Sandeep Ahuja & Co.

Established in the year 1986, we are a leading chartered accountancy firm based in Delhi & NCR rendering comprehensive professional services which include statutory audit, internal audit, direct tax, transfer pricing, GST, bank audit, propriety audit, cost accounting, internal financial controls and risk advisory.

Monday, August 11, 2014

Provisions relating to Notice of General Meetings as per New Companies Act, 2013

The provisions relating to notice of General meetings as per New Companies Act :

Ø  Every company except one Person Company shall hold Annual General meeting in each year in addition to any other meetings and notice calling the meeting shall mention the same.

Ø  The gap between two Annual General Meetings should not be more than 15 months.

Ø  In the case of first Annual General meeting, it should be held within 9 months from the close of the financial year and in all other cases within 6 months from the close of the financial year.

Ø  Every AGM shall be called during business hours (between 9am to 6Pm) on any day which shall not be a National holiday

Ø  Every AGM shall be held at the registered office or at such other place but within the registered office location.

Purpose and importance of the Proper Notice

Ø  The purpose of the Notice with specified length is to enable a member of the company to read, understand the financial statements, performance and to raise any questions on the state of affairs and to enable members to issue special notice to the company for certain resolutions as per provisions of Section 115

Ø  Any improper notice invalidates proceedings of General meetings and puts the approvals at the General meetings to nullity for want of proper notice.

Ø  However any accidental omission to give notice or non receipt by any member or any other person entitled to receive notice shall not invalidate the proceedings – Sec.101 (4) or Section 111 for circulation of members’ resolutions.


Persons entitled to receive Notice

As per Section 101(3) provides that Notice of every meeting shall be given to:
Ø  Every member of the company
Ø  Legal representative of decease member & Assignee of insolvent member
Ø  Auditor of the company
Ø  Every director of the company.


The Length of notice and Shorter Notice

 A notice calling a General meeting has to be in writing and to be given at least 21 Clear Days before the meeting date. The new Act has added the expression “clear days”. It means day of giving of notice and day of the meeting are to be excluded.

The new Act permits issuance of notice by electronic mode. Sec.101 (1)

A shorter notice of less than 21 Clear Days is valid for calling a General Meeting if consent is given by not less than 95% of the members entitled to vote at such meeting and such consent can be either in writing or by electronic mode. Sec.101(1)


Contents of the notice and Statements to be annexed to the Notice:

Section 101(2) provides that every valid notice calling the meeting shall specify the place, date, day and time and it should contain a statement of the business to be transacted at such meeting.

Section 102 provides that a statement setting out material facts for each item of special business to be transacted at the General meeting shall be annexed and contain the following particular details:

Ø  Nature of concern or interest whether financial or other wise of every director, Manager, Key Managerial personnel(KMP) and their relatives

Ø  Any other information which facilitates better understanding of the businesses to be transacted

Ø  In the case of special business to be transacted relates to or affects any other company, then the extent of shareholding in that other company of the promoters, directors, Manager, KMP of the company, if the extent of such shareholding is not less than 2% (earlier it was 20% ).

In the case of AGM any business other than the Ordinary Business shall be Special Business Section 102(2). Ordinary Business is:-

Ø  Considering the financial statements with Auditors’ report & Directors’ report
Ø  Declaration of dividend
Ø  Appointment of directors retiring by rotation    
Ø  Appointment of Auditors and fixation of their remuneration


Consequences of non disclosure of material facts in Notice

Any benefits which accrued as a result of such non disclosure/insufficient disclosure to
Promoter, Director, Manager or any other KMP who are in fiduciary position will not only be liable to compensate the company for the loss but also be liable for the consequences under other acts.

A criminal/civil action can be launched for breach of trust/misappropriation/cheating etc.
  
Section 102(5) provides a fine up to Rs. 50,000/- or 5 times of the profit accruing to promoter, director, manager or an KMP whichever is more can be levied on the defaulting officer in case of failure to comply with the provisions of section 102(1),
  
Conclusion & Precaution:

Penal provisions in the New Companies Act 2013 provide for strict abeyance of provisions and ensure transparency from the promoters/directors/Mangers/ Key Managerial Personnel in drafting of notice and disclosure of material facts of any item of special business to be transacted. 

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