Extraordinary General Meeting (EGM): Section 100 Of Companies Act 2013

What is an Extraordinary General Meeting (EGM)?

An extraordinary General Meeting (EGM) is a shareholders' meeting called outside of the company's annual general meeting (AGM). An extraordinary general meeting is used to deal with urgent issues that come up between shareholders' annual meetings.

EGMs are often considered emergency measures such as a quick legal settlement or the removal of a senior manager. EGM is also called a special general meeting or emergency general meeting.

In most cases, the only time the shareholders and managers meet is during the company's annual general meeting, which usually takes place on a fixed date and time.

However, certain events may require that the shareholders meet for a short period to deal with an emergency, usually involving company executives. An extraordinary general meeting is used as a way to meet and deal with urgent issues arising between the annual shareholders' meetings.

An EGM may be called to address any of the following:

· Removal of an officer

· Legal matter

· Any issue that cannot wait until the next shareholders' meeting

Another difference between an annual general meeting and an extraordinary general meeting is that the annual general meeting can only be held during office hours and not on a national holiday, and an EGM can be held on any day including holidays. Also, while a company board may only convene an AGM, the EGM may be convened by the board in connection with a shareholders' request, requisitions, or tribunal.

Matters that are Dealt Within an EGM

· It is provided in the Companies Act, 2013 that any business considered at an extraordinary general assembly shall be deemed to be a special entity.

· There are a variety of activities associated with EGM. EGM is used to remind the board of such relevant issues. It also gives the company the responsibility to provide shareholders with additional information about the issues to be addressed in the explanatory statement.

· A descriptive statement contains a declaration attached to it containing relevant information, such as the existence of concern or interest, whether financial or otherwise.

· It also provides information and facts that will help participants understand the importance and outcomes of the organization and the scope of business transactions and decision-making.

Calling an Extraordinary General Meeting

In terms of the Indian Companies Act of 2013, an extraordinary general meeting may be convened by certain members/shareholders or groups of company members who meet the following criteria:

1. If the company owns a shareholding-

Only members with 10% of the company'spayorr higher can call EGM. They must carry the voting rights on the agenda on the day of submission.

2. If the company does not have a shareholding -

The EGM may be called by the members with at least 10% of the voting power of all eligible members on the date of application.

· The members' EGM application is considered valid if they clearly state the specific matter of convening the meeting, are duly signed by members and are sent to the company's registered office. Upon submission of a valid application, the board of directors of a company must convene an extraordinary general meeting within three weeks. Should the board fail to do so, members may conduct an EGM on their own within three months of applying. EGM that meets the conditions can be postponed until the next date again.

· EGM called by the Board, upon receipt of a valid application, the Board has a period of 21 days to call the EGM. EGM must be within 45 days from the date of the EGM call.

· EGM called requisitionists, If the Board fails to convene an EGM, it may be summoned by those who wish to apply on their own within 3 months from the date of application. If the EGM is caught within the stated 3-month period, it can be postponed to any future date after 3 months.

Essentials of a Valid Requisition

The requirements for a valid application are listed below:

· Clarify the matter for which the meeting is called

· Signed by applicants; and

· It must be submitted to the company's registered office.

Requirements for hosting EGM

The 21-day notice must be given to members. However, there are exceptions to this rule. Where 95% of the voting members agree, the EGM can be held with short notice.

The required quorum for EGM

Unless Company Articles say otherwise, the following number of members is required in the quorum.

· In the case of a public company: five members are present in person; and

· In the case of any other company: two members are present in person.

The Procedure of an EGM

Before convening an EGM, the board of directors finalizes decisions to be discussed by members and/or shareholders in a meeting. Members should be informed of decisions and their priorities in advance so that they can research the matter and express their views and concerns at the meeting. Unless otherwise stated in the by-laws, at least five members must be present at EGM in the case of a public company, and at least two in the case of another company.

Usually, the EGM is run by a decision-maker. The Board, which is expected to have in-depth information on the situation, commends members on the benefits of the decision and answers their questions. Votes are cast by members in the interests of shareholders and the company, and the result is announced. Members who can attend the EGM may transfer their voting power to another member, known as a “representative.” Rules regarding representative votes vary depending on the party going to another party.

The key difference between Annual General Meeting (AGM) and Extraordinary General Meeting (EGM):

There are some key differences between AGM and EGM:

· The First Annual General Meeting (AGM) must be held within nine months from the end of the financial year. In contrast, there is no such requirement in the case of the Extraordinary General Assembly (EGM).

· Annual General Meeting (AGM) is a meeting to be organized by the company each calendar year, to discuss various business issues. On the other hand, an Extraordinary General Meeting (EGM) is any meeting other than an AGM in which business-related business management is discussed.

· The First Annual General Meeting (AGM) must be held within nine months from the end of the financial year. In contrast, there is no such requirement in the case of the Extraordinary General Assembly (EGM).

· Both general and special business are conducted at the AGM, and only specialized business is conducted at the EGM.

· The AGM should be held on any day other than a national holiday, during office hours only. Conversely, an EGM can be performed on any day including a national holiday, and at any time during the day.

· If the Annual General Meeting (AGM) is not convened within the prescribed period, a fine of up to Rs. 1,00,000 and Rs. 5000 a day is set. Conversely, there is no penalty imposed by the law for not convening a General Meeting (EGM).

· Although the AGM is only called by the board, the EGM may be called by the Board, the Board regarding the application of the shareholders, requisitionist, or court.

Section 100 of The Companies Act, 2013

[Calling of Extraordinary General Meeting]

100. (1) The Board may, whenever it deems fit, call an extraordinary general meeting of the company.

[Provided that an extraordinary general meeting of the company, other than of the wholly-owned subsidiary of a company incorporated outside India, shall be held at a place within India.]

(2) The Board shall, at the requisition made by, —

(a) in the case of a company having a share capital, such number of members who hold, on the date of the receipt of the requisition, not less than one-tenth of such of the paid-up share capital of the company as on that date carries the right of voting;

(b) in the case of a company not having a share capital, such number of members who have, on the date of receipt of the requisition, not less than one-tenth of the total voting power of all the members having on the said date a right to vote,

call an extraordinary general meeting of the company within the period specified in subsection (4).

(3) The requisition made under sub-section (2) shall set out the matters for the consideration of which the meeting is to be called and shall be signed by the requisitionists and sent to the registered office of the company.

(4) If the Board does not, within twenty-one days from the date of receipt of a valid requisition regarding any matter, proceed to call a meeting for the consideration of that matter on a day not later than forty-five days from the date of receipt of such requisition, the meeting may be called and held by the requisitionists themselves within three months from the date of the requisition.

(5) A meeting under sub-section (4) by the requisitionists shall be called and held in the same manner in which the meeting is called and held by the Board.

(6) Any reasonable expenses incurred by the requisitionists in calling a meeting under sub-section (4) shall be reimbursed to the requisitionists by the company and the sums so paid shall be deducted from any fee or other remuneration under section 197 payable to such of the directors who were in default in calling the meeting.