Shareholders Meeting

Last Updated :

-

Blog Author :

Shraddha Sureka

Edited by :

Ashish Kumar Srivastav

Reviewed by :

Dheeraj Vaidya, CFA, FRM

Table Of Contents

arrow

What is the Shareholders Meeting?

Shareholders meeting means a meeting of the stockholders of the corporation wherein resolutions are placed before the shareholders to discuss the corporate matters and other matters required by the bylaws of the company (such as company's performance over the relevant statutory period is reviewed and approved, Board of Directors (BOD) of the company are appointed, decisions regarding the increase in share capital, major acquisitions, mergers are taken, etc.) and may be conducted at frequent intervals (like annually or six-monthly or quarter or in exceptional circumstances).

Table of contents

Explanation

  • The word 'meeting engagement' implies an act of coming face to face or coming together to have a discussion. The word 'shareholders' means the actual persons who have taken a stake in the corporation, interested in the company's profits or loss of the business.
  • Please note that the shareholders do not manage the company. To manage the company's affairs, shareholders appoint a few experts in the management field. All such experts are collectively termed “Board of Directors” (BOD). BOD is also called the company's management by taking decisions and seeking the approval of the company's shareholders.
  • These are popularly known as general meetings. The question here arises why such a meeting is required? Can't the company take the decisions on its own? For this, let's recollect that a company is not a human being like you and me, but it is an artificial person constituted by the members. Hence it makes decisions through passing a resolution at the meeting by its member.
  • The purpose of the meeting is that the shareholders can know about the company's affairs & thereby, they can decide upon the suggestions made by the management in the proposed resolution. This means that the shareholders get equal importance in the decision-making process.
Shareholder-Meeting

Types of Shareholder's Meeting

Before going into the details of the types of shareholders' meetings, let's have a bird's eye view of the different types of company meetings:

Types of shareholders Meeting

#1 - Annual General Meeting (AGM)

  • It is the most important meeting which is compulsorily held every year. They are mandatory for both private companies as well as public companies.
  • The gap between the two AGMs should not exceed more than 15 months. In case of any difficulty arises in the conduct of an AGM within a prescribed time limit, the company may seek for extension of time from the Minister for special reasons only. However, such an extension shall be not more than three months.
  • AGM should be held during business hours only.
  • A notice period of a minimum of 21 days is required to be given before calling for an AGM. However, the notice period can be served by shorter notice if the consent of all the members who are entitled to attend and vote is obtained.

#2 - Extra-Ordinary General Meeting (EGM)

  • An extraordinary meeting means a meeting called in the unique circumstances of the company. The Board of Directors has the power to call an extraordinary general meeting whenever they deem fit.
  • The primary reason for calling an EGM is to discuss any urgent matters (i.e., to transact a special business) or any crisis, and it requires the special attention of the members. Thus, the management cannot wait until AGM is called upon.
  • An EGM can be held on any day, including holidays unlikely like an AGM must be held on days other than national holidays. An EGM can be called on the request of shareholders, members, or on the order of the tribunal.

#3 - Class Meetings

  • Class meetings are also called special shareholders' meetings.
  • Such meetings are required when the company must pass a resolution where such resolution affects only a particular class of shareholders.
  • Let's take an example. Say, the share capital structure is as follow:
    • 20,000 shares of $10 each, fully paid up
    • 50,000 shares of $10 each, the party paid up $ 5 only
    • 10,000 shares of $ 5 each, fully paid up

Here, the '20,000 shares of $10 each, fully paid up' is called a class of shareholders. Further, '50,000 shares of $10 each, the party paid up $ 5 only' is a different class of shareholders. Hence, a meeting may be called only for a specific class of stockholders.

General Provision Applicable for All Meetings

  1. The specific quorum required in case of any meeting: In the case of private limited companies, two members are required to form a quorum. In the case of other companies, at least three members are required to constitute a quorum.
  2. In case of meetings other than annual general meetings, a notice period of a minimum of 14 days (in case of a company other than an unlimited company) or a minimum of 7 days (in case of an unlimited company) is required to be given before calling for the said meeting. However, the notice period can be served by shorter notice than the specified period if the consent of at least 95% in value of the shares (in case of a company having a share capital) or at least 95% of total voting rights of all the members in that meeting (in case of a company not having a share capital), is obtained.

How to Hold a Shareholders’ Meeting?

  • The company must send notice to every member of the company. In the case of AGM, at least 21 days' notice is required. In the case of other meetings, at least 14 days' notice is required (for other than unlimited companies), or at least seven days' notice is required (for unlimited companies). As discussed in the previous point, the meeting may be called at shorter notice.
  • The notice shall specify the matters to be discussed in the ensuing meeting and be briefly explained. Draft copies of the relevant documents are also circulated along with the notice. Notice shall specify the quorum requirements. If the required quorum is not fulfilled, the meeting may be adjourned.
  • The notice shall specify how votes are to be cast upon. Nowadays, notices also give an option to vote electronically.
  • Conduct the meeting on the day specified in the given notice. There is no specific hard-bound procedure to be followed. Some organizations follow Roberts' Rules of Orders, which requires the motions, seconds, discussion, and voting. Other organizations may follow simple procedures.
  • After the meeting, a minute of the meeting is prepared, which summarizes the discussions and decisions made in the said meeting. Such minutes are then circulated to all the members, including those present at the meeting.

Importance

The management makes all the decisions of the company. However, management must take shareholders' approval before implementing the organization's key findings. Hence, for taking the said approvals, the board must call the shareholder's meeting. Now, which type of meeting is to be called depends upon the matter to be discussed.

Generally, this meeting is called for the following matters:

Conclusion

Each type of meeting has its relevance and importance. Every meeting cannot be an AGM, and every meeting cannot be either EGM. Corporations are required to comply with all the statutory requirements regarding calling and holding any shareholders' meeting. Noncompliance thereof may cost the company to pay penalties to the government.