An Annual General Meeting, as the name suggests, is a general meeting, which is held on a yearly basis. According to section 166 of the Companies Act, all companies must hold Annual General Meetings at stipulated time intervals. The notice for an Annual General Meeting must contain all the particulars of the meeting. However, the time to hold the first Annual General Meeting for a company is relaxed to 18 months from the date of incorporation.
● As per section 166(1) of the Companies Act, a company is not bound to hold any general meetings till the first Annual General Meeting is held.
● This relaxation is intended for the company to set up its final reports on the basis of a longer period of time.
● One more relaxation provided by section 166(1) of the Companies Act is that with the registrar’s consent, the date of an Annual General Meeting can be postponed.
● This date can be postponed to a maximum time period of three months.
● However, this relaxation is not applicable for the first Annual General Meeting.
● A company may not hold an Annual General Meeting in a year if the extension of the date of the meeting is made under the consent of the registrar.
● However, the reasons for the extension of the meeting should be genuine and should be properly justified.
Interval between Two Annual General Meetings
As per section 166(1) of the Companies Act, the time gap between two Annual General Meetings must not exceed fifteen months. According to section 210 of the Companies Act, a company must present a report containing the accounts of all the profits and losses. In case the company is not trading for profit, an income and expenditure account report must be made.
● The account shall state all the profits and losses earned and endured by the company from the day of its incorporation.
● The account shall be updated for at least 9 months from the date of the last annual general meeting.
● A balance sheet is also required to be attached along with the account.
The Annual General Meeting is subjected to three rules −
● The meeting must be held every year.
● A maximum gap of 15 months is allowed between two Annual General Meetings.
● The meeting must be held within six months from the preparation of the balance sheet.
Failure to comply with the above rules will be considered as an offence to the Companies Act by the law and will be treated as a default unless the registrar grants extension of time for holding a meeting.
Date, Time and Place
An Annual General Meeting can be held at any time during business hours. The day of the Annual General Meeting must not be a public holiday. The meeting can be held either at the registered office of the company or any preselected venue within the area of jurisdiction of the place where the registered office of the company is situated.
● A public company or a private company, which acts as a subsidiary of a public company, may fix the time of the meeting according to the articles of association of the company.
● A resolution may also be passed at a general meeting for the selection of time of the subsequent general meetings.
● However, for a private company, the time and venue of the meetings is fixed by passing a resolution in any of the meeting.
● The venue for the meeting of the private company may not be situated within the area of jurisdiction of the place where the registered office of the company is situated.
● The section 25 of the Negotiable Instruments Act, 1881, defines a public holiday to be a Sunday or any other day as declared by the Central Government to be a public holiday. A day may be declared as a public holiday after the notice for a meeting has been issued. For avoiding difficulties that may be caused in the above mentioned scenario, section 2(38) of the Companies Act says that, “no day declared by the Central government to be a public holiday shall be a holiday in relation to such a meeting, unless the notice of declaration was issued before the declaration of the meeting.”
Default in Holding Annual General Meeting
Not holding an annual general meeting according to section 166 of the Companies Act is considered to be a serious offence in the eyes of the law. Every member of the company who is in default and the company will be rendered as defaulters.
● A fine of up to INR 50,000 may be imposed on the defaulters.
● According to section 168 of the Companies Act, if the default is found to be continuing, then a fine of INR 2,500 will be imposed on the defaulters on a daily basis till the default continues.
Extraordinary General Meeting
Any general meeting of a company is considered to be an extraordinary general meeting, except the statutory meeting, an Annual General Meeting or any adjournment meeting. Such types of meetings can be fixed by the directors at any time that seems appropriate to the directors. However, the meetings must be held in accordance with the guidelines mentioned in the articles of association of the company.
These meetings are held generally for the transaction of the business of a special character. Various administrative affairs of a company, which can be transacted only by resolutions passed in general meetings, are carried out in these meetings.
It is not possible for the members of the company to wait for the next Annual General Meeting for clearance of such issues. The articles of association of a company, therefore, provides freedom to conduct extraordinary general meetings to sort out such issues.
An extraordinary general meeting can be convened −
● By the board of directors or on the requisitions of members.
● By the requisitionists themselves on the failure of the board to call for a meeting.
● By the Company Law board.
By the Board of Directors
If some business of special importance requires an approval of the members of the company, the board of directors may call for an extraordinary general meeting of the company. Going in accordance with the articles of association of the company, the board of directors of a company may call for an extraordinary general meeting whenever they feel appropriate.
The power of a director to convene an extraordinary general meeting must be exercised at a board of directors’ meeting as in the case of all the powers exercised by the director.
According to the provision of the articles, if a resolution is signed by all the members of the board and is as effective as a passed resolution, a general meeting may be convened on the context of the resolution. The articles also provide the facility that there may not be sufficient number of directors to call for a general meeting.
Thus in case of insufficient number of directors, any director or any two members of the company can call for the general meeting in the same way as called by the board of directors.
On Requisition of Members
The members of the company may also request for an extraordinary general meeting to be conducted. A request for holding an extraordinary general meeting can be made by the members −
● Holding at least 10% of the company’s paid up share capital and having the right to vote on the context of the matter to be discussed at the meeting.
● Holding 10% of voting powers of the members in case the company has no capital.
● Preference shareholders can also call for a general meeting if the proposed resolution is going to affect their interest.
● If a member ceases to withdraw after the requisition is made, the withdrawal will not invalidate the requisition.
● The appointment of shares does not affect the rights of a member to make requisitions or vote at a meeting.
By the Requisitionists Themselves
In case the directors fail to call for the meeting within 21 days of a requisition for a meeting to be held within 45 days after the submission of the requisition, the following consequences may be called −
● In context of a company having a share capital, by the requisitionists who represent either a major value of the paid up share capital or not less than one tenth of the company’s total share capital.
● For a company not having a share capital, by the requisitionists holding at least one-tenth of the total voting power
● This kind of meetings must be called within three months from the date when the requisition is filed.
● These kinds of meetings should be held similar to board meetings.
● It is not necessary for the requisitionists to disclose the reasons for the resolution to be proposed at the meeting.
By the Company Law Board
If it is practically impossible to call a meeting other than an Annual General Meeting for any arbitrary reasons, the Company Law Board, under section 186, may order a meeting to be called, either of its own accord or by an application of any director of the company to the Company Law Board.
A petition needs to be filed under section 186 of the Companies Act for the Company Law Board to call for a meeting.