Monday, September 27, 2010

What is the Valid Quorum for an Annual General Meeting ?

What is the Valid Quorum for an Annual General Meeting ?


Quorum refers to the minimum number of members who must be present at a meeting in order to constitute a valid meeting. A meeting without the minimum quorum is invalid and decisions taken at such a meeting are not binding. The articles of a company may provide for a quorum without which a meeting will be construed to be invalid. As per Section 174 of the Companies Act 1956, unless the articles of a company provide for larger quorum, 5 members personally present (not by proxy) in the case of a public company and 2 members personally present (not by proxy) in the case of a private company shall be the quorum for a general meeting of a company.

An authorised agent for many companies present in AGM shall have to be construed as a single member for the purpose of quorum.

Section 175. Chairman of meeting. (1) Unless the articles of the company otherwise provide, the members personally present at the meeting shall elect one of themselves to be the chairman thereof on a show of hands. Even selection of chairman a meeting to be made by members personally present at the meeting .

We have to make a harmonious reading of both the section 174 & Section 175 of the Companies Act 1956, members personally present shall be a valid quorum for a meeting.


Whether Authorised representative of many corporation has to be considered to be present in person for such companies ?

There is no wrong when a single individual being the nominee or authorised agent for three members. But , the issue is , if he alone present in the AGM or EGM , then it will not be a proper quorum. If two members or fives members personally present along with the proxy holder , then it would be a valid quorum.

If that individual is also member of the company and acts as a proxy for other three shareholders , then one additional member or four present in person in case of pvt ltd or public company respectively , shall be a valid quorum for the meeting.

There is no legal bar for an individual to act as a proxy for 100 other members and he can represent them as their proxy in the meeting . However , such individual cannot be construed as 100 members personally present in the meeting for the purpose of quorum.
In Kelantan Coconut Estates Ltd where the verdict was given in 1920 did speak about the authorised representatives of corporate’s should be treated individual members present in the meeting for the purpose of quorum.

This is English case law and we don't know the wordings of English Company Law that prevailed in 1920. Many amendments have come later including the last 2006 Amendment in UK Company Law.

We have to see the UK company law wordings for the interpretation of case law of Kelantan Coconut Estates Ltd.

But our Indian company law provision is so precise that it demands members personally present will be the quorum of a AGM.

In most of the cases, quorum is presumed unless there is a question about it. As a company secretary, as a prudent secretarial practice, it is better to show both in attendance and in minutes at least minimum two members present in person in private limited companies excluding proxies and authorized representatives . This is mainly to avoid unnecessary questioning of quorum if any disputes arise later on the subject.

Saturday, September 25, 2010

EXTENSION OF AGM -SECTION166 OR SECTION 210 ?

Question:

How to get extension of AGM? Whether we have to read the section 166 and section 210 of the Companies Act, 1956 harmoniously for getting extension from Registrar?


At times, it is possible due to certain unforeseen reasons; the companies may not be able to hold the annual general meeting. In such circumstances, the Registrar of Companies – for any special reasons – could grant time extension to hold the annual general meeting of the company by a period not exceeding three months.

This provision, however does not apply for the first annual general meeting of the company which is required to be held within a period of not more than eighteen months from the date of its incorporation and if the first general meeting is held within that period, the company is not require to hold any annual general meeting in the year of its incorporation or in the following year

As per section 166 of the Companies Act, 1956, the companies could hold its annual general meeting within fifteen months of the last annual general meeting. So long as the companies hold annual general meeting within the above specified time limit, no approval from any of the regulator is required for holding such meeting.

Sub-section 3 (b) of section 210 specifies that the company is required to hold its annual general meeting within six months from the end of the financial year.

At times, there is a possibility of non-compliance emerging on this subject – while compliance would be in order for section 166 for holding the annual general meeting within nine months (taking into consideration of three month’s extended period of time by ROC) , there could not non-compliance under section 210 – for not holding the annual general meeting within six months from the end of the financial year - due to different timing specified in both these sections for holding annual general meeting.

To remove this difficulty in interpreting, Department of Corporate Affairs) has issued its Circular No. 8/45(166)/64-PR dated 12-1-1965 on this subject which states that both the section 166(1) and Section 210 (4) should be read harmoniously together.

