Meaning of Company Meeting
Ordinarily, a meeting may be defined as assembly of people for lawful purpose or coming together of at least two people for the same reason.
A Co. meeting may be defined as, “a conference or coming together of at least a quorum of members in order to transact either the ordinary or special business of the company”.
Therefore, a meeting can no more be constituted by one person than it could if no shareholders at all had attended.
Although the word meeting is not defined in the Companies Act, in Sharp vs. Dawe (1876), a meeting was defined as, “an assembly of people for lawful purpose or the coming together of at least two persons for any lawful purpose”.
Meetings are divided into: -
(a) Public Meetings: - Those meetings which consider maters of public concern and to which all members of the public have access, subject to physical limitations of the place where the meeting is held or conditions imposed by any law.
(b) Private Meetings: - Those attended by people who have a specific right to attend, for example, Committees of golf club or members of a registered company. Therefore company meetings fall under this category.
Role of Company Meetings
Since a company is an artificial person, it cannot act on its own. It is the directors, elected representatives of shareholders who are vested with the powers of control and management of the company. Since directors must work as a team, meetings are held frequently. It is at these meetings that matters relating to the company business are decided.
Similarly shareholders meetings are also important as it is here that shareholders can look after their interest by exercising the powers conferred on them by statute. These meetings provide an opportunity to shareholders to come together and take decisions for their welfare by controlling the Board of Directors and their activities.
CLASSIFICATION OF MEETINGS
(a) STATUTORY MEETING (Section 130)
Every company limited by shares and every company limited by guarantee and having a share capital shall within a period of not less than one month and not more than three months from the date of the of commencement of business, hold a general meeting called statutory meeting. This meeting is held once during the lifetime of the company.
A private company, an unlimited company or a company limited by guarantee having no share capital, is not required to hold a statutory meeting. The notice convening this statutory meeting must be given at least 21 days before the meeting, and must specifically state that the meeting is a statutory meeting.
Objects of the Statutory Meeting
The object of this meeting is to afford the shareholder an early opportunity of obtaining material information as to the circumstances of the company’s promotion and also its immediate prospects.
According to Palmer, “the object of the statutory meeting is to put the shareholders of the company at as early a date as possible in possession of all the important facts relating to the new company”.
The members have a statutory right to discuss any matters relating to the formation of the company or arising out of the statutory report whether previous notice has been given or not. The other object include: -
(i) To put members of the Co. in possession of all the important facts relating to the company, for example, what shares have been taken up, what money has been received, what contracts have been entered into and what has been spent on preliminary expenses.
(ii) To provide the members an opportunity of meeting and discussing the management methods and prospects of the company.
(iii) To approve the modification of the terms of any contract named in the prospectus.
The law accordingly requires that the directors send a report known as statutory report to every member of the company at least 14 days before the date of the meeting. However, if all the members entitled to attend and vote at the meeting agree, the report can be forwarded less than 14 days before the meeting.
Contents of the Statutory Report
The report contains all the necessary information relating to the informational aspect of the company, as follows: -
(i) Total shares allocated: – Distinguishing shares allocated as fully or partly paid up otherwise than in cash, and stating shares partly paid up, the extent to which they are so paid up and in either case the consideration for which they have been allocated.
(ii) Cash received: – The total amount of cash received by the company in respect of shares allocated.
(iii) An abstract of receipts and payments made there out up to the date of the report, and an account or estimate of the preliminary expenses.
(iv) Directors and auditors: - The memos and addresses and occupations of the directors, auditors and managers and secretary and changes that have occurred to such names, addresses and occupations since the date of incorporation of the company.
(v) Particulars of any contract and the modification or the proposed modification of any contract which is to be submitted for the approval of the members at the meeting.
(vi) The extent to which the underwriting contracts have not been carried out and reasons therefore.
(vii) The arrears, if any, due on calls from any directors and the manager.
(viii) The particulars of any commission or brokerage paid or to be paid to any director or to the manager in connection with the issue or sale of shares or debentures of the Co.
The statutory report must be certified as correct, by not less as two directors one of whom shall be the Managing Director if any. The auditors of the company shall also certify as correct regarding the shares allotted, cash received in respect of any shares and the receipts and payments of the company. A certified copy of the report shall be delivered to the registrar for registration immediately after the same has bean sent to the members of the company.
Procedure at the Meeting
At the commencement of the meeting, the board shall place a list showing the names, addresses and occupations of the members of the company and the number of shares held by them. The list shall remain open for inspection by members during continuance of the meeting. The members present at the meeting may discuss any matter relating to the formation of the company or arising out of statutory report.
But the meeting cannot pass any resolution on any item or on a subject of which notice has not been given by the Act.
