Notice of Meeting :
The notice must be given by the proper summoning authority, which would normally be the Board of Directors. If however a notice has been issued without authority, the requisite authority may be given by ratification by the proper summoning authority before the meeting is held and notice may thus become good [Hooper Vs. Kerr, Stuart & Co. (1900) 83 L.T. 729].
Persons entitled to notice: Notice of the meeting shall be given:
(a) to every member of the company, legal representative of any deceased member or the assignee of an insolvent member;
(b) to the auditor or auditors of the company, and
(c) every director of the company. [Section 101(3)]
The company cannot take notice of the beneficial owners of shares who are, therefore, not entitled to receive notice. Where, however, anyone is legally entitled to represent the member, such representative is entitled to receive the notice.
A private company, which is not, a subsidiary of a public company may prescribe, by its Articles, persons to whom the notice should be given.
It does not always follow that all the members of a company are entitled to receive notice of meetings of the company; the Articles frequently provide that preference shareholders shall not be entitled to receive notice of and vote at general meeting of the company, except in certain circumstances. There is a statutory obligation to send notice to preference shareholders when their dividend is in arrears for more than a certain period [Section 47(2)]. This obligation arises from the fact that preference shareholders whose dividends are in arrears are entitled to attend and vote at the meeting.
The non-receipt of notice or accidental omission to given notice to any member shall not invalidate the proceedings in the meeting [Section 101(4)].However, omission to serve notice of meeting on a member on the mistaken ground that he is not a shareholder cannot be said to be an accidental omission [Musselwhite Vs. C.H. Musselwhite & Sons Ltd.(1962) 32 Comp. Cas 804]. ‘Accidental omission’ means that the omission must be not only designed but also not deliberate [Maharaja Export Vs. Apparels Exports Promotion Council (1986) 60 Comp. Cas 353.].
Length of notice: According to section 101(1) of the Companies Act, 2013, a general meeting of a company may be called by giving not less than clear twenty-one days’ notice either in writing or through electronic mode in such manner as may be prescribed.
However, section also provides that a general meeting may be called after giving a shorter notice if consent is given in writing or by electronic mode by not less than ninety-five per cent. of the members entitled to vote at such meeting.
The Delhi High Court held in Bharat Kumar Dilwale Vs. Bharat Carbon and Ribbon Manufacturing Co. Ltd. and other (1973) 43 Comp. Cas 197 that the expression “not less than 21 days notice” appearing in Section 101 of the Act implies a notice of 21 whole or clear days i.e. a period of 21 days excluding the day from which it ran and the day on which the notice expired. Part of the day, after the notice would be deemed to have been served, could not be added up to part of the day immediately before the timing of the meeting so as to construe one day. Each of the 21 days must be full or a clear day. Following the Supreme Court’s interpretation of the expression “not less than one month” that the first day and the last day of the month had to be excluded, the day of service of the notice and the day of the meeting were excluded from the computation of 21 days.
Consider the following practical situation:
ABC Ltd. called its annual general meeting on 7th September, 2005. The notice of AGM was posted on 16th August, 2005. One member holding 20 shares wishes to challenge the resolutions passed at the AGM on the ground that the notice was not valid. What advise would you give to him?
According to Section 101(1) of the Companies Act, 2013, a general meeting of a company may be called by giving not less than 21 days notice in writing. Not less than 21 days means 21 clear days i.e. excluding both the date on which the notice was served and the date of the meeting. In case the notice of the general meeting is sent by post, service of notice of the meeting shall be deemed to have been effected at the expiry of 48 hours after it was posted.
In the instant case, the notice was short of two days as per the section:
| 16th August to 7th September | 23 days |
| Less date of service and date of meeting | 2 days |
| 21 days | |
| Less 48 hours from the time of its posting | 2 day |
| 19 days |
Therefore, the meeting was invalid and the resolutions passed were invalid. However in case of Annual General Meeting, where all members entitled to vote consent, the meeting may be held on shorter notice.
