General Meeting is the essence of the corporate world, where shareholders’ voices are heard, and made decisions and the company comes into shape. As per the standards of the Companies Act, 2013, these business gatherings provide democratic decision-making, answerability, and transparency within the organization. In the present article, we are going to discuss the key provisions for calling a general meeting under the Companies Act, 2013. In addition, we will look at the statutory provisions that govern who, when, what, and how these meetings take place in the business. In this article we’ll discus about Navigating Corporate Decision-Making.
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A brief note on the General Meeting
A general meeting is a formal gathering of the company’s shareholders and members. Mainly it is for a shareholder, where they can be heard, discuss, and decide on significant situations regarding the company’s management and performance. It is a fundamental concept of any organization and gives a means for shareholders to discuss their concerns, and rights, and participate in the procedure of decision-making for the company.
General meetings are mainly held in compliance with the Articles of Association, and also as per laws and regulations by the corporate entities. Notice of the meeting is given to shareholders, and a meeting is conducted as per the prescribed processes. The meetings can be attended by shareholders themselves or appoint proxies to represent them. Decisions made in the general meeting by voting and any resolution need to be filed, then there will be a simple majority.
There are two kinds of general meetings:
- Annual General Meeting: It is abbreviated as AGM, which is a compulsory meeting conducted in a year as needed by company law and guidance. The main purpose of an AGM is to examine and approve the significant corporate matters going on in the company. Such as director’s elections, financial statements, appointment or re-appointment of auditors, and dividend distributions. The AGM is a great opportunity for shareholders to be involved in the company’s leadership and ask queries regarding the company’s operations.
- Extraordinary General Meeting: Its abbreviation is EGM, this meeting is held when urgent issues arise and cannot be waited until the next AGM. These issues are approving mergers and acquisitions, making amendments/ alterations in the company’s constitution, or addressing other critical conditions that need shareholder’s permission.
The primary purposes of general meetings are to create proper corporate governance in a company, answerability, and transparency. It is also providing the shareholder’s participation in shaping the company’s direction.
Significance of calling a general meeting as per Companies Act, 2013
Here are the key reasons for calling a general meeting under the Companies Act, 2013:
- Transparency: In the meeting, Companies are disclosing information, regarding financial reports, during general meetings. This transparency ensures that shareholders and members are informed about the company’s financial status and business operations.
- Exercise of Shareholders’ Rights: General meetings are a fundamental means for shareholders to exercise their rights. These meetings allow shareholders to vote on important issues, such as appointing directors, approving financial statements, and altering the company’s constitution. This ensures that shareholders have a say in the company’s affairs.
- Changes in Articles of Association: Any changes that need to be made in the company’s Articles of Association, then require shareholder’s permission in a general meeting.
- Approval of Key Decisions: Certain major decisions require the approval of shareholders in general meetings. This includes mergers, acquisitions, major capital expenditures, and changes in the company’s capital structure. Shareholder approval helps prevent misuse of power by company management.
- Auditors Appointment: Shareholders will be permitted to appoint the auditors in a general meeting. It helps in managing the process of auditing and ensures the independent scrutiny of the company’s financial system.
- Minority Shareholder’s Protection: It secured the interests of minority shareholders by raising objections, speaking about their issues, and voting against the decisions, which they believe are not in their interests
- Accountability: These meetings provide an evaluation of management, and the board of directors are liable to answer for their actions and decisions. It’s the right of the shareholders to raise queries about the operations and financial health of the company.
- Legal Compliance: The Companies Act, 2013, mandates the holding of annual general meetings for companies. Compliance with these statutory requirements is essential to avoid legal consequences and maintain the company’s good standing.
- Communication and Engagement: General meetings foster communication between the management and shareholders. They provide a platform for the company to convey its strategic plans and allow shareholders to provide feedback and ask questions.
Key Provisions for Calling a General Meeting as per Companies Act, 2013
The provisions for calling a general meeting of a company are provided under section 96 of the Companies Act, 2013. Here are the provisions for calling a general meeting:
- Notice of Meeting: To call upon the members, the company issues a notice for a meeting. The notice provides the time, place, and date of the meeting. It must also include the meeting agenda.
- Period for Notice: A general meeting can be called with a notice period of at least 21 days. However, the period may be shorter if members holding at least 95% of the total voting power agree to a shorter notice.
- Exception for Shorter Notice: There is a time when a shorter notice period is allowed as in case of an emergency meeting. However, there must be 95% of the voting power agreed upon by members holding.
- Means of Notice: Notices can be delivered to electronic and physical means. Such as by courier, post, email, or other electronic communication systems.
- Quorum: There are certain members, who have to present in the meeting. For the quorum for a general meeting of a private company, there must be two members personally presented and in the case of a public company five persons personally presented.
- Proxies: Members are allowed to appoint proxies to attend and vote on their behalf in the general meeting. The details of the proxy should be mentioned in the notice of the meeting.
- Voting: Decisions at a general meeting are generally made by a simple majority vote unless the Articles of Association specify a different requirement.
- Remote Participation: In case the Articles of Association of the company allows video conferencing, then the participation in the meetings can be attended by electronic means.
- Adjournment: If a quorum is not present within half an hour, then the meeting will be adjourned.
Takeaway
In conclusion, it can be said that provisions for calling a general meeting as per the Companies Act, 2013 are not just a legal formality, but it is a lifeblood of the companies. These instructions empower the shareholders, promote transparency and make sure that significant decisions must be taken collectively, along with protecting all shareholder’s interests. The general meeting is a good example of democratic participation in corporate decision-making. To determine the Companies Act, 2013 and understanding the significance of calling a general meeting led to building trust in the company, managing compliances, and adopting responsible business practices.
