company meeting, resolution, motion, quorum.agenda, proxy

Company Meetings

A ‘Meeting’ may be defined as any gathering, assembly or coming together of two or more persons for the transaction of some lawful business of common concern. Like any other association, a company must also hold meetings for its proper functioning. The shareholders or members of a company, who are the real owners, must have the opportunity to collectively discuss the affairs of the company and to exercise their ultimate control over the management of the company. Similarly, the directors, in whom the management of the company is vested, must come together periodically to function as a team and take collective decisions regarding the business policy of the company and to exercise overall supervision over the management. Thus, the management of a company is really carried on through meetings of shareholders and directors and the resolutions adopted therein.

Requisites of a Valid Meeting

If the business transacted at a meeting is to be valid and legally binding, the meeting itself must be validly held. A meeting will be considered to be validly held, if:

1.     It is properly convened by proper authority and by a proper notice.

2.     It is properly constituted with requisite quorum of members and by duly elected Chairman.

3.     It is properly conducted, i.e. according to rules.

Proper Authority to Convene Meeting

A meeting must be convened or called by a proper authority. Otherwise it will not be a valid meeting. The proper authority to convene general meetings of a company is the Board of Directors. The decision to convene a general meeting and issue notice for the same must be taken by a resolution passed at a validly held Board meeting.

Notice of Meetings

A meeting in order to be valid, must be convened by a proper notice issued by the proper authority. It means that the notice convening the meeting be properly drafted according to the Act and the rules, and must be served on all members who are entitled to attend and vote at the meeting.

Length of Notice: For general meeting of any kind at least 21days notice must be given to members. A shorter notice for Annual General Meeting will be valid, if all members entitled to vote give their consent. The number of days in each case shall be clear days, i.e. the days must be calculated excluding the day on which the notice is issued, a day or so for postal transit, and the day on which the meeting is to he held.

Contents of Notice: Every notice of meeting of a company must specify the place and the day and hour of the meeting, and shall contain a statement of the business to be transacted thereat.

1.     Place of Meeting: Every annual general meeting of a company must be held either at the registered office of the company or at some other place within the same city, town or village in which the registered office of the company is situated.

2.     Day of Meeting: Every annual general meeting of a company must be held on a day that is not apublic holiday.

3.     Time of the Meeting: Every annual general meeting shall be called for a time during the business hours of the company.

Quorum of Meetings

Quorum is the minimum number of members who must be present at a meeting as required by the rules. Any business transacted at a meeting without a quorum is invalid. The main purpose of having a quorum is to avoid decisions being taken at a meeting by a small minority which may be found to be unacceptable to the vast majority of members.

The number constituting a quorum at any company meeting is usually laid down in the Articles of Association. In the absence of any provision in the Articles, the provisions as to quorum laid down in the Companies Act, 1956 (under Sec.174) will apply. The Articles may provide for a larger quorum, but it cannot provide for a smaller quorum than that laid down in the Act. Sec.174 of Companies Act provides that the quorum for general meetings of shareholders shall be five members personally present in case of a public company; and two members personally present for any other company.

Agenda of Meetings

The word ‘agenda’ literally means ‘things to be done’. It refers to the programme of business to be transacted at a meeting. Agenda is essential for the systematic transaction of the business of a meeting in the proper order of importance. It is customary for all organisations to send an agenda along with the notice of a meeting to all members. The business of the meeting must be conducted in the same order in which the items are placed in the agenda and the order can be varied only with the consent of the meeting.

Proxy

The term ‘proxy’ is used to refer to the person who is nominated by a shareholder to represent him at a general meeting of the company. It also refers to the instrument through which such a nominee is named and authorised to attend the meeting.

Chairman of a Meeting

‘Chairman’ is the person who has been designated or elected to preside over and conduct the proceedings of a meeting. He is the chief authority in the conduct and control of the meeting.

