12.11.3 (Annual General Meeting)

(AGM) (Ss.166-168). As the name  signifies, this

is an annual of a company. The provisions  relating to this meeting are summarised as follows:

            (1)  Every company, whether. public or private, having a share capital or not,

limited or unlimited must hold this meeting.

            (2)  The meeting must be held in each calendar year and not more

than fifteen months shall elapse between two meetings. However, the first AGM may be held within eighteen months from the date of its incorporation and if such general meeting is held within that period, it need not hold any such meeting in the year of its incorporation or in the following year. The maximum gap between two such meetings may be extended by three months by taking permission of the Registrar, who may so allow for any special reason

The Company Law Department has expressed the view that the Registrar can grant extension of time, for special reasons, upto a maximum period of 3 months, even if such extension allows the company to hold its AGM beyond the  calendar year. However, the said extension shall be granted only if the application  therefor

is made to the Registrar before the expiry of the period  as per s.166 (1).

            (3)  The meeting must be held (i) on a day which is not a public holiday, (ii) during business hours, (iii) at the registered office of the .company  or at some other place within the city, town or village in  which the registered office is situated. [s.1.66(2)].

            (4)  The business to be transacted (s.123) at such a meeting may comprise  of:

            (i)  Ordinary business which relates to the following matters: (a)  consideration of accounts, balance sheet and the reports of the Board of Directors and  Auditors; (b) declaration of dividend; (c) appointment of directors in the place of those retiring; and (d) appointment of auditors and fixation of their            remuneration.

            (ii) Any business other than ordinary business transacted at the meeting will be deemed to be special business. with regard to all special business, an  Explanatory statement is required to be annexed to the notice.

            (5)  What about a situation where annual accounts are not ready for being placed before the AGM? In case annual accounts are not ready for laying at the appropriate AGM, it is open to the company concerned to adjourn the said AGM to a subsequent date when the annual accounts are expected to be ready for laying. Since consideration of annual accounts is only one of the matters to be dealt with at an AGM, directors are under a statutory obligation to hold the meeting. The  proper course shall be to hold the meeting and then adjourn it to a suitable date for considering the accounts. The adjourned meeting must, however, be held within the maximum time limit allowed under s .166.

            (6)  The combined reading of Ss.166 and 210 requires compliance with the

following: (a) There must be one meeting held in each calendar. year. (b) Not more than 15 months must elapse between one general meeting and another. (c) The period of 15 months may be extended to 18 months by the Registrar. (d) Except in the case of the first AGM, the accounts must relate to a period beginning with the day immediately after the period for which they were submitted and ending with a day which must not precede the day of the meeting by more than 6 months; or 6 months   extension granted by the Registrar, i.e., a maximum period of 9 months.

            (7)  The company must give twenty-one days notice to all the members of the company and the auditor. A shorter notice may be held valid if consent is accorded to by all the members entitled to vote at the meeting (s.171). Such a consent may be given before the meeting is held or after the resolutions are passed. A copy of directors' report on the company's position for the year together with copy of the audited accounts and auditors' report must accompany the notice. Also a proxy form must be attached with the notice, on which it shall be specifically mentioned that a member entitled to vote is entitled to appoint Proxy, and Proxy need not be a member of the company.

The notice must specify the place and the day and hour of the meeting and shall contain a statement of the business to be transacted thereat [s.172(1)].

If the time of holding the meeting and other essential particulars required by the section are not specified in the notice, the meeting will be invalid and all resolutions passed thereat will be of no effect.

The notice must be given to every member, legal representative of a deceased member or assignee of an insolvent member and to auditor or auditors [s.172(2)].

            (8)  If default is made in holding the meeting, the CLB may, on the application of any member of the company, call or direct the calling of the meeting. If the company fails to hold the meeting either originally or when directed to do so by the CLB, then the company and every officer of the company who is default shall be punishable with fine upto Rs 50,000; and in the case of a continuing default, with a further fine of' Rs 2500 per day during the continuance of default (s.168).

Certain typical issues in respect of AGM

            1.  Whether AGM can be called on a public holiday. Section 1.66(2), inter alia, that every AGM shall be called on a day that is not a public holiday. The Department of Company Affairs has opined that it is a mandatory provision.

However, Bank holidays (for purposes of closing) though declared as public holidays under the Negotiable Instruments Act, 1881 shall not be treated as public holidays for the aforesaid purpose. Thus, 31^st March and 30^th Sept. shall not be considered as public holidays.

In the following cases, however, AGM may be held on a public holiday:

            (i) Section 2(38) provides that if any day is declared by the Central Government to be a public holiday after the issue of the notice convening such a meeting, it shall not be deemed to be a public holiday in relation to the meeting.

            (ii)  Where a public company or its subsidiary has by its articles fixed the time of its AGM and the day turns out to be a public holiday [proviso (a) to s.166(2)].

            (iii)  Where a public company or its subsidiary has, by a resolution passed in one AGM fixed the time for its subsequent AGM and the day turns out to be a public

holiday [Proviso (a) to s.166(2)].

            (iv)  A private company which is not a subsidiary of a public company may also [like a public company or its subsidiary under (ii) and (iii) above] by a resolution agreed to all the members thereof fix the time as well as the place of its AGM and the same shall be valid if the day happens to be a public holiday Proviso (b) tos.166(2)].

            (v)  A company to whom a licence is granted under s.25 is exempted from the provisions of s.766(2).

            (vi)  Where the AGM is adjourned because of lack of quorum, it is to be held on the same day in the next week at the same time and place (s.174). In case the day comes to be accidentally a public holiday, it shall not amount to contravention of s.166(2).

            2.  It is not obligatory to advertise notice of meetings h the newspapers. However, as an abundant precaution, the company may advertise in the newspapers to avoid objection from such of the shareholders as reside outside India and who incidentally may not receive the notices served through post.

            3.  Voting rights of members shall be determined as at the date of the meeting and not as they would/have been if the meeting had been held within the prescribed time.

            4.  A meeting beyond statutory time cannot be said to be void or illegal. If the CLB does not extend the date of holding the AGM u/ s 167 , the Directors shall be subjected to increasing penalty but the meeting shall be a valid meeting. Otherwise, the position in law would become impossible

            5.  The Board of Directors has the power to cancel or postpone a meeting convened, though it cannot be exercised except for bona fide and proper reasons,