However, there are different High Court judgments relating to the question as to whether the requirement as to the period of notice is directory or mandatory.
In Saliesh Harilal Shah v. Matushree Textiles Ltd. (1994) 2CLJ, 291, the Bombay High Court [in contrast to the Madras High Court decision in N. Chettair(v) the Madras Race Club (1951] held that the requirement of the section as length of notice is directory only and not mandatory. A couple of shareholders cannot be permitted to defeat the interest of the large body of shareholders by saying that the duration of the notice was not sufficient even if the short notice does not indicate any prejudice to the complaining shareholders.
In this problem, the member may be advised to explore whether he has suffered any prejudice by the short notice before proceeding to challenge the validity of the resolutions.
A general meeting may be called after giving a shorter notice if consent is given in writing or by electronic mode by not less than ninety-five per cent. of the members entitled to vote at such meeting. [Section101(1)]. Note that all members can similarly agree to the accounts being sent to them not less than 21 days before the annual general meeting [Section 136(1)].
It may be noted that consent means ‘consent of members entitled to attend and vote’ and ‘not of members entitled to vote and present’. Under the Section 101 It would be seen that the requirement as to 21 days ‘notice may be dispensed with by agreement of the members, entitled to attend and vote and not merely of the members entitled to vote and present in person or proxy at the meeting. It, therefore, requires an agreement by not less than ninety-five per cent. of the members entitled to vote at such meeting in order to dispense with the requirement of 21 days notice. The section, in other words, indicates the intention on the part of the Legislature that the provision is mandatory and that it can be dispensed with only by the agreement of the members. It is not enough that the members present at the meeting indicated either expressly or impliedly that they consented to or acquiesced in shortening the period of notice [N.O.R Nagappa Chettiar Vs. Madras Race Club (1949) 19 Comp. Cas.].
According to the section 136 of the Companies Act, 2013 statement of account, auditors’s report together with all necessary annexures or attachments can be sent to members not less than 21 days before the date of meeting . The formalities prescribed by Sections 101 and 136 are independent of one another, the copies of the documents referred to in Section 136 are to be despatched also to persons other than those entitled to receive the notice of the general meeting. Moreover, consideration of annual accounts, etc., cannot be treated as identical and hence at par with the consideration of other business coming before the shareholders. Therefore, the shareholders must be given sufficient time to peruse the documents mentioned in Section 136.
If a meeting is called without notice to a shareholder the omission not being accidental, it is invalid and all proceedings therein are also invalid. A meeting was convened for December, 1969 but deliberately notice of the meeting was not sent to S and his wife. At that meeting B and S were elected as directors, but were to hold office only till April, 1970. In the next meeting, S was not elected and B and his wife were elected as directors. The contention of S was that since the meeting of December, 1969 was invalid, the meeting of 1970 was also invalid and so were the appointments of B and his wife. The omission to send the notice was not accidental.
Held that all the proceedings of April, 1970 meeting suffered from the infirmity of the December, 1969 meeting being invalid, and could not confer any legitimacy on the proceedings held at the alleged meeting of April, 1970. Any proceedings at this meeting of April, 1970 would be obviously unauthorised and illegal [Eastern Linkers (P) Ltd. Vs. Dina Nath Sodhi (1984) 55 Comp. Cas 462 (Delhi)].
Service of notice: The notice may be served personally or sent through post to the registered address of the members and in the absence of any registered office in India, to the address, if there be any, within India furnished by him to the company for the purpose of serving notice to him or through electronic mode. Service through post shall be deemed to have effected by correctly addressing, preparing and posting the notice. If, however, a member wants the notice to be served on him under a certificate or by registered post with or without acknowledgment due and has deposited money with the company to defray the incidental expenditure therefore, the notice must be served accordingly; otherwise service will not be deemed have been effected. Service on the joint holder may made by serving it on the one whose name appears first in the register of members. Service of notice shall be deemed to have been effected in the case of notice of meeting on the expiry of 48 hours since the posting of the same. When a notice is advertised in a news paper circulating in the neighbourhood of the registered office of the company, it is regarded as having been served on day on which the advertisement appears, on every member having no registered address in India and who has not supplied to the company an address within India for giving notice to him. Note that Section 20 applies to all documents and not merely service of notice of meetings.
