Extraordinary General Meeting
Extraordinary General Meeting
Extraordinary General Meeting
Definition
All general meetings of a company, other than the AGM and the statutory meeting, shall be
called extra general meetings
Notice
The notice of EGM is required to be sent to the member's at least 21 days before the date of
the meeting similarly as of the notice of AGM.
However, in case of unlisted company if all the members entitled to attend and vote at any
EGM su agree, a meeting may be held at a shorter notice.
BUSINESS TO BE TRANSACTED
All business transacted at such meeting is called special business Every item on the agenda
must be accompanied by the 'Explanatory Statement' in terms of Section 102
The requisition shall state the objects of the meeting, be signed by the requisitionists and
deposited at the registered office of the company
3. By requisitionists themselves
If the board does not proceed within 21 days from the date of the requisition being so
deposited to cause a meeting to be called, the requisitionists, may themselves call the
meeting, but in either case any meeting so called shall be held within 90 days from the date of
the deposit of the requisition.
Any meeting called by the requisitionists shall be called in the same manner, as nearly as
possible, as that in which meetings are to be called by board.
Requirement
Every public company having a share capital shall hold a general meeting of the members of
the company, to be called the "statutory meeting".
In case first annual general meeting (AGM) of a company is decided to be held earlier, no
statutory meeting shall be required.
The requirement shall not apply to a public company which converts itself from a private
company after one year of incorporation.
Time limit: The statutory meeting shall be held within earlier of:
•180 days from commencement of business; or
•9 months from the date of its incorporation.
Notice:
The notice of a statutory meeting shall be sent to the members at least 21 days before the
meeting along with a copy of statutory report.
Example 01: A public company was incorporated on 3 January 2021 and was allowed to
commence business from 25 April 2021.
It should hold statutory meeting latest by 2 October 2021 being earlier of:
Example 02: A public company was incorporated on 7 January 2021 and was allowed to
commence business from 22 February 2021.
It should hold statutory meeting latest by 20 August 2021 being earlier of:
22 February 2021 + 180 days----- 20 August 2021
7 January 2021 + 9 months ------6 October 2021.
d) the names, addresses and occupations of the directors, chief executive, secretary, auditors
and legal advisers of the company and the changes, if any, since incorporation;
e) the particulars of any contract to modified for which approval of meeting is required,
together with proposed modification;
f) the extent to which underwriting contracts have been carried out together with the reasons
for their not having been carried out; and
g) any commission or brokerage the particulars of any contract to modified for which
approval of meeting is required, together with proposed modification;
The statutory report shall also contain a brief account of the state of the company's affairs
since its incorporation and the business plan, Including any change or proposed change
affecting the interest of shareholders and business prospects of the company.
Certification / Authentication
The statutory report shall be certified by the chief executive and at least one director of the
company, and in case of a listed company also by the chief financial officer.
Discussion at meeting
The members of the company present at the meeting shall be at liberty to discuss any matter
relating to the formation of the company or arising out of the statutory report, whether
previous notice has been given or not, but no resolution of which notice has not been given in
accordance with the articles may be passed.
Adjournment
The meeting may adjourn from time to time, and at any adjourned meeting any resolution of
which notic has been given in accordance with the articles, either before or after the original
meeting, may be passed, and an adjourned meeting shall have the same powers as an original
meeting
Powers, duties, and kinds of directors
Introduction
The well-being of a company lies in the hands of the directors, who are also accountable for
the firm’s and the shareholders’ interests. Directors are fundamentally fiduciary agents who
owe responsibilities to the company. Directors are hired by the company’s shareholders to
administer the company’s operations in the best interests of the shareholders. Furthermore, no
company can achieve success without having excellent and honest directors, therefore
corporate success can only be reached if the company’s directors fulfill their obligations and
completely enforce the director’s duties. As a result, directors play a critical role in every
corporate governance mechanism. The general obligations of the director are founded on
certain common law norms and equitable principles.
Modern shareholders are more conscious of their obligations than ever before and they wield
more influence than anybody can imagine. With the arrival of the Shareholders Revolution,
there has been a democracy in business matters in which the shareholders are the supreme
power that selects its cabinet in the form of directors to run the show and create money for
them. The directors are given the appropriate authority, but also additional responsibilities,
during the process. The Companies Act of 2013 has guaranteed that this balance of power and
duties is preserved to the greatest degree possible for the benefit of the shareholders and to
ensure corporate governance. It employs both regulatory and punitive measures, including
rigorous judicial measures, to guarantee that regulations are effectively obeyed and to avoid
any mishaps in corporate governance, as well as to protect the organization’s legal integrity.