Whether for purposes of section 159 the time within which is it required to be held is governed solely by section 166.

DCA has received a reference from the Regional Director, Madras about the confirmation of the views contained in this Department's Letter No.8/45(166)/64-PR, dated 12.1.1965 [copy reproduced below] which, inter alia, stated that for the purpose of section 159, the time within which the annual general meeting is required to be held is governed solely by section 166 and section 210 is not relevant in such cases. This Department has since carefully considered the matter and do not see any sufficient reason to review the above views which are again reiterated and confirmed.
The following is the solution to the issue:

Draft a letter/ application on the letter head of the company giving the back ground about date of incorporation etc and explain the reasons as to why the company cannot convene the AGM on or before 30th September. Please note that as per the Ministry of Company Affairs Circulars:-

(a) Non Completion of Audits- both Statutory & C & AG audits are not valid reasons.
(b) Non availability of Chairman's for holding the Board meeting to obtain approval for accounts & convening the AGM are also not valid reason.

1. For instance , IFCI Financial Services Ltd got the extension as its amalgamation process was at its final stage. Where merger, acquisition is under process.

2.Preparation of accounts delayed as accounts details were corrupted due to compute virus as held in
Sera Sera Productions Case:
K Sera Sera Productions Ltd has informed BSE that the date of the Annual General Meeting was fixed as September 30, 2010. But due to some unavoidable reasons Company’s server got crashed and the backup of tally got corrupted. The Board of directors of the Company has decided to make an application to Registrar of Companies (ROC) Maharashtra, Mumbai for extension of holding Annual General Meeting. Accordingly the Company has made an application to the vide SRN A92421601 on August 26, 2010 requesting for extension of time for the purpose of holding the Annual General Meeting. The said application was approved by The Registrar of Companies (ROC) Maharashtra, Mumbai on August 30, 2010. The Company has been granted an extension for holding its Annual General Meeting upto December 31, 2010.
Source: BSE
R.V.Seckar

Saturday, September 11, 2010

Can Single Director present in India can sign the Balance sheet and P&L through a validly convened Board Meeting ?

Query : A company has two director and one director being in India and other in foreign nation. Can a Single Director sign the B/S and P& L account through a validly convened board meeting ?


Even if a single director in India signs the B/S and P&L account and makes a statement in this regard as per requirement of section 215 (2) .

215. Authentication of balance sheet and profit and loss account
(1) Save as provided by sub-section (2), every balance sheet and every profit and loss account of a company shall be signed on behalf of the Board of directors-


(i) in the case of banking company, by the persons specified in clause (a) or clause (b), as the case may be, of sub-section (2) of section 29 of the Banking Companies Act, 1949 (10 of 1949);

(ii) in the case of any other company, by its
1[* * *] manager or secretary, if any, and by not less than two directors of the company one of whom shall be a managing director where there is one.

(2) In the case of a company not being a banking company, when only one of its directors is for the time being in India, the balance sheet and the profit and loss account shall be signed by such director; but in such a case there shall be attached to the balance sheet and the profit and loss account a statement signed by him explaining the reason for non-compliance with the provisions of sub-section .

(3) The balance sheet and the profit and loss account shall be approved by the Board of directors before they are signed on behalf of the Board in accordance with the provisions of this section and before they are submitted to the auditors for their report thereon.
From the above mentioned provisions it is clear that one director in India can sign the B/S and P/L Account.

However , section 215 (3) requires even before signing B/S and P& L account , the same has to be approved by the Board.

Section 287(2) stipulates that the quorum for a meeting of the Board of directors of a company shall be one-third of its total strength (any fraction contained in that one-third being rounded off as one), or two directors, whichever is higher : ( minimum and articles may prescribe more) .

With only one director in India , a valid board meeting cannot be convened under section 287(2) of the Companies Act 1956. Hence , it is suggested an alternate director has to be appointed and this will take care of the requirement of section 287(2) of the Companies Act .

A valid board meeting can be convened with the alternate director and B/S and P&L can be ratified in such meeting .Then , B/S and P&L can be signed by a single director as stated in the section 215 or two directors can sign ( including the alternate director) the same.

This could be the possible solution to the issue.


R.V.Seckar