According to the Companies (Management and Administration) rules, 2014, the company may serve the notice in electronic mode in following manner.
(1) A company may give notice through electronic mode. The expression ‘‘electronic mode’’ shall mean any communication sent by a company through its authorized and secured computer programme which is capable of producing confirmation and keeping record of such communication addressed to the person entitled to receive such communication at the last electronic mail address provided by the member.
(2) A notice may be sent through e-mail as a text or as an attachment to e-mail or as a notification providing electronic link or Uniform Resource Locator for accessing such notice.
(3) (i) The e-mail shall be addressed to the person entitled to receive such e-mail as per the records of the company or as provided by the depository:
Provided that the company shall provide an advance opportunity atleast once in a financial year, to the member to register his e-mail address and changes therein and such request may be made by only those members who have not got their email id recorded or to update a fresh email id and not from the members whose email ids are already registered.
(ii) The subject line in e-mail shall state the name of the company, notice of the type of meeting, place and the date on which the meeting is scheduled.
(iii) If notice is sent in the form of a non-editable attachment to e-mail, such attachment shall be in the Portable Document Format or in a non-editable format together with a ‘link or instructions’ for recipient for downloading relevant version of the software.
(iv) When notice or notifications of availability of notice are sent by e-mail, the company should ensure that it uses a system which produces confirmation of the total number of recipients e-mailed and a record of each recipient to whom the notice has been sent and copy of such record and any notices of any failed transmissions and subsequent re-sending shall be retained by or on behalf of the company as ‘‘proof of sending’’.
(v) The company’s obligation shall be satisfied when it transmits the e-mail and the company shall not be held responsible for a failure in transmission beyond its control.
(vi) If a member entitled to receive notice fails to provide or update relevant e-mail address to the company, or to the depository participant as the case may be, the company shall not be in default for not delivering notice via e-mail.
(vii) The company may send e-mail through in-house facility or its registrar and transfer agent or authorise any third party agency providing bulk e-mail facility.
(viii) The notice made available on the electronic link or Uniform Resource Locator has to be readable, and the recipient should be able to obtain and retain copies and the company shall give the complete Uniform Resource Locator or address of the website and full details of how to access the document or information.
(ix) The notice of the general meeting of the company shall be simultaneously placed on the website of the company if any and on the website as may be notified by the Central Government.
Explanation.- For the purpose of this rule, it is hereby declared that the extra ordinary general meeting shall be held at a place within India.
Where a person refuses to accept notice served by registered post, under section 27 of the General Clauses Act, such tender of the registered cover and his refusal to accept the same is vaild service, in accordance with law [Joginder Singh Palta Vs. Time Travel (.P) Ltd. (1984) 56 Comp, Cas. 103 (Cas)].
Where the photocopy of the purported notice of two meetings, one of the board of directors and another an extraordinary general meeting of the company to consider the removal of a permanent director, was sent to the permanent director under certificate of posting despite protests by the said director by registered acknowledgment due post that he had not been receiving notices of meetings, it was held that such notice was not properly served and meetings either could not be held or if they were held there was no proper notice to the director and hence the meetings were invalid. [Tarlok Chand Khanna Vs. Raj Kumar Kapoor (1983) 54 Comp. Cas 12 (Delhi)].
It should be noted that an improper or insufficient notice, as well as absence of notice, may affect the validity of a meeting and render the resolutions passed at the meeting ineffective [See Boschoek Proprietary Company Vs. Fuxe (1906) I Ch.148; Bailu Vs. Oriental # Company (1915) I Ch.503]. But the accidental omission to give notice does not invalidate proceedings at meeting [Section 101(4)]. The requirement of 21 days notice is not mandatory and an accidental omission to give a notice of less than 21 days ‘does not invalidate the meeting.
