Extraordinary General Meeting of the Company on Requisition

An Extraordinary General Meeting (EGM) is a significant event that can be called by a company’s board of directors or shareholders to discuss and vote on important matters outside of the company’s regular annual general meeting. In accordance with the Companies Act 2013, an EGM is required for certain decisions that affect the company’s future.

As such, understanding the rules and procedures of an EGM is essential for company directors, shareholders, and other stakeholders. In this article, we will explore the purpose and function of an EGM under the Companies Act, and the legal requirements for calling and conducting an EGM.

What is an Extraordinary General Meeting?

A firm or organisation will conduct an Extraordinary General Meeting to discuss issues that need the immediate attention of senior executives, the board of directors, and all shareholders that cannot wait until the upcoming annual general meeting. For the purpose of handling a crisis, the EGM is called at an unusual time.

Any business conducted at an EGM is regarded as unique. An extraordinary general meeting can have as its agenda, for instance, the dismissal of a senior executive. A special or emergency general meeting is another name for an EGM.

Mandatory Requirements for EGM

The Board shall, at the requisition made by

• in the case of a company having a share capital, such number of members who hold, on the date of the receipt of the requisition, not less than one-tenth of such of the paid-up share capital of the company as on that date carries the right of voting.
• in the case of a company not having a share capital, such number of members who have, on the date of receipt of the requisition, not less than one-tenth of the total voting power of all the members having on the said date a right to vote, call an extraordinary general meeting of the company.

If the Board does not, within twenty-one days from the date of receipt of a valid requisition in regard to any matter, proceed to call a meeting for the consideration of that matter on a day not later than forty-five days from the date of receipt of such requisition, the meeting may be called and held by the requisitionists themselves within a period of three months from the date of the requisition.

Who can Call for an EGM?

The Companies Act, 2013 specifies the members/shareholders who are eligible to call for an extraordinary general meeting. In the case of a company with a share capital, members who hold at least one-tenth of the company’s paid-up capital with voting rights on the matter at hand can call for an EGM. Members holding at least one-tenth of the total voting power for companies without a share capital can call for an EGM.

EGM called by Board vs. Requisitionists

Upon receiving a valid requisition from the eligible members, the Board has a period of 21 days to call for an EGM. The EGM must be held within 45 days from the day of the EGM being called. If the Board fails to call for an EGM, the requisitionists can call for an EGM during a period of 3 months from the day the requisition was deposited. If the EGM is held within this specified period of 3 months, it can be adjourned to any day in the future after the 3 months.

Essentials of a Valid Requisition

For a requisition to be valid, it must specify the issue for which the meeting is called, be signed by the requisitionists, and be deposited at the company’s registered office.

Quorum Required for EGM

Unless the company’s Articles state otherwise, the quorum required for an EGM is five members personally present for public companies and two members personally present for other companies.

A quorum must be present within half an hour from the time appointed for holding the meeting otherwise the meeting shall stand adjourned.

The Function of Extraordinary General Meeting

The Companies Act of 2013 mandates that all matters discussed during an Extraordinary General Meeting must be classified as special business. An EGM serves two primary purposes. Firstly, it serves to inform shareholders about important matters pertaining to the company and encourages their attendance whenever possible. Secondly, an EGM imposes a responsibility on the company to provide shareholders with detailed information about the business to be discussed in the form of an explanatory statement.

The explanatory statement, typically included in the notice for the EGM, provides shareholders with details such as the nature of concern or interest (financial or otherwise) and any other pertinent information required for them to make informed decisions.

Procedure for EGM

The procedure for calling or holding an EGM is outlined in the company’s articles of association and can be scheduled on any day other than a national holiday.

Here are the steps for holding an Extraordinary General Meeting under the Companies Act, 2013 by the board:

Step 1: Convene Board Meeting to discuss the following

• Propose resolutions to be passed at the EGM of shareholders
• Fix the date, time, and place for convening the EGM

Step 2: Issue and dispatch notices for the EGM

• Provide notice in writing or through electronic mode with at least 21 clear days
• Include details specified in Chapter VII, Rule 7.16 for sending a notice through electronic means
• Give notice to every member of the company, legal representative of any deceased member or the assignee of an insolvent member, the auditor or auditors of the company, and every director of the company

Step 3: Obtain consent for shorter notice

The meeting can be held at a shorter notice if written or electronic consent is obtained from not less than 95 percent of members entitled to vote at such a meeting (Section 101(1) Proviso).

Step 4: Attach a statement to the notice

According to Section 102, the statement annexed to the notice shall contain the nature of concern or interest, financial or otherwise, if any, in respect of each item of every director, manager, key managerial personnel, and relatives of the persons mentioned in sub-clauses (i) and (ii); and any other information and facts that may enable members to understand the meaning, scope, and implications of the items of business and to take a decision thereon.

Step 5: Ensure quorum

• Ensure that the quorum required for private companies, that is, two members, is present
• Adjourn the meeting if the quorum is not present within half-an-hour from the time appointed for holding a meeting of the company
• Give not less than three days notice to the members individually or by publishing an advertisement in the newspapers (one in English and one in the vernacular language) which is in circulation at the place where the registered office of the company is situated (Provided in case of an adjourned meeting or change of day, time or place of meeting under clause (a))

Step 6: Elect Chairman

• The members present at the meeting shall elect one of themselves to be the chairman on show of hands
• Take a poll if demanded, in accordance with the provisions of this Act

Step 7: Appointment of Proxies

• Central Government may prescribe a class or classes of companies whose members shall not be entitled to appoint another person as a proxy (Section 105(1) Proviso 3)
• A person appointed as a proxy shall act on behalf of such member or a number of members not exceeding fifty and such number of shares as may be prescribed (Section 105(1) Proviso 4)

Step 8: Voting

According to Section 107[14], voting can be done by show of hands unless a poll is demanded. A poll can be ordered by the chairman on demand made by:

(a) In the case of a company having a share capital, by the members present in person or by proxy, where allowed, and having not less than one-tenth of the total voting power or holding shares on which an aggregate sum of not less than five lakh rupees or such higher amount as may be prescribed has been paid-up; and

(b) In the case of any other company, by any member or members present in person or by proxy, where allowed, and having not less than one-tenth of the total voting power.

In addition to this, Section 108[16] allows voting through electronic means for the class or classes of companies prescribed by the central government. Chapter VII Rule 7.18 states that the following companies can conduct voting through electronic means:

(a) Every listed company

(b) A company with five hundred or more shareholders may allow its members to exercise their right to vote at general meetings by electronic means.

The procedure for electronic voting and requirements are further stated in the proviso to Rule 7.18, Chapter VII Draft Rules.

Step 9

After the voting is done and resolutions are passed, ensure that the minutes of the meeting are prepared and signed within 30 days of the conclusion of the meeting (Section 118[17]).

Step 10

According to Section 117[18], file the appropriate form with the Registrar of Companies (ROC) within 30 days of passing the resolution.

Conclusion

The Extraordinary General Meeting is a crucial aspect of company governance, which provides an opportunity for members to make important decisions that cannot wait until the next Annual General Meeting. It is important for companies to follow the procedures laid out in the Companies Act to ensure that these meetings are conducted fairly and transparently.