Corporate governance
Corporate governance refers to a collection of principles, ethics, values, morals, rules, laws,
and processes, among other things. Corporate governance provides a structure in which
directors of a company are charged with the tasks and responsibilities pertaining to the
management of the company’s activities.
The term “governance” denotes “control,” as in “controlling a company, an institution, etc.,”
or “corporate governance,” as in “governing or controlling corporate entities,” such as ethics,
values, principles, and morals. To have excellent corporate governance, the director must
satisfactorily perform his/her duties towards the company’s owners (shareholders), creditors,
staff, clients, government, and society at large. Corporate governance aids in the
establishment of a system in which a director is entrusted with the tasks and obligations of the
company’s operations. For successful corporate governance, its rules must be such that the
company’s directors do not abuse their authority, but rather understand their obligations and
responsibilities towards the company and act in the best interests of the firm in the largest
context.
The idea of ‘corporate governance’ is not a goal in itself; it is only the beginning of a
company’s growth for long-term profitability.
Directors and the board of directors in a company
The term “director” is defined under Section 2 (34) of the Companies Act 2013 as “a director
appointed to the Board of a company,” where “Board of Directors” or “Board” in relation to a
Company refers to the collective body of the firm’s directors. According to Chapter
XI, Section 149 of the Companies Act 2013, every company must have a Board of directors,
the composition of which should be as follows:
1. Public Company: A minimum of three and a maximum of fifteen directors should be
appointed. Also, at least one-third of the directors must be independent.
2. Private Company: Minimum of two and a maximum of fifteen directors are required
for a private company.
3. One Person Company (OPC): A minimum of one director must be appointed.
In every Company format, a maximum of 15 directors can be appointed (OPC, Public,
Private). By passing a special resolution in the company, the number of directors can be
increased above 15. Out of all the appointed directors, one must have resided for more than
182 days in India in the preceding calendar year. Also, at least one of the directors among all
the directors should be a woman director.
The Companies Act of 2013 recognizes the concept of an independent director, which was
previously solely part of the listing agreement. It refers to a director who is not a full-time
director, the Managing director, or a nominee director and meets the qualifications outlined in
Section 149 of the Act.
According to sections 266A and 266B of the Companies Act of 1956, a Director
Identification Number (DIN) is a one-of-a-kind identification number assigned to existing
and/or future directors of any incorporated company. According to the requirements of the
Companies Act, every director shall be selected by the company in general meetings,
provided they have been assigned the Director Identification Number (DIN) and have
submitted a statement that he/she is not disqualified to become a director.
The Board of Directors appoints an additional director to serve until the next general meeting
using the Board’s inherent power. The Board of Directors may designate an alternate director
to function as a director in absence for a term of not less than three months and not more than
the allowed period for the director who is being replaced.
The Board may appoint as a director any individual nominated by any institution in
accordance with the terms of any extant legislation or other government regulation or
shareholdings, such directors are known as nominated directors.
As per Principle of Proportional, representation the articles of a company may allow for the
appointment of not less than two-thirds of the total number of directors of a company, and
such appointments may be made once every three years and casual vacancies of such
directors shall be addressed as specified in sub-section (4) of Section 161.
Independent director
According to Section 149(6), an independent director with reference to a company is one who
is not a managing director, whole-time director, or nominee director. Companies that must
appoint an independent director are mentioned in Rule 4 of the Companies (Appointment and
Qualification of Directors) Rules, 2014. The following companies must nominate at least two
independent directors:
Public Companies with Paid-up Share Capital of Rs.10 Crores or more;
Public Companies with a turnover of Rs.100 crores or more;
Public companies having total outstanding loans, debentures and deposits of Rs. 50
crores or more.