The annual general meeting for 1980-81 and 1981-82 were convened on 7-10-1983 belatedly and with great difficulty. The notice of the meeting was published in a newspaper of Calcutta on 12-9-1983. The shareholders received the notice 22-9-1983 which was shown to have been posted on 16-9-1983. The notice was dated 9-9-1983. D sought an injunction that the resolutions passed at the meetings are not given effect to, on the ground that the notice was received by him on 22-9-1983. D held only seven shares of ` 10 in the company and was a resident of Calcutta where the meeting was to be held. He was not prejudiced by the short notice in anyway. The question was whether the shortness of the notice invalidated the meeting.
Held that Section 101(1) makes it abundantly clear that it is not a condition precedent to the holding of the annual general meeting of a company that a clear 21 days’ notice must be given to each and every member of the company. The accidental omission to give notice to any member or non-receipt of notice by any member shall not invalidate the proceedings at the meeting. If the contention of D was to be upheld it would mean that whereas if the notice to a shareholder was not accidentally posted at all, the proceedings at the annual general meeting of a company would be valid, but if the notice was posted accidentally less 21 days before the meeting, the proceedings at the meeting will be void even though the shareholder received the notice in good time before the meeting was held an actually attended the meeting. Hence, such a construction would lead to absurdity and should be avoided. The contention could not, therefore be accepted that a short notice served on member will invalidate meeting altogether but non-receipt of the notice by a member will not have the same effect. In view of the clear provisions of Section 101, it cannot be said that the requirements of Section 101 are mandatory and a short notice given to any member will render the entire meeting void and of no legal consequence even if that the member has not suffered any prejudice in any way. On the facts of the case that the notice of the meetings was published in a newspaper in good time, the shareholder was a resident of Calcutta; advertisement was given in a newspaper having circulation in Calcutta the two annual meetings were held at Calcutta; the shareholder had not been able to make out any case of any prejudice at all; and that two annual meetings were at last held after protracted litigations, there was no reason why the resolutions passed at the annual general meeting should not be given effect to merely because one shareholder having 7 shares of ` 10 actually each received the individual notices less than 21 days in advance. The balance of convenience did not required an order of injunction [Calcutta Chemical Co. Ltd. Vs. Chandra Roy (1985) 58 Comp. Cas 275 (Cal)]. Further if a notice of meeting is published as a newspaper advertisement, the statement of material facts, referred to in Section 102, need not be annexed, but the fact that the statement shall be forwarded must be mentioned.
Contents of notice: Every notice of a meeting shall specify the place, date, day and the hour of the meeting and shall contain a statement of the business to be transacted at such meeting. Section 102 of the Companies Act, 2013 provide that a statement setting out all the material facts concerning each item of special business to be transacted at a general meeting shall be annexed to the notice calling such meeting.
(1) Material facts related to special business: According to section 102 of the Companies Act, 2013, following are the material facts-
(a) the nature of concern or interest, financial or otherwise, if any, in respect of each items of—
(i) every director and the manager, if any;
(ii) every other key managerial personnel; and
(iii) relatives of the persons mentioned in sub-clauses (i) and (ii);
(b) any other information and facts that may enable members to understand the meaning, scope and implications of the items of business and to take decision thereon.
(2) Special Business: For the purposes of sub-section (1),—
(a) in the case of an annual general meeting, all business to be transacted thereat shall be deemed special, other than—
(i) the consideration of financial statements and the reports of the Board of Directors and auditors;
(ii) the declaration of any dividend;
(iii) the appointment of directors in place of those retiring;
(iv) the appointment of, and the fixing of the remuneration of, the auditors; and
(b) in the case of any other meeting, all business shall be deemed to be special:
Section further says that, where any item of special business to be transacted at a meeting of the company relates to or affects any other company, the extent of shareholding interest in that other company of every promoter, director, manager, if any, and of every other key managerial personnel (KMP) of the first mentioned company shall, if the extent of such shareholding is not less than two per cent. of the paid-up share capital of that company, also be set out in the statement.
