Section 100 of the Companies Act, 2013 - Calling of EGM by members themselves

CALLING OF EXTRAORDINARY GENERAL MEETINGS BY MEMBERS

Section 100 of the Companies Act, 2013 which contains provisions relating to holding of Extraordinary General Meetings (EGM) has commenced with effect from 12.09.2013. The provisions contained in this Section are similar to the provisions contained in Section 169 of the Companies Act, 1956.

An EGM may be called by

(i) the Board of Directors

(ii) the Board of Directors at the requisition of such number of shareholders as specified under the Section

(iii) the requisitonists themselves

(iv) the National Company Law Tribunal.

The Board of Directors of a company may call an EGM as and when shareholder’s approval is required for transacting any business and which item cannot be deferred until the next Annual General Meeting. All items of business transacted at EGM are deemed to be special business.

An EGM may also be called by the Board of Directors on the requisition of the members of the company.  On receipt of a valid requisition by the company, the Board should proceed to call an EGM within 45 days from the date of receipt of the requisition. The notice convening the EGM must be sent to all the members of the company and other persons entitled to receive the same within 21 days from the date of receipt of the requisition.

Validity of the Requisition

The requisition, in order to be valid, must be

•         signed by not less than the total numbers of members as specified above in the diagram.

•         set out matters for the consideration of which the meeting is to be called

•         delivered to the Registered Office of the company.

CALLING OF EGM BY REQUISITONISTS THEMSELVES

In the event of failure by the Board to call the meeting within the prescribed time period of 45 days, sub-section (4) of Section 100 of the Companies Act, 2013 empowers the requisitonists to call and hold the meeting themselves within 3 months from the date of the requisition.

The Draft Rules under the Companies Act, 2013 provide for detailed procedure for calling an extra-ordinary general meeting by the requisitonists themselves which was earlier not provided under the Companies Act, 1956. These rules are yet to be finalised by the Ministry.

Procedure for calling the meeting:

(i) In the event of Board’s failure to call the meeting, the requisitonists shall demand the list of members together with their registered address from the company which the company shall be bound to give within 3 days from the expiry of the 45^th day.

(ii) The list of members shall be as on the date on which by the requisitonists deposited a valid requisition with the company for calling the EGM.

(iii) The notice for calling the EGM shall specify the day, date, time and place of the meeting and shall contain the business to be transacted at the meeting. The date of the meeting should not be later than 3 months from the date of depositing the requisition with the company.

(iv)Explanatory Statement pursuant to section 102 of the Companies Act, 2013 is not required to be annexed. The requisitonists may, at their discretion, disclose in the notice the reason for moving the proposed resolution. However, the author feels this provision should be made mandatory as the remaining 90% of the shareholders who are not a party to the requisition have a right to know the reasons for proposing the resolutions at the EGM and form their judgement.

(v)The notice shall be signed by either all the requisitonists or by any one requisitionist duly authorised in writing by all. In case of joint shareholding, it would be enough if the requisition/ notice is signed by any one of the joint holders.

(vi)At least 21 day’s clear notice should be given to all the members of the company as per the list obtained and the notice of the meeting shall be sent either by

·         Ordinary post; or

·         Registered post; or

·         E-mail

Quorum of the meeting

The minimum number of members as specified under sub-section (1) of Section 103 of the Companies Act, 2013 shall form the required quorum for the purpose of the meeting. If the quorum is not present within half-an-hour from the time appointed for holding the meeting, then the meeting shall stand cancelled.

Reimbursement of expenses

Any reasonable expenses incurred by the requisitonists in calling the meeting shall be reimbursed to them by the company and the sums so reimbursed shall be deducted from the remuneration of the directors who were in default in calling the meeting.

JUDICIAL RULINGS:

[Life Insurance Corpn. Of India Vs. Escorts Ltd. (1986)59 Comp. As. 548(SC)]

Every shareholder of a company has the right, subject to statutorily prescribed procedural and numerical requirements, to call an EGM in accordance with the provisions of the Companies Acts. He cannot be restrained from calling a meeting and he is not bound to disclose the reasons for the resolution proposed to be moved at the meeting. Nor are the reasons for the resolutions subject to judicial review.

[Col. Kuldip Singh Dhillon Vs. Paragaon Utility Financiers (P) Ltd. (1986) 60 Comp. Cas1075 (Punj.& Har)

Section 181, interalia, states that notwithstanding anything contained in the Act, The articles of the company may provide that no member shall exercise any voting right in respect of any shares registered in his name on which any calls or other moneys presently payable by him have not been paid. From conjoint reading of Section 181 and the Articles of Association of the company, it is clear that any sum is due from a shareholder in respect of share, he is not entitled to vote at any general meeting. Where the articles of association of a company prohibited any defaulting shareholder from exercising his right to vote at any general meeting, and certain shareholders had not paid a call made on their shares it was held that they were not entitled to requisition an EGM under Section 169].

[Centron Industrial Alliance Ltd. Vs. Pravin Kantilal Vakil (1985) 57 Comp. Cas. 12 (Bom.)].

Where an amalgamation scheme has been approved in a statutory meeting under Section 391, the shareholders cannot requisition a meeting to compel the company for withdrawing its petition pending before the Court for its sanction under Section 392.

[Cricket Club of India Ltd. v Madhav L.Apte (1975) 45 Comp. Cas. 574 (Bom)]

The word or the adjective ‘valid’ in Section 169 has no reference to the object of the requisition but rather to the requirements in that section itself. If these requirements indicated in the earlier part of section are satisfied, then the requisition deposited with the company must be regarded as a valid requisition on which the directors of the company must act.

The provisions of Section 100 of the Companies Act, 2013 particularly relating to calling the Extraordinary General Meeting by the members themselves assumes great significance in the wake of disputes arising between the management and the shareholders or between two different groups in the management. It has been seen that the right of the members of a company to requisition an EGM is exercised quite often by the members in situations arising out of such dispute.