Individuals qualified for independent directorship:
1. Who, in the board’s viewpoint, is a person of integrity and possesses appropriate
expertise and experience;
2. 1. Who is or was a promoter of the Company or any of its Holding, Subsidiary, or
Associate Companies (HSA Companies);
2. Who is not connected to the company’s promoters or directors, or its HSA companies;
3. Who has or has not had a Pecuniary (Money) relationship with the company and its
HSA company, or their promoters or directors, during the two most immediately
preceding fiscal years or the current fiscal year;
4. None of whose relatives has or has had a financial relationship with the company, its
HSA company, or their Promoters, directors, amounting to 2% or more of the firm’s
gross turnover or total income, or fifty lakhs, or such greater amount as may be
prescribed, whichever is less, during the two most recent preceding fiscal years or
during the current fiscal year.
5. Who, neither he nor any of his relatives-
1. Holds or has held the post of Key Managerial Personnel (KMP) or has worked for the
Company or its HSA companies in any of the three fiscal years;
2. He or any of his relatives has an employee or owner or a partner in any of the three
fiscal years immediately preceding the fiscal year in which he is suggested to be
hired, as an auditor in the firm, Company Secretary in practice, Cost Auditor, Legal
Consultant of the company or its HSA companies;
3. Holds along with his relatives 2 per cent or more of the Company’s total voting
power;
4. He or she has not been the Chief Executive or director of any Non-Profit Organization
that receives 25% of its revenue from the Company or HSA Companies or its
Promoters or directors, or that NGO owns 2% or more of the Company’s total voting
power.
F. Who holds any other qualifications that may be needed.
Women director
According to Section 149 (1) (a) second proviso, certain kinds of corporations must have at
least one female director on their board. Such companies include any listed company and any
public company, having:
1. Paid-up capital of at least Rs. 100 crore, or more,
2. Turnover of Rs. 300 crore or higher.
Additional directors
Section 161(1) of the 2013 Act allows a company to designate any individual as an additional
director.
Alternate directors
According to Section 161(2), a company may appoint an alternate director if the Articles of
Incorporation grant such authority to the company or if a resolution is approved. An alternate
director is appointed if one of the company’s directors is abroad from India for at least three
months and in his/her absence, the alternate director is appointed.
The tenure of an alternate director cannot be longer than the term of the director in
whose place he has been appointed.
Furthermore, he will be required to vacate the post if and when the original director
returns to India.
Any changes to the term of office made during the absence of the original director
will only affect the original director and not the alternate director.
Shadow director
A person who is not appointed to the Board but whose instructions the Board is accustomed
to act is responsible as a director of the company unless he or she is offering advice in his or
her professional role.
Nominee directors
They can be nominated by certain shareholders, third parties via contracts, lending public
financial institutions or banks, or the Central Government in cases of tyranny or
mismanagement.
Liability of directors
For any and all acts harmful to the company’s interests, the directors might be held jointly or
collectively liable. Despite the fact that the director and the Company are different entities,
the director may be held responsible on behalf of the Company in the following situations:
Tax Liability: Unless a director or a past director can show that the non-recovery or
non-payment of taxes is due to gross negligence or breach of duty, then any present or
past director (during the defaulter’s time period) will be responsible to pay the tax
deficit as well as any related penalties.
Refunding a share application or excess portion of a share application amount.
To pay the expenses of qualification shares.
In the event of a misrepresentation in the prospectus, there lies a civil liability.
Fraudulent Business Conduct and all connected debts and contracts signed.
Failing in providing disclosures as stipulated under SEBI (Acquisition of Shares &
Takeovers) Regulations, 1997 and SEBI (Prohibition of Insider Trading) Regulations,
1992 by the directors might lead to legal proceedings by the Securities and Exchange
Board of India (SEBI).
Important judgments
Re: City Equitable Fire Insurance Company Ltd (1925)
It is a case involving the responsibilities of directors of a company in which it was discovered
that the directors of the insurance company had delegated almost entirely the administration
of the company’s operations onto the chairman of the company, which was the primary cause
for the commission of frauds. It was thus decided that in the course of their work, the
directors of the firm must observe the duties of care and skill required.
Conclusion
An analysis of the provisions of the 2013 Companies Act reveals that the 2013 law is
effective in addressing the gaps left by the preceding legislation, the 1956 Act. Though the
2013 Act was implemented in a phase-wise manner, and it wasn’t until 2019 that the 1956
Act was entirely abolished. The 2013 Act has effectively modernized India’s corporate law
framework, putting it on par with corporate regulation throughout the world. Moreover, the
2013 Act’s provisions relating to the directors of a company are more clear and evident when
compared to those of the 1956 Act.