An Extraordinary General Meeting (EGM) is the one that is not an Annual General Meeting (AGM). EGM is held when some urgent issues arise in the company and it requires the input of all the senior executives and the Board. In the complex realm of corporate governance within India, the Companies Act, 2013, stands tall as the bedrock, delineating the legal architecture that governs the operations of companies. This comprehensive legislation lays out the principles and regulations that companies must adhere to, shaping the contours of their functioning. Central to this framework is the provision for meetings, a key arena of corporate discourse. Within this landscape, Extraordinary General Meetings (EGMs) emerge as a focal point, offering a specialized platform for companies to address urgent and critical matters that demand immediate attention.
Geeky Takeaways:
- EGMs go beyond the cyclic predictability of AGMs, allowing companies to respond promptly to critical issues, thereby ensuring a level of responsiveness that aligns with the rapidly changing dynamics of the business environment.
- EGM is held in case of emergencies and requires the attention of senior executives and the Board.
- Members, Shareholders, and executives must be informed of the purpose of the meeting so they have time to prepare their valuable input and collectively decide on further course of action.
An Extraordinary General Meeting (EGM) is an exceptional assembly convened by a company to deliberate and decide on matters of urgency that cannot await the routine schedule of an Annual General Meeting (AGM). AGMs, which follow regular intervals, serve as forums for routine corporate activities. In contrast, EGMs are summoned on an ad-hoc basis, responding to exigent circumstances that necessitate immediate attention. Unlike the more predictable and routine nature of AGMs, EGMs provide a dynamic platform for active shareholder participation in decision-making processes.
Who can Call for an EGM?
An Extraordinary General Meeting (EGM) can be called by either the Board of Directors or Shareholders. The Board initiates an EGM when urgent matters arise, emphasizing their governance role. Shareholders, collectively holding at least 10% of voting rights, can also request an EGM, giving them a direct say in decision-making. This dual approach ensures a balanced involvement of both the company’s leadership and its shareholders in convening crucial methods.
1. Board of Directors: The authority to call for an EGM is vested in the Board of Directors. This prerogative enables the board to convene a meeting whenever immediate decisions are deemed necessary. This is especially crucial for matters that cannot wait until the next scheduled AGM.
2. Requisition by Shareholders: Shareholders also possess the right to requisition of an EGM. To exercise this right, shareholders collectively holding at least 10% of the paid-up share capital carrying voting rights can submit a requisition. This process provides shareholders with a means to influence the company’s decision-making process.
Essentials of a Valid Requisition
Essentials for a valid requisition to call an Extraordinary General Meeting (EGM) are straightforward. Shareholders must collectively own at least 10% of the voting rights, ensuring a meaningful stake. The purpose of the meeting must be clearly stated, promoting transparency among all shareholders. Lastly, submitting the requisition at the company’s office during business hours, following a formal process, ensures a legitimate and well-documented request. These steps create a structured way for shareholders to ask for an EGM.
1. Ownership of Shares
The requisitioning shareholders must collectively hold at least 10% of the paid-up share capital carrying voting rights. This ensures that the request is not arbitrary and is supported by a significant stake in the company.
2. Stating the Purpose
The requisition must explicitly state the purpose for which the meeting is sought. A clear and specific agenda ensures that all shareholders are informed of the issues at hand, fostering transparency in decision-making.
3. Proper Timing
The requisition must be submitted at the registered office of the company during business hours. It should be sent by registered post or delivered by hand, adhering to a formal and documented process.
Requirements for Holding an EGM
Conducting an Extraordinary General Meeting (EGM) involves meeting specific requirements outlined by the Companies Act, 2013. These requirements encompass giving adequate notice to stakeholders, clearly defining the agenda, and providing provisions for proxy participation. These procedural aspects ensure that EGMs are conducted transparently and in accordance with established standards, fostering inclusivity and informed decision-making among shareholders.
1. Notice
The notice for an EGM must be provided to all shareholders, directors, and auditors. The notice period should comply with Companies Act, ensuring sufficient time for stakeholders to prepare for the meeting.
2. Agenda
The agenda for the EGM should be clearly defined in the notice. This includes a comprehensive listing of all matters to be discussed and decided upon during the meeting, facilitating an informed participation of shareholders.
3. Proxy Participation
Shareholders unable to attend the EGM in person have the option to appoint a proxy to represent them. The notice should include proxy forms and relevant details, enabling remote participation in the decision-making process.
Quorum required for an EGM
Ensuring the presence of a minimum number of shareholders is crucial in conducting a valid Extraordinary General Meeting (EGM). This minimum number, known as quorum, varies based on the type and size of the company. Meeting the quorum requirement guarantees that decisions made during the EGM are representative and reflective of a significant shareholder presence.
1. In the Case of a Public or Listed Company
Quorum typically involves a minimum of five members personally present if the number of members exceeds 1,000 and 15 members if it exceeds 5,000. This ensures a reasonable representation of stakeholders in larger companies.
2. In the Case of a Private Company
Quorum is generally set at two members personally present unless the company’s articles specify a different number. This recognizes the often smaller scale and ownership structure of private companies.
Conclusion
EGMs play a pivotal role in the corporate governance structure, allowing companies to address urgent matters that may arise between AGMs. Whether convened by the board or requisitioned by shareholders, these meetings facilitate transparent decision-making and provide a forum for shareholders to express their opinions.
In conclusion, a clear understanding of the provisions related to EGMs under the Companies Act, 2013, is essential for both company management and shareholders. Adherence to the legal requirements ensures the validity of the meeting and the decisions taken therein, contributing to the overall stability and governance of the company.
Can the board convene an EGM without shareholder requisition?
Yes, the board has the authority to convene an EGM when it deems necessary, especially for urgent matters requiring immediate attention. This authority is explicitly granted under Section 100 of the Companies Act, 2013.
How can shareholders requisite an EGM?
Shareholders, collectively holding at least 10% of the paid-up share capital carrying voting rights, can requisite an EGM by submitting a requisition stating the purpose of the meeting. This requisition should be in writing, sent to the registered office of the company, and comply with the prescribed format.
What is the role of quorum in an EGM?
Quorum plays a crucial role in ensuring the validity of decisions made at an EGM. It acts as a safeguard, ensuring that a reasonable number of shareholders are present to deliberate and make decisions.
Can shareholders participate in an EGM through proxies?
Yes, shareholders can appoint proxies to represent them if they cannot attend the EGM in person, allowing for remote participation in decision-making processes.
What are the limitations on the frequency of EGMs that can be convened in a year?
There is no specific limit on the number of EGMs that can be convened in a year under the Companies Act, 2013. However, companies should exercise discretion in calling EGMs to ensure efficiency and considerate use of shareholders’ time.
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