Tanya Agarwal, Research Associate
Meetings play a vital role in functioning and governance of a company. The Companies Amendment Act 2013 which came into force a month ago has improvised the earlier provisions relating to company meetings. The concept of statutory meeting and filing of statutory report under Section 165 of the Companies Act of 1956 has been dropped. In this Article, the author has compared the provisions related to company meetings in 1956 Act and 2013 Act.
Points to remember
- 1 General Provisions of Meetings
- 2 Quorum For The Meeting
- 3 Proxies
- 4 Pro-Technology Provisions
- 5 Annual General Meeting
- 6 Board Meetings
- 7 Participation in Meetings through electronic mode
- 8 Notice of the Meeting
- 9 Quorum for the meeting
- 10 Passing of Resolution by Circulation
- 11 Additional Concepts under the 2013 Act
General Provisions of Meetings
Notice of General Meetings- Section 102 of the Companies Act, 2013 vis-a-vis Section 173 of Companies Act, 1956
Section 102 clarifies that material facts are those that enables members to understand the meaning, scope and implications of the items of business and to take decision thereon.
Section 102 (2) also requires disclosure of not only the names of the interested parties but also the nature and extent of interest of directors, managers, key managerial personnel and relatives of directors, manager in the explanatory statement to be annexed for every special business in the notice calling general meetings.
The proviso to sub-section (2) requires mention of the extent of the interest of every promoter, director, manager or key managerial personnel in any other company to be affected by the proposed resolution if they hold two percent in that other company. The 1956 Act required such a disclosure if director, manager or secretary holds twenty percent or more in such other companies.
Quorum For The Meeting
Under the 1956 Act, the quorum requirement for public companies was five members personally present unless a higher quorum is stipulated by articles of association. Section 103 of the 2013 Act requires that-
5 members personally present if the number of members as on the date of meeting is not more than 1000
15 members personally present if the number of members as on the date of meeting is more than one thousand but up to 5000
30 members personally present if the number of members as on the date of the meeting exceeds 5000;
If the meeting of could not be held due to want of quorum then, Section 103 (2) will be applied regardless of what articles of company provide. However, under Section 288 of 1956 Act articles of association prevailed over the Act in such a case.
Proviso to Section 103 (2) is also a new requirement added by the amendment. It requires that in case of an adjourned meeting or of a change of day, time or place of adjourned meeting the company shall give not less than three days notice to the members either individually or by publishing an advertisement in the newspapers.
Third Proviso to Section 105 (1) of 2013 Act empowers the Central Government to prescribe a class or classes of companies whose members shall not be entitled to appoint another person as a proxy.
Fourth proviso to Section 105 (1) of 2013 Act provides that a person appointed as proxy shall act on behalf of such member or number of members not exceeding fifty and such number of shares as may be prescribed.
However, the 1956 Act did not provide for these limitations in relation to appointment of proxies
Section 101 of the 2013, Act permits that notice of the general meetings of the company can be given through electronic mode.
Section 108 of the 2013 Act enables the members of prescribed class or classes of companies to exercise vote through electronic means.
The ordinary resolutions1and special resolutions2may be passed by electronic voting. Votes casted electronically as well as votes by postal ballot shall be counted for the purpose of determining whether ordinary or special resolution has been passed.
Annual General Meeting
As the name signifies, it is an annual meeting of the body of the members. Section 166 of the old Companies Act, 1956 which required first AGM to be held within 18 months of its date of incorporation has been done away with. Also, the Second Proviso to Section 166(2)3has been dropped by the 2013 Act.
Under Section 96 (1) the first annual general meeting shall be held within a period of nine months from the date of closing of the first financial year of the company and in other cases within a period of six months, from the date of closing of the financial year. There are two provisos to section 96 –
Firstly, if a company holds its first annual general meeting as aforesaid, it shall not be necessary for the company to hold any annual general meeting in the year of its incorporation. Secondly, the Registrar may, for any special reason, extend the time within which any annual general meeting, other than the first annual general meeting, shall be held, by a period not exceeding three months.
Section 166 merely mandated calling of AGM during business hours without defining business hours. Section 96 defines business hours would mean between 9 am and 6 pm.
Section 166 provided that AGM cannot be called on a public holiday but new companies act allows it to be called on a public holiday but not on a national holiday. The intention behind Section 96(2) was to facilitate widest participation by the shareholders and make possible holding of such meetings as early as possible including on Sundays4. National holiday means and includes a day declared as such by the Central government.
Provisions akin to the meetings of the Board are incorporated in Chapter XII of the 2013 Act. According to section 173 (1) of the 2013 Act every company shall hold the first meeting of the Board of Directors within thirty days of the date of its incorporation. Board meetings should be held at least four times in a year and the gap between two consecutive board meetings cannot be more than one hundred and twenty days7.
Participation in Meetings through electronic mode
Although, the Companies Act, 1956 was silent on this issue, Ministry of Corporate Affairs through its General Circular No. 28/2011 laid down certain rules regarding the participation by directors in meetings of board through electronic mode. Moreover Section 173(2) permits the participation of directors in a meeting of the Board through video conferencing or other audio visual means8. The audio- visual means should not only be capable of recording and recognising the participation of the directors but also recording and storing of such proceedings along with date and time.