Statutory Meeting of a Company

Statutory Meeting is the first meeting of the shareholders of a public company. It must be held within a period of not less than one month nor more than 6 months from the date at which the company is entitled to commence business. It is held only once in the lifetime of a company. A private company and a company limited by guarantee and not having a share capital need not hold such a meeting.

The purpose of the statutory meeting with its statutory report is to put the shareholders of the company in possession of all the important facts relating to the new company, what shares have been taken up, what moneys received etc. This also provides an opportunity to the shareholders of meeting to discuss the whole situation, the management and prospects of the company.

The Board of Directors must, atleast 21 days before the day on which the meeting is to be held, forward a report, called the ‘statutory report’ to every member of the company. This report contains all the necessary information relating to formational aspects of the company for the information of the shareholders.

Contents of Statutory Report

1.     The total number of shares allotted, distinguishing those allotted as fully or partly paid up otherwise than in cash, the extent to which they are partly paid up, the consideration for which they have been allotted and total amount received in cash; 

2.     An abstract of the receipts and payments under distinctive heads upto a date within seven days of the date of report;

3.     An account of estimate of the preliminary expenses of the company.

4.     The names, addresses and occupations of the managing director, director, and also its secretary and auditors of the company;

5.     The particulars of any contract which, and the modification or proposed modification of which, are to be submitted to the meeting for approval;

6.     The extent to which underwriting contracts, if any, have not been carried out and the reason therefor;

7.     The arrears, if any, due on calls from directors, managing director or manager; and 

8.     The particulars of any commission or brokerage paid, or to be paid, in connection with the issue or sale of shares to any director, managing director or manager.

Certification and Filing of Statutory Report

The Statutory Report must be carried as correct by not less than two directors of the company including the managing director, if there is one. After the statutory report has been certified by the directors, the auditors of the company must also certify the report in respect of the number of shares allotted, cash received on such shares and the receipts and payments of the company upto a date within seven days of the report. After the statutory report has been sent to the members along with the notice, a certified copy of the report must be filed with the Registrar of Companies for registration forthwith.

Consequences of Default

If a company makes default in holding the statutory meeting within the prescribed period or in issuing and filing the statutory report according to the provisions of Sec.165 of the Act, every director or other officer of the company in default will be liable to pay fine which may extend to Rs.500. Moreover, a company may be wound up by the Court, if default is made in delivering the statutory report to the Registrar or in holding the statutory meeting.

Motions and Resolutions

A ‘motion’ is a definite proposal put before a meeting for its consideration and adoption. A ‘resolution’ on the other hand is the formal expression of the decision of a meeting. When a motion has been duly voted upon and passed by a majority, with or without amendment, it is called a ‘resolution’. A resolution once adopted and recorded in the minutes becomes the official decision of the meeting and cannot be rescinded or revoked except by the consent of two-thirds majority in a meeting specially called for the purpose.

Kinds of Resolutions

1. Ordinary Resolution

A resolution which is passed by a simple majority of votes cast by members present in person or by proxy is called ‘ordinary resolution’. Simple majority means that the votes cast in favor of the resolution must be at least one more than 50 per cent of the votes cast.

An ordinary resolution must satisfy the following conditions:

1.     It must be moved at a general meeting of which due notice has been given

2.     The voting may be on show of hands or by poll

3.     Voting must be by members who are entitled to vote in person or by proxy, if allowed; and

4.     The votes cast in favor of the resolution, including the casting vote of the chairman, if any, must exceed the votes, cast against the resolution.

Usually, ordinary resolutions are required to transact ‘ordinary business’. In addition, ordinary resolutions are sufficient to transact following types of special business:

• Adoption of statutory report
• Removal of director from office before the expiry of his term
• Alteration of share capital
• Issue of shares at a discount
• Appointment of sole selling agents.

2. Special Resolution

A special resolution is one which is required for transacting special business and is required to be passed by a three-fourths majority of members present and vote in the meeting.

