Extraordinary General Meetings: Purpose and Procedures

An EGM, or Extraordinary General Meeting, is a meeting of company members convened to address urgent business matters that cannot wait until the next Annual General Meeting (AGM). Unlike AGMs, which are held once a year, EGMs can be called at any time to seek shareholder approval on significant issues that arise between AGMs.

Purpose of an Extraordinary General Meeting

The primary purpose of an EGM is to make decisions on critical matters affecting the company and its shareholders. These matters may include:

• Amendments to the company’s articles of association
• Approval of major transactions, such as mergers or acquisitions
• Appointment or removal of directors
• Changes to the company’s capital structure
• Approval of financial statements

EGMs are crucial for ensuring transparency and accountability within a company. They allow shareholders to voice their opinions, ask questions, and participate in decision-making.

Relevant Regulations  

• Sections 100, 101, 108, and 118 of the Companies Act, 2013.
• Rules 18 and 20 of the Companies (Management and Administration) Rules, 2014.
• Secretarial Standard on General Meeting (SS-2).
• Regulations 30, 42, 44, and 46 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

Advantages of an Extraordinary General Meeting

• Flexibility: EGMs can be convened anytime, enabling swift decision-making on unforeseen and critical matters.
• Specialized Focus: EGMs can be tailored to address specific topics, fostering a more concentrated and efficient discussion.
• Greater Participation: Shareholders who cannot attend the AGM can engage and express their views on significant issues through EGM participation.
• Increased Transparency: EGMs provide a platform for shareholders to seek clarifications, ask questions, and gain deeper insights into the company’s operations and affairs.
• Changes in Company Structure: EGMs can be called to deliberate and sanction changes in the company’s structure, such as mergers, acquisitions, or other transformative actions.
• Resolving Deadlocks: EGMs offer the chance for shareholders to reevaluate and potentially break the deadlock on particular issues, ensuring a conclusive decision.

Mandatory Requirements

• Distribution of gifts, gift coupons, or cash instead of gifts to members during or in connection with the General Meeting is prohibited.
• Companies listed on a recognized stock exchange and those with a membership of at least 1,000 members must provide electronic voting facilities for members to exercise their voting rights on proposed resolutions during a general meeting.
• A quorum must be maintained throughout the meeting, and no business can be conducted if the quorum is not met (as per Clause 3.1 of the Secretarial Standard on General Meetings).
• The presence of the Chairperson is essential.
• The Minutes Book must be maintained for the signing of meeting minutes.

Procedure for Extraordinary General Meetings

The EGM procedure entails several vital steps:

Appointment of Scrutinizer:

• Companies listed on recognized stock exchanges or with at least 1,000 members must enable electronic voting for resolutions at general meetings.
• A Scrutinizer, independent of the company, is appointed to oversee the voting and e-voting process fairly.
• Consent of a Chartered Accountant, Cost Accountant, Company Secretary in practice, Advocate, or another independent person is required for their appointment.

Board Meeting:

• Conduct a Board Meeting, following Section 173 and Secretarial Standard on Board Meeting (SS-1).
• Provide notice of the Board Meeting to all Directors at least seven days in advance or shorter notice in case of urgent business.
• Attach the agenda, notes, draft resolutions, and terms and conditions for appointing the Managing Director (MD) or Whole-Time Director (WTD).
• Pass a Board Resolution to:
  • Set the date, time, and venue for the General Meeting.
  • Approve the draft notice of the General Meeting with the explanatory statement.
  • Authorize the Director or Company Secretary to issue the notice and take necessary actions.
  • Appoint a scrutinizer for e-voting.
  • Appoint an agency for remote e-voting.
  • Determine the cut-off date for member voting rights.
  • Authorize the Chairman or another director to receive the Scrutinizer’s reports and related documents.

Draft Minutes:

• Prepare and circulate draft minutes within 15 days of the Board Meeting to all Directors for their comments.

Notice of General Meeting:

• Provide a minimum of 21 days’ notice for the General Meeting, either in writing or electronically.
• Send the notice to every Member, Director, Auditor, Secretarial Auditor, Debenture Trustee (if applicable), and other specified persons.
• Include a statement of special business in the notice.
• For listed companies, submit a copy of the notice to the stock exchange(s) and post it on their website within specified timelines.

