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.

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