India: Revised General Meetings Process: Secretarial Standard 2

Last Updated: 11 September 2015
Article by Jaya Moorjani

Introduction

The Ministry of Corporate Affairs notified secretarial standard 2 ("SS-2") on April 23, 2015 which came into effect from July 1, 2015. The objective of SS-2 is to ensure good corporate governance and better accountability towards shareholders in all general meetings ("GM"). Section 118(10) of the Companies Act, 2013 ("the Act") imposes an obligation on companies to strictly comply with SS-2 at all times.

This bulletin highlights the process of holding GMs by private limited companies after coming into force of SS-2. While some of the procedures are already practiced as per the Act, our aim is to provide an overview of the entire process to be followed to hold GMs now.

1. Amended Meeting Process

With effect from July 1, 2015, all Indian companies have to follow the provisions of the Act, their articles of association1 and SS-2 to convene their GMs on or after July 1, 2015. Indian law mandates convening of an annual general meeting ("AGM") within six months of the closing of the financial year to transact ordinary2 and special business.3 The gap between two AGMs should not exceed fifteen months. In case directors fail to convene the AGM, the members may also convene it. The Board or members on requisition4 may call an extra-ordinary general meeting ("EGM"), whenever required to carry out any urgent special business. AGM or EGM on requisition will be held at the registered office or some place within the same city but other EGMs can be convened at any place within India. The section below covers the process for GMs of private limited companies.

(a) Notice and Agenda – The directors have to circulate written notice to all members including directors, auditors and debenture trustees, if any, by hand, post or e-mail at least twenty-one clear5 days prior to the GM. If the company holds a GM at shorter notice for urgent matters, consent of at least 95% percent of the members is required. The company must necessarily maintain proof of dispatch. Notice should contain day, date, time, full address of venue of the GM including the route map and a statement that any individual member can appoint a proxy. Accordingly, a proxy form and attendance slip should be attached with the notice. If the company has a website, notice should be hosted there as well.

Further, the GM must be conducted on any day, except national holiday, during business hours i.e. from 9 am to 6 pm. If it is not held on the date fixed, it may be adjourned and re-convened by giving a notice at least three days before the GM. Further, the notice has to contain an explanatory statement in case of special business stating background of the resolutions.

(b) Quorum – The quorum for a GM is 2 members unless articles change this requirement. Members constituting quorum should be personally present throughout the Meeting. Proxies nominated by individual members are not counted for quorum; however, authorized representative of a body corporate is counted towards quorum. A person authorized by two or more body corporate will be treated as more than one person. However, it is not enough that one authorized representative represent 2 members for the purpose of quorum, at least two individuals should be present. Presence of the member who has already voted by remote e-voting6 also constitutes quorum.

(c) Chairman – The chairman of the board will be the chairman of the GM. If he is absent, the directors will have to elect a chairman from amongst themselves. If none of the directors are present or willing to act as chairman, the members present shall elect one of themselves by show of hands. The chairman's overall job is to ensure the GM is held in a fair and legal manner. In case of equality of votes, he has a casting vote.

(d) Proxies – A member may appoint his proxy to attend GM on his behalf at least 48 hours before the Meeting. Such appointment shall be through a proxy form which shall be duly filled, dated, signed and stamped. A proxy can only act on behalf of up to 50 members at a time so long as the aggregate shareholding represented by such proxy should not exceed 10% of the total share capital of the members carrying voting rights. However, a member holding 10% or more share capital can appoint a single person as proxy but that proxy cannot act on behalf of any other shareholder. Proxy's appointment is valid for both, the original and the adjourned GM, and he should carry a valid identity proof while attending such GMs. A proxy's authority can be revoked in writing anytime before the GM. In case a member who had appointed a proxy also attends the GM, the proxy's authority automatically stands revoked.

(e) Voting – The voting process involves a member proposing a resolution and another member seconding it. An "interested member" cannot vote in any contract in which he is a related party. The company may put all resolutions for voting by show of hands but members or the chairman may demand for poll even after the declaration of result of voting by show of hands. Further, companies having at least 1,000 shareholders can put any resolution for electronic voting or e-voting.

Remote e-voting and ballot at the Meeting – If a company circulates any resolution for e-voting, it will necessarily have to put that resolution for ballot at the GM. E-voting has to remain open for at least three days and should close by 5 p.m. preceding the Meeting day. Members who have already voted on that resolution can attend the GM but cannot vote again. In the event any member has nominated a proxy, such proxy cannot vote by show of hands but only through postal ballot. The Board will decide the last date for casting vote through the e-voting process. Such date should not be earlier than 7 days prior to the meeting date. The notice facilitating e-voting has to be circulated in the same manner as in case of other GMs but it should contain date and time of commencement and closure of e-voting, cut-off date, manner of obtaining log-in ID and password, process for e-voting and ballot at the GM, website address where notice is displayed, details of the concerned person for any grievances related to e-voting and a statement stating that e-voting cannot be allowed after the fixed date and time. It should specifically state that the members who cast their votes through e-voting can attend GM but cannot vote again.

