Extraordinary General Meeting

Extraordinary General Meeting: The Meeting for Business That Will Not Wait

The annual general meeting is held once a year, on a predictable schedule. But business does not always wait for the annual cycle. Matters of urgency or significance may arise between AGMs — a proposed merger or acquisition, an alteration of the company's capital structure, a change of auditors, the removal of a director, the issue of new shares, the approval of a related-party transaction above thresholds — that require the decision of the shareholders in general meeting but that cannot be deferred until the next AGM. The extraordinary general meeting (EGM) is the company's mechanism for addressing such matters: a general meeting called outside the ordinary course, to transact specific, identified business.

Who May Convene an EGM

The Companies Act, 2013 recognises several routes to the convening of an EGM, each responding to a different initiator. By the board: the board of directors may, whenever it deems fit, call an EGM to transact any business it considers necessary or expedient — the most common route, used by boards to seek shareholder approval for matters arising between AGMs. On requisition by members: under Section 100 of the Act, members holding at least 10 per cent of the paid-up share capital (in the case of a company having share capital) or at least one-tenth of the total voting power (in other cases) may requisition the board to call an EGM. If the board fails to call the meeting within a reasonable time (45 days), the requisitionists may themselves call the meeting — a powerful minority right. By the Tribunal: under Section 98, where for any reason it is impracticable to call or hold a meeting of a company (other than an AGM) in the manner prescribed, the National Company Law Tribunal may, on application, order the meeting to be called, held, and conducted in such manner as it thinks fit, and may give such ancillary or consequential directions as it considers expedient. By the National Company Law Tribunal on oppression/mismanagement applications: in proceedings under Section 241, the Tribunal may order meetings to be held.

Procedure, Business, and Distinction from AGM

The procedure for an EGM follows, in most respects, the rules applicable to general meetings: notice of at least 21 clear days (or shorter notice if agreed by members holding at least 95 per cent of the paid-up share capital in the case of a private company, or such other percentage as prescribed), agenda, explanatory statements for special business, the recording of proceedings, and the conduct of votes (by show of hands, poll, electronic means, or postal ballot, as applicable). The business transacted at an EGM is by definition 'special business' — there is no 'ordinary business' of an EGM as there is of an AGM — and each item requires an explanatory statement setting out the reasons for the proposal and any other material facts. The principal matters commonly addressed at EGMs include: alteration of the memorandum (changing the company's name, objects, registered office, or capital); alteration of the articles; issue of shares on a preferential basis; approval of related-party transactions; appointment or removal of directors; change of auditors; buyback of shares; reduction of capital; and the approval of schemes of arrangement (mergers, demergers). The distinction from the AGM is principally one of frequency and business: the AGM is held annually and transacts the ordinary business (financial statements, dividend, director rotation, auditor appointment); the EGM is held as and when required and transacts whatever specific business necessitates it. Both are general meetings of the company, with full member participation and voting, and the resolutions passed at each are binding on the company. The flexibility to convene EGMs as needed is essential to the company's ability to respond to events and opportunities between annual cycles — a mechanism of agility within the otherwise structured framework of corporate decision-making.

“Business will not wait for the annual meeting — opportunities arise, crises emerge, decisions must be taken. The extraordinary general meeting is the company's instrument of agility: a meeting called as and when needed, to address the matters that the year's routine cannot accommodate. In its formality, it mirrors the AGM; in its frequency and purpose, it serves the company's need to act.”