Section 130 (8) provides that the meeting may adjourn from time to time and at any adjourned meting, a resolution can be passed after due notice in accordance with the articles has been given so that if the company at the original meeting wishes to pass a resolution and sufficient notice has not been given, it can resolve to adjourn for the necessary period in order to allow notice to be given.
The adjourned meeting is treated as if it is an original meeting for the purpose of transacting business.
Effects of Non-Compliance
If default is made in complying with Section 130, every director of the company who is knowingly and willfully guilty of the default, or in the case of the company, every officer of the company who is in default, is liable to fine up to Sh. 1,000 shillings.
In addition, default in delivering the statutory report or in holding the statutory meeting is one of the grounds for petition for winding up order against the company.
The court ordinarily does not take such serious view of default. So instead of making a winding up order, Section 222 (3) provides that the courts may direct the report to be delivered or the meeting to be held and order the costs to be paid by the persons in default.
(b) ANNUAL GENERAL MEETING
Every company must in each year hold, in addition to any other meeting, Annual General Meeting. The notice conveying the meeting must specify that it is a notice of the Annual General Meeting.
The first Annual General Meeting must be held within 18 months from the date of incorporation, meaning that the Co. is not required to hold an Annual General Meeting in the year of incorporation or in the next year.
For example, a company incorporated on October 1, 2004 may hold it Annual General Meeting by April 1 2006 and then no other meeting will be necessary either in 2005 or 2006. Similarly, if a company is incorporated in January 1, 2005, it may hold its Annual General Meeting within 18 months, that is, by July 1, 2006. If the meeting is held say in June 2006, the company need not hold any other meeting in the year 2005 and 2006.
Every Annual General Meeting must be held during business hours and on working days.
The registrar may, for any special reason, extend the time for holding any Annual General Meeting by any given period; but no extension of time is granted for holding the first Annual General Meeting.
There should be at least one Annual General Meeting per year and as many meetings as there are years.
Case Law: Sree Meenakshi Mills Co. Ltd vs. Assistant Registrar of Co. AIR (1938)
The Annual General Meeting of a company called in December 1934 was adjourned and held in 1935 March. The next meeting was held in January 1936, no other meeting being held in 1935. The company was prosecuted for failure to call the Annual General Meeting in 1935. The company argued that it did hold a meeting in the year 1935, but it was held by court that the meeting of March 1935 was the adjourned meeting of 1934.
If default is made in holding an Annual General Meeting, a member may apply to the registrar of companies to call or direct the calling of such meeting.
Default in accordance with provision of Section 131 or in complying with any directions of the registrar, renders the company and its officers who are in default liable to a fine up to Sh. 2,000.
Requirements of Notice
Proper length of notice must be provided by statute or articles. Section 133 of the Act provides that minimum notice required for company meetings, other than the adjourned meeting is as follows: -
(a) In case of Annual General Meeting, 21 days notice in writing is given.
(b) Incase of a meeting other than AGM or a meeting of passing a special resolution, 14 days notice in writing and 7 days incase of unlimited company.
Any provision contained in the articles shall be valid in so far as it provides for the calling of a meeting by a short notice than it is provide by this section.
Ordinary Business of Annual General Meeting
The normal business transacted at an Annual General Meeting depends upon the articles. Article 52 of Table A provides that the ordinary business of such a meeting shall be:-
(i) The declaration of dividends.
(ii) The consideration of accounts.
(iii) The election of directors in place of the retiring.
(iv) Appointment of and fixing of the remuneration of auditors.
Any business which is not defined as “ordinary business” of an Annual General Meeting is known as special business.
Section 148 of the Act provides that at the Annual General Meeting, the directors of a company must lay before the company the Profit and Loss Account.
The proceedings at the meeting are commenced by the chairman, who usually makes a speech on the company’s affairs and any other circumstances of interest to the company and also answers questions from the members if any. After this, he initiates or proposes a motion relating to the adoption of accounts and payments of dividends if any.
The next item of business deals with the proposal for election or re-election of directors. Section 184 must be complied here. This section stipulates that if single resolution is passed for election or re-election of more than one director of a public company, such a resolution is invalid unless resolution was previously passed that all the directors concerned can be elected by a single composite resolution.
Thirdly, a motion regarding the remuneration of the company’s auditors is proposed. This is obligatory.
Although the appointment of auditors must be made at this Annual General Meeting, they are automatically re-elected, provided they are qualified without any resolution to that effect, unless: -
(a) They have resigned, or
(b) They are unwilling to act, or
(c) A resolution has been passed expressly providing that they shall not be reappointed
(d) Other auditors in their place have been appointed.
Role of an Annual General Meeting
(i) It is only at an Annual General Meeting that shareholders can exercise any control over the affairs of the company. They can confront the directors, their elected representatives at least once a year.