A special resolution in order to be valid under the law must satisfy the following conditions:

1.     The notice of the general meeting must have been duly given as required under the Act;

2.     The intention to propose the resolution as a special resolution must have been duly specified in the notice calling the general meeting or other intimation of such intention must have been given to members;

3.     The voting may be on show of hands or on poll;

4.     Votes are cast by members who are entitled so to do, either in person or by proxy; and

5.     Votes cast in favor of the resolution are not less than three times the number of votes, if any, cast against the resolution.

Special resolution is required to transact the following types of business:

• To change of name of the company
• To change of the domicile of the company
• To change the object clause
• To alter Articles of Association
• To create reserve capital
• To Reduce share capital
• To pay interest out of capital
• To decide winding up of the company 

3. Resolutions Requiring Special Notice

Section 190 of the Companies Act, 1956 provides as follows:

1.     Where by any provision contained in this Act or in the Articles, special notice is required of any resolution, notice of the intention to move the resolution shall be given to the company not less than 14 days before the meeting at which it is to be moved, exclusive of the day on which the notice is served or deemed to be served and the day of the meeting.

2.     The company shall, immediately after the notice of the intention to move any such resolution has been received by it, give its members notice of the resolution in the same manner as it gives notice of the meeting, or if that is not practicable, shall give them notice thereof, either by advertisement in a newspaper having an appropriate circulation or in any other mode allowed by the Articles, not less than seven days before the meeting.

The Companies Act has specified certain types of business where such a resolution is required. If a member wants to move such a resolution, he must give special notice to the company of his intention to move such a resolution at least 14 days before the date of the meeting. On receipt of such notice, the company must give notice of the resolution to its members at least 7 days before the meeting, in the same manner as it gives notice of the meeting. If it is not practicable, notice must be given through advertisement in newspapers or any other mode allowed by the Articles. The resolution proposed to be moved may be an ordinary resolution or special resolution.

According to Companies Act, a resolution requiring special notice is required to transact the following types of business:

1.     Removal of a director before the expiry of his term or to appoint another director in place of a director so removed.

2.     Appointment as auditor of a person other than the retiring auditors or deciding that retiring auditor shall not be re-appointed.

Articles may provide for additional matters for which special notice is required.

Credit: Business Law-CU

MBA Knowledge Base > Mercantile Law > Preparation of Minutes under Companies Act

Preparation of Minutes under Companies Act

‘Minutes’ have been defined as the written record of the business done at a meeting. The minutes comprise the official record of the proceedings and decisions of a meeting. They constitute a clear, concise, accurate and permanent record of the decisions and actions of a constituted body. Once approved and signed by the chairman, they are acceptable as evidence of the proceedings in a court of law.

Provisions of the Companies Act regarding Minutes

Section 193 of the Companies Act makes it obligatory for every company to maintain minutes of the proceedings of every general meeting and meetings of the Board of Directors and its Committee. It has also been laid down that minutes of company meetings kept in accordance with the provisions of this section will be recognized as evidence of the proceedings recorded therein. Entries must be made in the minutes book within thirty days of the conclusion of such meetings and the pages of the minutes book must be consecutively numbered.

The minutes of each meeting must contain a fair and correct summary of the proceedings. In the case of Board meeting, the names of the directors present and those dissenting in any resolution must also be mentioned in the minutes.

The minutes need not include any matter which, in the opinion of the chairman, is or may be considered to be defamatory or irrelevant or immaterial or is detrimental to the interests of the company. The chairman will have absolute discretion in deciding whether any matter should or should not be included on the above grounds.

Each page of every minutes book must be initialed or signed and the last page of the book must be dated and signed by the Chairman of the same meeting.

Any default in complying with these provisions will make the company, and every officer of the company in default, liable to fine as per the provisions of the Act.

Sec.196 of the Companies Act provides that the minutes of the proceedings of every general meeting of the company must be kept at the registered office of the company and must remain open for inspection by any member, free of charge, subject to any reasonable restrictions that the company may impose by its Articles or in general meeting.