Companies Act Section 115

Companies Act, Section 115: Resolutions Requiring Special Notice

Section 115 of the Companies Act lays down the requirements and procedural aspects of resolutions that require special notice before being considered in a company meeting. This provision is particularly significant as it ensures that members of a company are given adequate notice when specific resolutions are proposed. The requirement of special notice serves as a safeguard, preventing sudden or unexpected decisions that may affect the company’s governance or operations.

This section applies to certain types of resolutions where either the Companies Act or the articles of association of a company explicitly mandate a special notice. The process involves both members of the company and the company itself, ensuring that sufficient time is given for deliberation and response before the resolution is put to a vote.

1. Requirement for Special Notice

A special notice is required in cases where either the Companies Act or the articles of association of a company specify that a particular resolution cannot be passed without such notice.

This requirement ensures that shareholders and stakeholders are well-informed in advance, allowing them to prepare for discussions or raise objections if necessary.

The provision is particularly relevant for significant corporate decisions, such as the removal of a director before the expiry of their term or the appointment of auditors under special circumstances.

2. Who Can Give Special Notice?

A resolution requiring special notice must be proposed by members of the company who meet specific qualifications related to their voting power or financial contribution. These qualifications are as follows:

Number of Members:

The special notice must be given by a group of members who collectively hold at least 1% of the total voting power in the company.

This means that shareholders with significant voting influence have the authority to request such resolutions.

Minimum Shareholding Requirement:

Alternatively, special notice can also be given by members who hold shares on which an aggregate amount has been paid up, not exceeding five lakh rupees, or any higher amount as may be prescribed by law.

This ensures that members with a substantial financial stake in the company have the right to propose such important resolutions.

These provisions prevent frivolous or unnecessary proposals by ensuring that only members with sufficient voting power or financial contribution can initiate such resolutions.

3. Obligation of the Company to Notify Members

Once the company receives a special notice, it is obligated to inform all its members about the proposed resolution. The method of notification is prescribed by the Companies Act and relevant rules and regulations.

The company must provide clear and timely communication regarding the resolution, ensuring that all members have an opportunity to participate in discussions and decision-making.

The notice must be circulated in the prescribed manner, which may include:

Publishing the resolution in company notices or circulars.

Sending written communication to all members.

Announcing the resolution on the company's website (if applicable).

Publishing the notice in a widely circulated newspaper, if required by law.

The requirement to circulate the notice in a prescribed manner ensures transparency, fairness, and proper corporate governance within the company.

4. Purpose and Importance of Special Notice

The requirement for a special notice serves several key purposes in corporate governance:

Prevents sudden or surprise resolutions: Members and stakeholders are given sufficient time to analyze and prepare for significant decisions.

Ensures shareholder participation: The notice enables all members to engage in discussions and contribute to the decision-making process.

Protects the interests of the company: Important corporate matters cannot be passed hastily without adequate deliberation.

Maintains transparency and accountability: By requiring special notice, companies foster good governance practices and prevent manipulation by a small group of members.

5. Examples of Resolutions Requiring Special Notice

Certain resolutions typically require special notice as per company law and best corporate governance practices. These include:

Removal of a Director Before Expiry of Term:

If members wish to remove a director before their tenure ends, a special notice must be given to the company, allowing the director an opportunity to respond.

Appointment of an Auditor in Place of a Retiring Auditor:

If a company intends to appoint an auditor other than the existing auditor at the annual general meeting, a special notice is required.

Reappointment of an Auditor in Certain Cases:

If the retiring auditor has been associated with the company for a long duration, and members propose appointing another auditor instead, a special notice must be issued.

Other Resolutions as Specified in the Articles of Association:

The articles of a company may specify additional cases where special notice is mandatory before passing certain resolutions.