Advertisement of Notice in Newspaper:

• Publish the notice in a vernacular and an English newspaper with wide circulation in the district where the company’s registered office is located.
• For listed companies, submit a copy of the advertisement to the Stock Exchange and post it on the website.

Remote E-Voting:

• Allow remote e-voting for at least three days, closing at 5:00 p.m. on the day before the General Meeting.
• Members holding shares as of the cut-off date can opt for remote e-voting.

Proxy Register:

• Maintain a chronological register of all proxies received.
• Record reasons for rejecting any proxy in the remarks column.

Documents at the Venue:

Ensure that the following documents are available at the General Meeting venue:

• Copy of the meeting notice.
• Ballot form.
• Register of Members.
• Proxy registers.

Convene the General Meeting:

• Verify the presence of a quorum before commencing the meeting.
• The Chairman of the Board presides over the meeting, or if absent or unwilling, a Director or Member is elected as Chairman.
• Directors and the Company Secretary sit with the Chairman.
• The Chairman conducts the meeting, ensuring that only agenda items from the notice are addressed and overseeing the voting process.
• The Chairman explains resolutions and allows Members to seek clarifications or offer comments.
• Provide e-voting for eligible Members.

Vote of Thanks:

Ensure a vote of thanks is given to the Chair after the General Meeting.

Disclosure of Proceedings:

Listed companies must submit a disclosure of the General Meeting proceedings to the Stock Exchange and post it on the company’s website within specified timelines.

Announcement of E-Voting Results:

The Scrutinizer submits a report on the total number of votes for or against the resolutions.

• The Chairman or authorized person declares the results.
• Post the results at least three days at various locations on the company’s website.

Preparation and Signing of Minutes:

Follow the procedures outlined in Section 118 and SS-2 for the preparation and signing of minutes.

Who can Call for an EGM?

An Extraordinary General Meeting (EGM) can be called by the members or shareholders of a company, but there are specific requirements outlined in the Companies Act, 2013:

For Companies with Share Capital:

• Members holding at least one-tenth of the company’s paid-up capital carrying voting rights can call for an EGM.

For Companies without Share Capital:

• Members holding at least one-tenth of the total voting power regarding the matter can call for an EGM.

EGM Called by the Board:

• When a valid requisition is received, the Board has 21 days to call for an EGM.
• The EGM must then be held within 45 days from the day it is called by the Board.

EGM Called by the Requisitionists:

• If the Board fails to call for an EGM, the requisitionists can call for it within three months from the date the requisition was deposited.
• If the EGM is held within this specified 3-month period, it can be adjourned to any future date after the three months.

Difference Between AGM and EGM

The distinction between an Annual General Meeting (AGM) and an Extraordinary General Meeting (EGM) primarily lies in their purpose and frequency:

Frequently Asked Questions

What is the main purpose of an EGM?

An EGM is held to address urgent business matters that cannot wait until the next Annual General Meeting (AGM), such as major transactions, amendments to the company’s articles, or changes in the company’s capital structure.

Who can call for an EGM?

An EGM can be called by the company’s board of directors, or by members holding at least one-tenth of the company’s paid-up capital or voting power, as per the Companies Act, 2013.

What is the required notice period for an EGM?

A minimum of 21 days’ notice is generally required for an EGM, but in urgent situations, shorter notice may be provided if all members entitled to vote agree.

How does an EGM differ from an AGM?

An EGM is called to address specific urgent matters and can be convened at any time, while an AGM is a mandatory annual meeting held to discuss the regular business of the company.

Conclusion

EGMs are duly convened meetings of the members/shareholders of a company held between two annual general meetings to address an urgent need; they facilitate the management of urgent issues that cannot be delayed till the next annual general meeting. Shareholders and executives of companies often meet once every year for an annual general meeting to discuss various aspects of the company and its future. However, while this meeting is held on a fixed date and time and occurs every 12 to 18 months, at times, between two annual meetings, there might be a need to call the executive and shareholders to discuss urgent matters. InstaFiling can assist with the entire process of convening and conducting an EGM, from drafting notices and resolutions to ensuring compliance with legal requirements and maintaining proper documentation. Our expert team ensures that your meetings are conducted smoothly and efficiently, adhering to all regulatory standards.