Notice of the Meeting
In contrast to Section 286 of the Companies Act, 1956 the amendment specifies the period of notice. Section 173(3) mandates that to validly hold a Board meeting, seven days’ notice in writing should be given to every director at his address registered with the company and such notice shall be sent by hand delivery or by post or by electronic means.
However, Board meeting can also be called at a shorter notice to transact urgent business but at least one independent director should be present at the meeting. If the independent directors are absent from such meeting then decisions taken at such a meeting shall be circulated to all the directors and shall be final only on ratification thereof by at least one independent director.
A penalty of twenty five thousand shall be imposed on the officer of the company who fails to discharge his duty of giving notice.
Quorum for the meeting
Though the quorum requirement9still remains the same but now participation of the directors by video conferencing or by other audio visual means shall also be counted for the purposes of quorum10. Section 174(2) has been added by the 2013 Act which states that:
The continuing directors may act notwithstanding any vacancy in the Board; but, if and so long as their number is reduced below the quorum fixed by the Act for a meeting of the Board, the continuing directors or director may act for the purpose of increasing the number of directors to that fixed for the quorum, or of summoning a general meeting of the company and for no other purpose.
Passing of Resolution by Circulation
Section 289 of the 1956 Act which dealt with passing of resolution by circulation has been modified to great extent by 2013 Act. The1956 Act, required approval by all the directors, or all the members of the Committee in India. On the other hand, section 175(1) of the 2013 Act provides that approval should be by a majority of the directors or members (of the committee), who are entitled to vote on the resolution. The phrase ‘in India’ been omitted in Section 175 to allow participation by foreign directors as well.
Proviso to Section 175(1) has added another situation which didn’t exist earlier. In case, less than one-third of the total number of directors of the company for the time being required that any resolution under circulation must be decided at a meeting, the chairperson shall put the resolution to be decided at a meeting of the Board.
Section 175(2) which requires that the resolution passed by circulation shall be noted at a subsequent meeting of the Board or the committee was not there under 1956 Act.
Additional Concepts under the 2013 Act
Small Company/ Dormant Company – According to Section 173(5) board meeting is required to be held at least once in each half of a calendar year and the gap between the 2 meetings is not less than 90 days. This does not apply for one person companies which have only one director on its board of directors.
One Person Company – According to Section 122(3) any business which is required to be transacted at an annual general meeting or other general meeting of a company by means of an ordinary or special resolution, it shall be sufficient if, in case of One Person Company, the resolution is communicated by the member to the company and entered in the minutes-book required to be maintained under section 118 and signed and dated by the member and such date shall be deemed to be the date of the meeting.
Comply with Secretarial Standards – Section 118 (10) provides that every company shall observe secretarial standards with respect to general and Board meetings specified by the Institute of Company Secretaries of India constituted under section 3 of the Company Secretaries Act, 1980, and approved as such by the Central Government.
Tampering of Minutes – According to Section 118(12) of Companies Act, 2013 if a person is found guilty of tampering with the minutes of the proceedings of the meeting he shall be punishable with imprisonment for a term which may extend to two years and with fine which shall not be less than 25,000 but which may extend to one lakh.
The Companies Amendment Act, 2013 has made an attempt to ensure that company meetings are carried out effectively and transparently. It also recognises the technological advancements by legalizing participation in meeting through audio-visual means, electronic voting and other similar provisions. Though it has not completely changed the provisions existing in the old Act but has brought major changes by dropping the requirement of statutory meeting, classifying quorum in case of public companies. The 2013 Act has also recognized the concept of One Person Company and has enacted separate provisions with respect to meetings. The provisions requiring independent directors to hold at least one meeting in a year without attendance of non-independent directors and members of management can be called as a positive step towards better governance. To sum up, 2013 Act has to some extent been successful in introducing as well as enhancing the provisions related to company meetings as per the need of hour.
- Section 114(1) Companies Act 2013 [↩]
- Section 114(2)(c) Companies Act 2013 [↩]
- Section 166(2)Companies Act, 1956 provided that: (a) a public company or a private company which is a subsidiary of a public company, may by its articles fix the time for its annual general meetings and may also by a resolution passed in one annual general meeting fix the time for its subsequent annual general meetings; and (b) a private company which is not a subsidiary of a public company, may in like manner and also by a resolution agreed to by all the members thereof, fix the times as well at the place for its annual general meeting. [↩]
- The Parliamentary Committee Report on the Companies Bill, 2011, available at http://www.scribd.com/doc/99565110/Parliamentary-Committee-Report-Lok-Sabha-on-Companies-Bill-2011. (Last visited 17th October, 2013). [↩]
- Section 97(1) Companies Amendment Act, 2013 [↩]
- Section 167(1) Companies (Second Amendment) Act, 2002. The 2002 amendment vested power in the tribunal in case of revival of a sick industrial company. [↩]
- Section 285 of the Companies Act, 1956 dealt with Board meetings. [↩]
- Provided that the Central Government may, by notification, specify such matters which shall not be dealt with in a meeting through video conferencing or other audio visual means. [↩]
- Under both Section 287 Companies Act, 1956 and Section 174(1) of Companies Act, 2013 the quorum for a meeting of the Board of Directors of a company shall be one third of its total strength or two directors, whichever is higher. [↩]
- Section 174(1) Companies Amendment Act, 2013 [↩]