(ii) They also get an opportunity to discuss the affairs and review the working of the company.
(iii) They can put necessary measures to protect their interests, for example, they may refuse to re-elect a director whose actions and policy they disapprove.
(iv) They can also take up any matter of the company for discussion.
(v) Appointment of auditors is done in this meeting.
(vi) Annual accounts are also presented for consideration.
(vii)Dividends are declared.
(c) EXTRA –ORDINARY MEETING (Section 312)
A statutory meeting and an Annual General Meeting are called ordinary meetings. Every other meeting of the company which is not the above is an “extra ordinary meeting”.
Extra ordinary meetings can be convened either by the directors whenever they think fit or on the requisition of members of the company, under Article 49.
Where directors think fit to convene a meting, they do so by resolution passed at a duly convened and constituted meeting of the Board. Article 52 of Table A, states that all business that is transacted at extra ordinary meeting shall be deemed as special.
The extra ordinary general meeting may be convened:-
(a) By Board of Directors on its own or on the requisition of the members.
(b) By the requisitionists themselves on the failure of Board of Directors to call the meeting.
Extra-ordinary meeting convened by Board of Directors:-
(a) On its own:– The BOD may call an extra ordinary meeting whenever some special business is to be transacted which in the opinion of the Board of Directors, cannot be postponed till the next Annual General Meeting.
(b) On requisition of members: - The requisite number of members of a company may ask for an extra ordinary general mee$ting to be held. The Board of Directors shall proceed to call such a meting. The requisition for such a meeting by the members shall be signed:-
(i) Incase of company with share capital holders of not less than 10% of the paid up capital of the company having a right of voting in regard to the matter of acquisition.
(ii) Incase of company with no share capital, by members representing not less than one tenth of the total voting power in regard to the matter of requisition.
A requisition signed by one of the joint owners of the shares has the same force and effects as if it has been signed by all of them.
The requisition shall set out all matters for consideration on which the meeting is called and shall be deposited in the registered office of the company. The directors are required to convene such a meeting within 21 days from the date of deposit of the requisition, but if the fail to do so, the requisitionists themselves may convene the meetings, as nearly as possible in the manner required by the company’s articles for convening the meeting, under Section 132.
The company must compensate the requisitionists for any reasonable expenses incurred and may repay out of sums payable by the company to such directors as were in default.
Unless the meeting is called to pass a special resolution, the requisite notice for an extra ordinary general meeting is 14 days (Saturdays, Sundays, Public holidays are not included). In case of unlimited company, 7 days notice is required, but where special resolution is required, 21 days.
(d) CLASS MEETINGS
Class meetings are generally held for obtaining the consent of a particular class of shareholders for altering their rights and privileges or for the conversion, of one class into another, for instance, there may be a meeting of preference shareholders for varying their rate of dividend.
Prima facie, a class meeting should be attended by the members of the class in order that the discussion of the matter which the meeting has to consider may be carried unhampered.
The presence of a number of persons with conflicting interests would render it impossible for the members of the class to adequately discuss the matter from their point of view.
And if the presence of the outsiders is retained in spite of the ascertained wish of the constituents of the meeting for their exclusion, it cannot be said that a separate meeting of the class had been fully held. But where the constituents of the meeting meet together and no one infact raised any objection to the presence of strangers or outsiders within the same four walls, there is no reason why their meeting should be a perfectly good meeting, as per Carruth vs. Imperical Chemicals Industries (1937).
Rights of Minority
Although the articles may allow the variation of class rights with the consent of a specified proportion of class shareholders, the minority of that particular class of shareholders has a valuable right to object.
Section 74 stipulates that the holders of not less than 15% of the issued shares of the class, being persons who did not consent to the resolution or abstained or did not vote at all, may object within 30 days to the alteration approved by the majority of the class.
The court must disallow the variation if it is not satisfied it would unfairly prejudice the shareholders of a class, but if not saTisfied, then it wilL confirm the variatiOn. A letter of the court confirming this must be sent to the registrar within 30 dayS. If memorandum or articles of the company do not provide For the variation of class of rights and it is desired that The variation be effected, then this must be done under SectiOn 207 which giv%s power to the compaNy to compromise with its credItors, or any class Of them.
Meeting of thE Board
The company is %ntitled to the combined wisdom of the directors a.d the directors are required to meet Together as a board; and directors must meeT as frequently aspossiblE. ThesEare known As board meetings. It is at these meetings that vital matteRs relatIng tothecompany are discussed and decided upon.
MeetInGsof Committees of Directors
In a large company where diRectors are many, it is often Necessary to delegate certain matters to committees of their number. But this power must be provided by the articles. By so doing, the full board will probably not need to meeT more frequeNtly.