Company Law Content
- General Meeting is a major organ. Ordinarily, a meeting may be defined as assembly of people for a lawful purpose or the coming together of at least two persons for common objects.
- But a company meeting may be defined as a concurrence or coming together of at least a quorum of members in order to run of company.
- Company’s meetings are of considerable importance.
- Since a company is an artificial person, it cannot act on its own, The directors meeting is important. Important matters relating to control, management and business of company are decided by the directors’ meetings.
- Similarly, shareholders meeting (general meetings) are also important because shareholders, who have invested the capital, can exercise their power conferred by law for their security and fulfillment of interest.
- The meeting provides opportunity to shareholders to come together and take decision for their welfare by controlling the board of directors. Besides, there are certain matters which can be only decided only by the shareholders.
- Mainly there are 2 types of meeting in a company one is meeting of BOD section 97. The next is meeting of shareholders General Meeting (Section 67 to 77 of Nepalese Company Act.)
- Generally the shareholders’ meeting formulates policies, gives the guidelines to the Board of Directors, and holds the right like a parliament. The amendment of MOA and AOA, to pass the financial statement of company are main functions of general meeting.
- There are certain matters which can only be decided by the shareholders. Therefore shareholders’ meeting is held time to time.
- So, meeting is an assembly or gathering of person for some business or for discussion. General meeting is the type of meeting where all members/ shareholders of company can participate and decide on the matters provided by MOA, AOA, and Consensus Agreement (in case of private company)
- General meeting is the highest governing organ of company, the directors’ meeting determines the control and management of company the general meeting controls and gives guide lines to the boar of directors on the limitation of area provided by law, MOA and AOA.
- Generally directors are appointed by general meeting. Directors are accountable to general meeting individually and collectively, general meeting is an important assembly to show the control over the management by shareholders for their interest.
- A company is a kind of democratic association. To exercise the rights of shareholders the shareholders meeting are held time to time in a company. The shareholders’ meeting is general meeting but all meetings of shareholders are not general meetings. The general meetings constitute the board of directors’. The board of directors gets legitimacy or authority through the authority of the general meeting.
Type of General Meeting
- In Nepal ,the Companies Act 2063 mention about 2 types of general meetings.
- As per Section 67(1) of the Acts- The general meetings of company will be;
- Annual General Meeting (AGM)
- Routine or scheduled meeting
- Every company must conduct the AGM annually within the determined time frame and as per the procedures stipulated in MOA, AOA, and concerned statutes.
- Sec 76(1) – every public company shall hold its first general meeting after it is licensed to commence business, thereafter it shall hold the annual general meeting every year within six months after expiry of financial year.
- 76(2)- In case of failing to call annual general meeting within this time frame, after expiry of time limit the office may extend another 3 month time limit on the request of company on the basis of reasonable grounds.
- Sec 76(3) – If a company fails to call AGM even within this extended period, the shareholder may file a petition to court for the general meeting, court issues the appropriate order.
- Extra – Ordinary General Meeting(EGM)
- This is nonscheduled meeting.
- EGM is depended upon the situation or if there is necessity to call meeting in any time the company extra ordinary meeting.
- Section 82
- If it deems necessary.
- In course of examining accounts of company if it deems necessary
- if directors fail to call general meeting.
- On the request of auditor- section – section 82 (2)
- On the request of shareholder –section 82(3)
- On the basis of inspection of ‘office’- section 82(3)
- The shareholders can file petition to CRO and CRO issues the orders to call EGM.
Types of General Meeting
- Preliminary General Meeting ( PGM)
First general meeting section 76(1) of the Nepalese Company Act does not directly tell the preliminary general meeting but the matters of shares, the amount collected by shares are decided in PGM. It can be mentioned AoA.
- Annual General Meeting (AGM)
- Extra – Ordinary General Meeting (EGM)
Power and Functions of General Meeting
- Like the power of legislative on the basis of theory of check and balance.
- The powers of general meetings are used by the shareholders by adopting resolutions in such meetings.
- GM makes policy level decision. Generally, the important functions of GM are;
- To constitute BoD.
- Discussion on reports and resolutions.
- To pass Board’s report, financial report and auditors report.
- Appointment of auditor.
- Determination of dividend.
- To exercise supreme power to conduct the company in better way.
- Amendments in MoA & AoA.
- As being the supreme organ of company, the general meeting has following special powers and function as per Nepalese legal provision which are as follows;
- Conversion of private company in to public company- section 13(1)(a)
- Conversion of public company into private company section 14 (Necessary amendments in MoA & AoA)
- Issuance of premium shares section – 29(1) (C)
- Alteration in share capital Increment of capital-section – 56(5)
Reduction of capital section – 57(1)
- Discussion on resolution submitted by the directors in the situation of loss of net worth of company section- 60(1)
- Buyback of shares; section 61(2)(d) on the basis of various reasons the General Meeting must approve for it .
- Issuance of shares on discount – Section 64(2)
- Discuss on the matters to be submitted in general meeting; Section 77(1),such matters are;
– Audited Financial Report
– Audit Report
– Report of Board etc.
- Decision on dividend, appointment of directors and their remuneration, appointment of auditor and their remuneration; Section 77(6), Section 111(1) Section 118
- Adoption of special resolution sec 83 This section is specially related )
- Appointment and Removable of directors from office.