To ensure that e-voting is carried out efficiently, the Board will have to appoint any company secretary, chartered accountant, cost accountant, advocate or any other reputed person to scrutinize the e-voting process. Such appointed person can take assistance of any other person who is not in the employment of the company but aware of the e-voting process. The scrutinizer has to submit his report within 3 days of the conclusion of the GM to the chairman for signatures. The chairman will declare the result of the voting and the number of votes for and against each resolution. He will also display such results including scrutinizer's report on the notice board of the registered and corporate office of the company as well as on its website.

Conduct of poll – Before or after the declaration of result of voting by show of hands, the chairman or the members may demand for poll. In case of poll for appointment of the chairman or adjournment of the GM, the chairman may allow an immediate poll but in other cases, it will be exercised within 48 hours of the demand. One ballot paper may be used for more than one item. The chairman will have to declare the result within 2 days of the submission of scrutinizer's report. It is noteworthy that process for appointment of scrutinizers and declaration of result is the same as for e-voting.

Postal ballot – The company which has more than 200 members can pass the following resolutions only by postal ballot: (a) alteration of object clause but in case of companies incorporated under the Companies Act, 1956, alteration of main objects only; (b) shifting of registered office from one city, town or village to another; (c) issue of shares with differential rights; (d) variation in rights attached to a class of securities; (e) buy-back of shares; (f) appointment of a director by small shareholders; (g) sale of the whole or substantially the whole of an undertaking; (h) giving loans, guarantee or security in excess of limits specified. Notice of the meeting where such resolutions shall be passed should include the postal ballot form and a postage prepaid envelope addressed to the scrutinizer along with the necessary instructions for filling and sending it back. Any resolution passed by postal ballot can only be rescinded by another resolution passed in the same manner.

(f) Minutes – The minutes have to be drafted, finalized and signed by the chairman within 30 days of the GM and entered in the minute book. However, in case the chairman is not able to sign them, any authorized director can sign. All minutes should state the date and place of signature so that no alteration can be made thereafter. The Company Secretary ("CS") or any authorized director if there is no CS, must certify the signed minutes. All resolutions passed through postal ballot should also reflect in the minutes.

SS-2 has supplemented some more provisions for maintenance of minutes such as (i) meetings, resolutions and minute sheets should be serially numbered; (ii) loose-leaf minute sheets should be bound and kept in the safe custody of CS at the registered office or at any other place with board's approval; (iii) minutes must contain company's name, serial number, type, day, date, venue and time at the beginning and conclusion of the GM; (iv) names of directors present in alphabetical order; (v) qualifications or comments on the financial transactions mentioned in auditors' report (vi) proxies and number of shares represented (vii) names of the scrutinisers appointed in case of poll (viii) unambiguous language and fair and correct summary of the noting and resolutions passed.

Further, SS-2 has widened the scope of the maintenance of minutes. Companies can maintain them electronically, but will have to comply with the provisions of "time stamp" i.e. the real time of an event is recorded by a secure computer system.7 The "time stamp" will add the time to a file ensuring compliance with all timelines mentioned in SS-2 and the Act. Electronic minutes have to be digitally signed by chairman.

2. Penalty

SS-2 applies to all types of general meetings including those with debenture-holders and creditors of all companies.8 Failure to comply with SS-2 can result in penalty of INR 25,000 (USD 384 approximately) on the company and INR 5,000 (USD 77 approximately)9 on every officer-in-default. SS-2 supplements the provisions of the Act and if a particular standard or any part thereof becomes inconsistent with the Act due to any amendments, the provisions of the Act shall prevail.

3. Impact and Conclusion

It is clear from the above that the procedure for convening GMs has become more stringent and cumbersome. It now requires a lot more compliances. Closely-held private companies and unlisted public companies have to comply with fairly stringent procedural requirements. The ultimate intent behind these changes is that companies will operate in a consistent and transparent manner and have better disclosures. All this is likely to enhance corporate governance standards and investors' confidence.

Footnotes

1 Table F contains model clauses for company's articles of association. As a matter of practice, most companies typically adopt Table F as it is unless they specifically wish to modify some clauses

2 Business relating to (i) approval and adoption of financial statements, auditors' and directors' report; (ii) declaration of dividend; (iii) appointment of non-retiring directors; and (iv) appointment or ratification or fixing of remuneration of auditors are considered as ordinary business

3 Business other than ordinary business are deemed as special business

4 Meetings by requisition have to be called by members holding at least 1/10th of the total paid-up share capital having voting rights in case of a company having share capital and by members holding 1/10th of the total voting power in cases of companies not having share capital

5 Clear days do not include the day of sending notice and the day of meeting

6 Remote voting is the facility of casting vote electronically from a place other than meeting venue

7 A system reasonably reliable and secured from unauthorized access or misuse. It should be correct and support generally accepted security features

8 The exception is one person companies that have only one director on its Board

9 Section 118(11)

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions