Companies Act Section 100

Companies Act, Section 100: Calling of Extraordinary General Meeting

Section 100 of the Companies Act provides the legal framework for calling an Extraordinary General Meeting (EGM) of a company. An EGM is a meeting convened to discuss urgent matters that cannot wait until the next Annual General Meeting (AGM). This section outlines the rights and responsibilities of the Board of Directors, as well as the requisitioning members who may demand an EGM when certain conditions are met. Below is a comprehensive explanation of Section 100, which encompasses the procedure for calling an EGM, the requisition rights of shareholders, and the process for convening a meeting if the Board fails to act within the prescribed timelines.

Subsection (1): Board's Authority to Call an EGM

1. The Board’s Power to Call an EGM:

The Board of Directors of a company has the authority to call an Extraordinary General Meeting (EGM) at its discretion whenever it deems necessary. This provides the company with the flexibility to convene a meeting whenever there are urgent or unforeseen issues that need to be addressed before the next Annual General Meeting (AGM).

The Board of Directors may call such a meeting to discuss any business or matters that require immediate attention, such as decisions involving changes in the company’s operations, financials, or governance.

2. Place of Holding the EGM:

It is important to note that the EGM should be held within India, except in the case of a wholly-owned subsidiary of a company incorporated outside India. This ensures that EGMs, which often deal with matters of importance to the shareholders and the company’s future, are held in locations accessible to the majority of the company’s stakeholders.

Subsection (2): Requisition by Members for an EGM

1. Requisition by Members of a Company with Share Capital:

If a company has share capital, members (shareholders) holding at least one-tenth of the company’s paid-up share capital that carries voting rights have the right to request the Board to call an EGM.

The requisition must be made by these members, and they must hold the specified percentage of the paid-up share capital on the date of receiving the requisition. This ensures that those with a significant stake in the company’s affairs can demand an EGM when necessary.

2. Requisition by Members of a Company Without Share Capital:

In the case of a company without share capital, the requisition can be made by members who, together, hold at least one-tenth of the total voting power of all members who have the right to vote on the specified date. This requirement allows members, regardless of whether they hold share capital or not, to have a say in calling an EGM.

Subsection (3): Content and Procedure for the Requisition

1. Matters to be Considered at the EGM:

The requisition must clearly specify the matters that the members want to discuss or resolve at the EGM. This ensures that the purpose of the meeting is clearly communicated to the company and all members, allowing for proper preparation and a focused discussion.

The requisition must be signed by the members requesting the meeting and sent to the company’s registered office.

Subsection (4): Failure of the Board to Call an EGM

1. Failure of the Board to Call the Meeting:

If the Board of Directors does not call the EGM within 21 days of receiving a valid requisition, then the requisitioning members are allowed to call the meeting themselves.

The EGM must be convened within 45 days from the date the requisition is received. If the Board fails to act within this time frame, the requisitioning members can take matters into their own hands and arrange for the meeting to be held.

2. Time Frame for Holding the EGM:

If the requisitioning members themselves call the meeting, it must be held within a period of three months from the date the requisition was made. This ensures that any urgent matters raised by the requisitioning members are addressed promptly and within a reasonable time frame.

Subsection (5): Manner of Holding the EGM by Requisitionists

1. Procedure for Calling the Meeting:

When the requisitioning members decide to call the meeting, they must follow the same procedure as the Board of Directors would. This means that the meeting should be organized in accordance with the company’s Articles of Association and in compliance with the relevant provisions of the Companies Act.

The requisitionists are responsible for ensuring the proper notice of the meeting is given, as well as ensuring the meeting is conducted according to the company's rules and regulations.

Subsection (6): Reimbursement of Expenses Incurred by Requisitionists

1. Reimbursement of Reasonable Expenses:

If the requisitioning members have to call the meeting themselves due to the failure of the Board to do so, the company is required to reimburse the members for any reasonable expenses incurred in the process of calling and holding the meeting.

This ensures that members who act in good faith to protect their interests and the interests of the company are not unduly burdened by the financial costs of organizing the EGM.

2. Deductions from Directors’ Remuneration:

The company is entitled to recover the expenses from the remuneration or fees payable to the directors who were in default. This ensures that directors who fail to carry out their responsibilities in a timely manner are held accountable for their actions. These amounts will be deducted from the fees or other remuneration the defaulting directors are entitled to under Section 197 of the Companies Act.

Objective and Purpose of Section 100

1. Ensuring Shareholder Rights and Participation:

Section 100 is designed to protect the rights of shareholders by enabling them to call an Extraordinary General Meeting (EGM) if the Board of Directors fails to act in a timely manner. It ensures that shareholders have a voice and can convene a meeting when the Board neglects to do so, ensuring that urgent matters are not ignored.

2. Accountability of the Board:

By imposing a deadline for the Board to act and allowing the requisitioning members to call the meeting if the Board fails to do so, this section holds the Board accountable for its inaction. The provision also ensures that the requisitioning members are reimbursed for any reasonable costs incurred due to the failure of the Board, thus discouraging delays in decision-making.

3. Flexibility and Transparency in Corporate Governance:

Section 100 promotes transparency and flexibility in corporate governance. It allows shareholders to directly address urgent issues through the EGM process when the Board fails to act, ensuring that the management of the company is responsive to the needs of its stakeholders.