Section 87(1), 89(3) (b)
- Power to determine ,remuneration, allowance, reward etc. of directors.- Section 91
- By ordinary resolution;
- By adopting special resolution;
– grant a reward in a sum not exceeding 3% of net profits after payment of income tax to the directors who work full time in a company as to encourage them.
-Power to permit the compensation to the directors for relief or retirement – section 91(4)
- m) Approval of transaction of director and their close relative with companies- sec 93.
- n) To instruct the BOD on the powers and duties .Section 95(1)
0) power to specify the remuneration and other facilities to MD/CEO sec 96(3)
- P) Power to ratify any act or transaction done by a director beyond the authority conferred to him-section 103(3)
- q) Power to permit the authority of directors relating to receiving the loan and major transaction.
- r) Power to adopt special resolution relating to liquidation of company- Section 126(1).
- s) Power to appoint liquidator and auditor in the process of liquidation – Section 127.
- t) Power to make decision regarding merger – Section177 (1) by adoption special resolution.
- u) Power to issue bonus share- Section 179
- v) Power to determine and provide the dividend, Section 182(8)
– All power and duties where special resolution is needed, that falls under the scopes of power and duties of general meeting.
– Approval of BOD’s strategy in the situation of loss of net worth of company, Section 60.
Notice for General Meeting
- For public company –Section 67(2).
- Section 67(11) for private company (as per provision of AoA).
- Time, date and venue – the district where registered office of company situated or such place adjoining to district of registered office. Section 67(4)
- Earlier notice
21 days for Annual General Meeting.
15 days for EGM.
7days in case of failing in above mentioned time.
- In notice, there must be agenda Section 67(2).
- All such procedures of private companies will be as per the provisions of AoA & Consensus Agreement.
- Quorum must be followed as per Section 73 in case of public company, but for private company as specified in AoA.
- But not mandatory for profit not distributing company & company converted by corporation, Section 3(3) ,73 (4) & 173.
Validity or legality of general meeting
- Section 69 speaks that before general meeting commences legality of meeting should be ascertain.
Special and General Resolution
- Resolution is a proposal or motion.
- Set of declaration
- Set of proposal, presented for discussion or decision,
- The resolution are presented in General meeting, such as;
– In AGM
– In EGM
-in Board Meeting.,
- Section 74(2) – agenda of meeting shall be presented in form of resolution.
Nepalese Company Act provides two types resolution;
- Section 83 of Nepalese Company Act provides the matters requiring special resolution such as;
- Change in MOA &AOA, Section – 21.
- Regarding remuneration, allowance, reward etc. of directors Section -91 (2).
- Approval of transaction of directors beyond their working scope, Section -103(4).
- Restriction on authority of directors to conduct major transactions or to obtain loan, Section – 105(1).
- In case of voluntary liquidation, Section -126(1).
- A proxy may be defined as a person authorized to act and vote for another at a meeting, through the expression is commonly applied to the document by which proxy is appointed.
- A proxy is a person, representative of shareholders of a meeting of company, who may be described as his agent to carry out a course which the shareholder himself decided upon.
- Section 71(2) provides the option for appointment of proxy determining certain conditions.
(Single Shareholder Company has no compulsion to conduct a general meeting, Section 152)
-If a Company fails to submit report (approved by general meeting) on CRO for regular 3 consecutive financial years, such company’s registration cancelled. (Section – 136)
Procedural Formalities for General Meeting
-A company is not corporately assembled so as to transact any business, unless the meeting is convened by a proper notice.
-Notice is an advance intimation of the meeting so as to give the person receiving it an opportunity to prepare himself for it.
-Every member of company is entitled to a notice of every general meeting and such notice will be in and must be given in certain writing duration of days before the date of meeting.
-The first and essential requisite of a valid meeting is that it should be called by proper authority .Obviously the proper authority is the board of directors. Similarly the second requirement of a valid meeting is that a proper notice of meeting should be given to members of the company.
-‘Corporately assembled’ means that meeting shall be one held upon notice which gives every corporates the opportunity of being present.
Contents of Notice
Notice should specify the agenda, place, day and hour of meeting to be a valid meeting must be held at the day, place and time specified.
Statement of Business (agenda)
-a notice must contain a statement of business to be transacted. Generally there are two types of statement of business, namely;
- a) General business (general agenda)
at the annual general meeting, there must be the directors report, Financial statement , declaration of directors and auditors and fixing the remuneration.
- b) Special business (special agenda)
Any other business than above mentioned business and all business presented in extra ordinary general meeting (EGM) are regarded as special business.
-As per legal provision of section 67 subsection 2 of Nepalese Companies Act 2063 B.S.
A public company shall send a notice specifying the agenda of meeting to every shareholder at the address given by that shareholder at the address given by that shareholder to the company, in advanced of at least 15 days to hold extra- ordinary general meeting. A notice thereof shall also be published at least twice in national daily newspapers.
Proviso of 67(2)
If such meeting is adjourned in first time a notice of that meeting published in a national daily newspaper in advanced of at least seven days shall be deemed to have been duly given .But there should be same agenda to enjoy the seven day notice.
For private companies-
Section 67 subsection (11) – As AoA specifies.