EGM) refers to a shareholder meeting called other than a company’s scheduled AGM, i.e., Annual General Meeting. An EGM is also known as an emergency general meeting or special general meeting. EGMs are generally called when a company encounters critical matters that seek prompt resolution.

Significance of Extraordinary General Meeting for Incorporated Companies

In most scenarios, shareholders meet only during an AGM of a company, which generally takes place at a predetermined date and time. But, certain events might seek shareholders to come together on urgent notice to resolve critical matters seeking immediate attention.

The EGM is utilized to handle the urgent matters that come up between the annual meetings of shareholders.

An EGM usually takes place to address the following concerns related to:

  • The removal of an executive
  • A legal matter
  • Any matter that can’t wait until the next shareholders meeting

Another fundamental difference between an AGM & an EGM is that an AGM can only be conducted during business hours and working days only. Meanwhile, an EGM doesn’t have to adhere to such conditions.

Besides, unlike AGM, an extraordinary general meeting can only be called by the Board on the demand of shareholders or tribunal.

Provisions for Extraordinary General Meeting under Companies Act, 2013

Regulation 42 of table F states that all board meetings other than AGM shall be regarded as EGM. All business that is transacted at EGM shall be considered special.

Section 100 under Companies Act, 2013, read with rule 17 of The Companies (Management & Administration) Rules, 2014, sets out the provisions relating to the convening of EGM.

Is there is any set timeframe in which EGM should be conducted?

There is no standard time for convening an EGM, unlike AGM. But, some critical matters seek the immediate attention of the concerned shareholders. This is when the Extraordinary General meeting comes into play. It allows the company to transact business where the shareholders’ concerns are required under the Companies Act, 2013.

What matters are addressed in the Extraordinary General Meeting (EGM)?

As per the Companies Act, 2013, EGM can be called for resolving any subject matter, including legal disputes or internal management issues. However, in general, EGM is convened for addressing the following subject matters:

  • The removal of a company’s top officials, including executive and directors
  • Removal of Auditor
  • A legal dispute

Any matter seeking prompts the attention of the concerned shareholders and cannot be delayed any further or to the point of the next AGM.

What are the norms for prior notification to members for convening EGM?

The notification for EGM must be shared with the concerned shareholders before 21 days of such a meeting. However, companies have the right to convene EGM on an urgent basis. This is contrary to the conditions concerning Annual General Meeting.

The notification must reflect the subject matters seeking the participation of the concerned shareholders. As per the Companies Act, 2013[1], any matter transacted in such a meeting is deemed a special business.

Who has the authority to call an Extraordinary General meeting?

An Extraordinary General Meeting

An Extraordinary General Meeting (EGM) can be called by:- 1. Company or

2. requisition made by,—

  • Members have at least 1/10th of the company’s paid-up share capital.
  • Members have at least 1/10th of the total voting power in case of non-availability of share capital with the company.

The criteria for holding EGM by concerned members should be identical to that of the Board’s execution.

What about the reimbursement of expenses incurred by the concerned members in calling an EGM?

Any reasonable expenses incurred by the concerned members in calling an EGM under sub-section (4) shall be reimbursed to such members by the company and the amount so paid shall be subtracted from any fee or other remuneration as per Companies Act, 2013 payable to such of the director allegedly failed in calling the meeting.

What are the form/return filing provisions for holding EGM in a company?

As such, there are no requirements under the prevailing Act that mandate filing form or return to conduct EGM in the company. However, filing of E-form MGT-14 is mandatory if the company has passed special resolutions in any general meeting.

What type of penalties shall come to effect in case of non-compliance relating to EGM’s provisions?

In such a case, Defaulters are required to pay a fine amounting to Rs 10000 within the prescribed timeline. Further, in case of a continuing violation, per day fine of Rs 1000 shall come to effect. The maximum fine in this context has been capped at Rs 2, 00,000 and Rs 50,000 for company and person in default, respectively.

Conclusion

Extraordinary General Meeting gives leverage to incorporated companies to deal with or resolve critical issues in a time-bound manner. Unlike AGM, the companies have the privilege to conduct EGM on an urgent basis. This especially comes in handy in the event of a legal dispute or any crisis that seeks the immediate attention of the stakeholders.

Read our Article:Is it Mandatory to File ADT 1 for Auditor’s Appointment?

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