(3) Details of time and place of inspection of documents given in the statement: Where any item of business refers to any document, which is to be considered at the meeting, the time and place where such document can be inspected shall be specified in the statement under sub-section (1).
(4) Non-disclosure or insufficient disclosure in any statement: Where as a result of the non-disclosure or insufficient disclosure in any statement referred to in sub-section (1), being made by a promoter, director, manager, if any, or other key managerial personnel, any benefit which accrues to such promoter, director, manager or other key managerial personnel or their relatives, either directly or indirectly, the promoter, director, manager or other key managerial personnel, as the case may be, shall hold such benefit in trust for the company, and shall, without prejudice to any other action being taken against him under this Act or under any other law for the time being in force, be liable to compensate the company to the extent of the benefit received by him.
(5) Default in compliance: If any default is made in complying with the provisions of this section, every promoter, director, manager or other key managerial personnel who is in default shall be punishable with fine which may extend to fifty thousand rupees or five times the amount of benefit accruing to the promoter, director, manager or other key managerial personnel or any of his relatives, whichever is more.
A notice must clearly specify the business, which is to be transacted at the meeting to which the notice relates; otherwise the notice would be bad. It should make a full and frank disclosure to the shareholders of the fact, on which they would be expected to vote. [Tiessien Vs. Henderson (1889) 1 Ch. 861; Narayanlal Bansailal Vs. Manekji Patel Mfg. Company, 93, (Bom) L.R.556].
Where the business to be transacted at the meeting is considered as special, an explanatory statement must be annexed to the notice convening the meeting setting out all material facts concerning each item of business, nature of the concern or interest, if any, of every director and the manager (Section 102). It must also state the time and place where the documents in respect of such items can be inspected. Where the special business relates to another company the extent of shareholding/ interest of every director, etc. is necessarily, to be disclosed only if the shareholding interest is not less than 2 % of the paid-up capital of that other company (Student should not confuse ‘special business’ with ‘special resolution’). Where the statement annexed to the notice of the meeting contains full and frank disclosure of the material facts concerning each item of business must essentially depend upon the facts of each case. A very minor defect arising out of strict non-conformity with the provisions contained in Section 102 might not render the resolution null and void [Joseph Michael Vs. Tranvancore Rubber & Tea Co. Ltd. (1986) 59 Comp. Cas.898 (Ker.)].
The explanatory statement must give all facts, which have a bearing on the question on which shareholders have to form their judgement. The explanatory statement, which is required to be annexed under Section 102, is for the purpose of ensuring that all facts that have a bearing on the question on which shareholders have to form their judgement are brought to their notice. Company C had, at a meeting convened under Section 230, approved a scheme of amalgamation with company B. Later, some shareholders to consider alternative scheme in the interest of the company requisitioned an extraordinary general meeting. The explanatory statement did not mention any specific scheme, but it was contended by the requisition insist that in the two annual reports of the company there was a mention of proposal from M, for the lease of C’s factory which had been sent for legal advice and, therefore, the shareholders must be deemed to be aware of the alternate scheme even though the explanatory statement did not specifically refer to this proposal of M. Further, the annual reports did not contain the scheme proposed by M. The question was whether the explanatory statement was insufficient and misleading.
Held that in the explanatory statement there was not even a reference to the proposal of M. If the purpose of calling the requisitioned meeting was to consider the scheme proposed by M, it should have been so stated. The explanatory statement was insufficient and misleading; The requirements of law were not complied with and all relevant facts in the present case, and the alternative schemes were not put before the shareholders fairly and, accordingly, the requisition for calling the impugned meeting was bad in law [Centron Industrial Alliance Ltd. Vs. Pravin Kantilal Vakil (1985) 57 Comp. Cas.12 (Bom.).]
Section 102 is designed to secure that facts having a bearing on the issue on which the shareholders have to form their judgement, are brought to the notice of the shareholders so that they can exercise intelligent judgement.