It is in no doubt that a company’s most important decisions are taken through its General Meetings. In India, corporate governance is generally managed by the Companies Act, 2013 and the Annual general meeting should take place as per provisions enabled in the Companies act. But, what exactly are these Extraordinary General Meetings and why should they be distinguished from normal annual general meetings? Whether are these extraordinary meetings important in the light of the sustainability of corporate governance? Let us ponder upon this topic of extraordinary general meetings and this article will be an analysis of Companies’ acts with respect to Extraordinary General Meetings.

What is Annual General Meeting?

Section 96 of the Companies act, 2013 deals with the Annual General Meeting. Annual General Meetings form an important part of corporate governance in many ways. It ensures that the shareholders’ rights of the company are protected. Directors have both statutory and fiduciary duties to perform throughout the survival of a company. But, the annual general meetings are the one which proves that ultimate control and the objectives of the company are to be vested with the shareholders of the company.

It is to facilitate this desirable objective, every year, the shareholders or the sharers of the company come together to review the workings of the company the functions performed by its board of directors. Annual general meeting requires certain important conditions and requirements to be fulfilled as per Companies act in order to be a valid meeting under the eyes of the law.

Extraordinary General Meetings:

Having known what an annual general meeting is, it is also important to understand what an extraordinary general meeting is. Under Companies act, 2013, section 100 deals with the calling of extraordinary general meetings and provides for who and when can an extraordinary general meeting be called as per law.
Section 100 sub-section (1) gives the necessary power to the Board of directors to call an extraordinary general meeting of the company. It adds the proviso, that except for the subsidiary company which has been wholly owned by a parent company, all other companies should conduct the meeting at any place within the territories of India.

Sub-section (2) of the section requires the requisition to be made by, in case of a company with share capital, the total members of the company who hold at least one-tenth of paid-up share capital of that company and should possess the right to vote on the date of the receipt of the requisition. Whereas, on the other hand, if the company does not possess the share capital, then the requisitions should be made by all the members who hold at least one-tenth of the total voting power among all the members of the company on the date of issue of requisition. If this sub-section is fulfilled, then the board can call an extraordinary general meeting of that company within the period that is specified under sub-section (4) of section 100.

Subsection (3) enables the board to set out the matters for consideration during the meeting that is to be called in the requisitions made and requires the same to be signed by the requisitions [procedure as mentioned under sub-section (2) of section 100] and to be submitted before the registered office of the company.
Sub-section (4) of section 100 states that the meeting as decided under previous subsections should, if not conducted within 21 days from the date of making of such requisition, conduct the same within the period of 45 days from the date of such requisition. It further states that if such meeting has not been commenced by the board within 45 days, then the persons who signed the requisition (requisitionists) shall have the power to commence the extraordinary meeting within three months from the date of making of requisitions. Sub-section 5 states that this meeting commenced by the requisitionists, shall be held in the same manner as that will be commenced and held by the Board of Directors.
Sub-section (6) states that the cost incurred by those requisitionists in conducting the meeting as per sub-section (4) should be reimbursed to those requisitionists and paid as a fee or as remuneration as per section 197 payable by those who were in default in commencing the meeting as per the provisions under this law.

Importance of Extraordinary Meeting under Company law:

But, what importance does an extraordinary general meeting hold in corporate governance and a company? Firstly, it is argued for the right that it ensures to the shareholders’ community. The same can be substantiated through a famous case of Life Insurance Corp. of India v. Escorts Limited (1986), where the court that each shareholder of a company has the specific right to call an extraordinary general meeting that is prescribed under the provisions of the Companies Act, 2013. He cannot be restricted from calling the meeting and is not in a position to disclose any of the resolutions proposed to be moved at the general meeting. Court also stated that the resolutions are subject to judicial review. In the same case, the court observed that when a meeting is requisitioned for the objective of removing directors of the company, it is not at all necessary for those requisitionists to expressly state the reasons for such removal that took place.
Requisitionists have been given the right over the matters that have been listed in the requisition. They cannot discuss or take up the issues that are out of their powers or rights.

Conclusion:

It is clear from the above analysis that even though the boards of directors have both the fiduciary and the statutory duties towards the company, the shareholders are the ultimate stakeholders and will perform the decoding functions that are given at every general meeting of the company.