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Priyanka Bajpayee
| Updated: 23 Mar, 2020 | Category: Annual Compliances, Compliances

Shareholders Meeting is Crucial to Your Business. Learn Why!

Shareholders Meeting

In every Company decision making is done either by the shareholder or by the director. The meeting where the decision making is done by the shareholders is termed as Shareholder Meeting or General Meeting. However, where the decision is taken by the directors is termed as Board Meeting. For the approval of certain business items after availing company registration, a company conducts a shareholder meeting.

In this topic, we will discuss what is Shareholders Meeting? Further, we will also discuss what compliances are required to be followed before and at the time of conducting the shareholders Meeting.

What is the Shareholders Meeting?

A company is a separate legal entity, and the shareholders are the persons who constitute the company. A company cannot decide on its own as it is an artificial person. Hence, the company communicates its decision passed at the meeting through its members.

The primary purpose of a Shareholder meeting is to ensure that a company gives a reasonable and fair opportunity to those entitled to participate in the meeting. The decisions taken by the company relates to the management of the affairs of the company as per the prescribed procedures.

The shareholders[1] play a very important role in the affairs of the company. Shareholder meetings also termed as Annual general meetings or Extraordinary general meetings. For the approval of certain business transactions, the company conducts the Shareholder general meeting.

Requisites of Shareholding Meeting

The requisites of the Shareholders Meeting are-

  • There must be a proper authority to call a Shareholders Meeting.
  • Proper notice must be served along with the explanatory statement.
  • The proper quorum must be present in the Shareholder Meeting.
  • Chairman must preside the meeting and will look after the matters to be discussed in the meeting.
  • Proper Proxy.
  • The shareholder’s meeting shall be conducted properly by the Board.

Read our article:Threshold Limit Under Companies Act, 2013

Types of Shareholders Meeting

There are 2 kinds of shareholder meetings.

Annual General Meeting

Section 96 of the Companies Act 2013 deals in the Annual General Meeting. The Annual General Meeting applies to all companies and is held to approve the ordinary business and special business. Any other shareholder meeting apart from the Annual General Meeting is termed as an extraordinary general meeting).

Ordinary business – At an Annual General Meeting, the following businesses transacted are termed as an ordinary business:

  • The consideration and adoption of financial statements and the Board of Directors and auditor’s report.
  • The declaration of any dividend.
  • The appointment of directors in place of the retiring director /removal of a director.
  • The appointment of the retiring auditors.

The above-mentioned business and related business are approved bypassing the Ordinary resolution.

Special Business – Apart from ordinary business matters, certain matters require Special Resolution. Below mentioned are some of the matters requiring Special Resolution-

  • Alteration of AOA
  • Alteration of MOA
  • For issuing the GDR in any Foreign Country
  • Buy-Back of shares
  • Reduction of Share Capital
  • Appointment of more than 15 directors in the company
  • To issue debentures convertible into shares, etc.

Frequency of Annual General Meeting

  • Every company shall conduct an AGM once in every year.
  • 1st AGM shall be held within 9 months from the closing of 1st financial year
  • The Subsequent meeting should be held within 6 months from the closing of the financial year.
Note: The gap between the 2 Annual general meetings should not exceed 15 months.

Extraordinary General Meeting

The extraordinary general meeting is defined as a shareholders meeting which is not an Annual General Meeting. An Extraordinary general meeting is conducted by the company to discuss some urgent business issues.

Requisites of Extra-Ordinary General Meeting

  • The meeting shall be called to discuss some urgent issues.
  • The clear notice of 21 days must be given to the members.
  • The proper quorum must be present.

Who can call the Shareholders Meeting?

Shareholders meeting can either called by the Board of Directors or by the Members-

By the Board – At common law, the Board of the director can call the shareholders meeting. However, the individual director has not that power to call a shareholder meeting.

Note: The notice will not be considered valid if it is not sanctioned by the Board of Directors.

By the Members – In case of Extra-ordinary General Meeting, the members who fulfil the requirement of Section 100(Extraordinary general meeting) can call the EGM.

Note: In case of failure of the Board of Directors to call the EGM within the time limit as prescribed, the members of the company can call an EGM.

Methods of voting in the Shareholders Meeting

Various methods of voting in the Shareholders Meeting are-

  • By a show of hands
  • By acclamation (By beating bench)
  • By division
  • By Postal Ballot
  • By Poll
  • By voice vote
  • By ballot (i.e. giving the vote by writing in the paper).

Takeaway

In India, the Shareholders meeting is obligatory compliance for the companies. The only objective of conducting a Shareholders meeting is to provide the shareholders with an opportunity to express and vote on the matters affecting the company. The Board of Directors can call the shareholders meeting at any time. All requisites shall be duly complied with before conducting the shareholders meeting.

For more details, contact Corpbiz, our expert will guide you in executing the compliances that are mandatory required to be done by the company.

Read our article:Board Meeting – Meaning, Quorum, Notice and Requirements

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Priyanka Bajpayee

Priyanka Bajpayee has done Masters in International Business Law and well versed in content writing covering the area of legal and finance. Also, she has practical experience of almost 1.5 years in Legal compliance and secretarial work.

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