Article on Annual General Meeting of Companies

Annual General Meeting is a yearly get-together of members of a company to participate as well as raise their voice in its management. Although it’s a statutory obligation but very often in well-functioning companies it bestows an opportunity to members to exchange views, appraise the activities of directors, perusal of financial statements, consider any recommendation as to dividend etc. Sometimes disputes among the members of a company may result delay or cause impracticable plight in calling AGM and to overcome the situation the interference of the company court is not very unusual.

Every company (whether public or private) shall in each year of the Gregorian calendar hold its Annual General Meeting and not more than 15 (fifteen) months shall elapse between 02 (two) meeting. The Registrar of Joint Stock Companies and Firms may, on an application made by a company within 30 days from the date of expiry of the aforesaid period, extend the time for a further period not exceeding 90 days or not exceeding 31^st December, whichever is earlier. A company may hold its first AGM within a period of 18 (eighteen) months from the date of its incorporation and the Registrar shall not be entitled to extend the said period.

If any default is made in holding the meeting, the company and every officer of the company who is in default, shall be punishable with fine which may extend to ten thousand taka and in case of a continuing default, with a further fine which may extend to two hundred fifty taka for every day after the first day during which such default continues. The mere facts that the organization is a private limited company and all the members are from a single family and there is no dispute among the members regarding the management of the company, it shall not exempt them from the responsibility of holding AGM in time. “It is the duty of the board of directors to call an annual general meeting after the close of the financial year and discharge functions imposed on them by the provisions of the Act, and they are bound to place the balance sheet and profit and loss account before it.” [40 Comp Cas 17 (Pat)]

Annual General Meeting may be convened by 14 (fourteen) days’ notice in writing stating the time and place of meeting. A shorter notice shall be sufficient if all the members entitled to attend and vote thereat so agreed in writing. The notice shall be served on every member with the statement (agenda) of the business to be transacted at the meeting. “In determining whether a notice given by the directors of a meeting gave sufficient notice of the business to be conducted at the meeting, each case has to be considered on its own merits with reference to the nature of the articles of the company concerned, the nature of the notice given and the nature of the business placed before the meeting.” (AIR 1931 Bom 354). In Young –Versus- Ladies’ Imperial Club reported in [1920] 2 KB 523 it was held that as the notice of a meeting did not state the object of the meeting with sufficient particularity it was invalid and consequently the proceedings of that meeting were invalidated.

But accidental omission to give notice or the non-receipt of notice by any member shall not invalidate the proceedings of the meeting. ‘Accidental’ means happening by chance or accident, unintentional, by inadvertence, happening or causing without design, intent or through inattention etc. Where deliberately and designedly notices were not given to some of the members and there was no excuse of accidental omission, the meeting was held to be invalid. [55 Comp Cas 462 (Del)]

The members whose registered addresses are in enemy territory must be treated as alien enemies irrespective of their nationality. So long as they retain the character of alien enemies their right of voting is suspended. [1915] 2 Ch 124.

Subject to the provisions of Articles of Association (AoA) any member elected by the members present at a meeting shall be entitled to preside over the meeting. Unless AoA provides otherwise for private limited company whose number of members does not exceed six, two members and if such number exceeds six, three members personally present shall form a quorum. In case of any other company the quorum shall be formed by personal presence of five members.

A member may cast his/ her vote either personally or by a proxy. Proxy means “a person appointed, usually by written authority, by a person entitled to vote personally, to vote at the discretion of the proxy” (Encyclopaedic Law Lexicon, 4^th Edition, Volume-3).

Schedule I of the Companies Act, 1994 prescribes the Form for appointment of a proxy which shall be signed by the member and if the member is a corporation or a company it shall be executed either under seal or under the hands of an officer or by duly appointed attorney. The said executed instrument should be deposited at the registered office of the company not less than forty-eight hours before commencement of meeting.

In United Western Bank Ltd reported in (2002) 3 Comp LJ 247 (CLB) it was held that a proxy cannot be a company as a company, being an artificial entity cannot be present, vote or speak in a meeting. Therefore, a company cannot be appointed as a proxy.

“The practice in general meetings is for voting to take place on a show of hands, a poll is taken only if a valid demand is made. On show of hands each member will have one vote irrespective of the number of shares held….Where a poll is taken all members can cast their votes according to the number of shares held and this therefore gives a more accurate picture of the opinion of the shareholders. Uncontroversial resolutions are normally voted on by a show of hands only but where an issue is disputed, a member can demand a poll be taken.” [Company Law by Alan Dignam & John Lowry, page-260. (8th edition)]

Five members present in person or by proxy, or the chairman of the meeting, or any member or members holding not less than one-tenth of the issued capital carrying voting right shall be entitled to demand a poll. Provided that in case of private limited company, if not more than seven members are personally present, one member, and if more than seven members are personally present, two members, shall be entitled to demand poll.

In AGM the members can appoint or remove directors, pass audited accounts, approve recommended dividend and participate in other businesses transacted at the meeting within the ambit of law. After commencement of meeting it may be adjourned but the adjourned meeting must be held within the maximum time limit fixed by law.

The Board of Directors may postpone or cancel any notice convening an annual general meeting but it should not be exercised except for bona fide and proper reasons. [1968] 1 Comp. LJ 21. But the voting rights of members shall be determined as at the date of the meeting and not as they would have been if the meeting had been held within the prescribed time. [1962] 1 ALL ER 201.

Holding AGM beyond the prescribed time will not invalidate the meeting and any resolution passed in such meeting shall not suffer from any legal infirmity although it only lead to imposition of penalty, as prescribed.

To overcome any impracticable situation for holding Annual General Meeting the court may interfere with necessary order. Even for holding meeting the court may appoint an independent person to preside over such meeting. 38 DLR (AD) 296.

Annual General Meeting can play a dynamic role to ensure transparent as well as accountable management in business organizations. Due to constant monitoring of several regulatory authorities most of the companies listed in stock exchanges have been holding their AGM in time although still there are some loopholes. With the pace of time the number of small entrepreneurs in private companies have been increased and to protect these small investors the concerned regulators may pay more attention.

Md. Nazrul Islam Khan is an Advocate of the Supreme Court of Bangladesh and can be reached at nikhan.law.ru@gmail.com