Differentiating AGM and EGM:
The Companies Act of 2013 does not define the term “meeting”. Usually, a meeting means a gathering of people to discuss or finalize some matters. In the context of a company, meetings are held among directors or shareholders to discuss matters about corporate performance and strategy. The meetings of shareholders are called general meetings and that of the directors are called Board meetings.
General Meetings can be classified into three types:
- Annual General Meeting (AGM): This type of meeting is held once a year to approve the financial statements and other ordinary business of a company.
- Extra-Ordinary General Meeting (EGM): This type of meeting is held to transact some special business that may not be deferred to the next Annual General Meeting.
- Class Meetings: These are meetings of a particular class of shareholders e.g., preference shareholders. Only the members of that particular class are entitled to attend and vote at these meetings.
In this blog, we shall be differentiating between an AGM and an EGM and their respective provisions under the Companies Act.
What is an Annual General Meeting?
The Annual General Meeting (AGM) is an annual meeting of the members of a company. In this meeting, the members approve the audited annual financial statements of the company for a given financial year. The members also get an opportunity to ask questions and express their views on the performance of the company during the financial year.
Every company except a “One Person Company” is required to hold in each year an annual general meeting of its members.
What is the purpose of calling an AGM?
The objective of calling an AGM is to discuss/transact the ordinary businesses of the company which may include the following:
- To approve audited financial statements for the financial year
- To declare dividends
- To appoint directors in place of retiring ones
- To appoint and fix the remuneration of auditors
(Subsection 2 of Section 102)
Apart from the above, the members may also approve any other special business.
Who can call an AGM?
The Board of Directors of a company has the authority to convene an AGM and in case it fails, the members can approach the appropriate authority to call the meeting.
In case the Board fails to convene the AGM, any member of the company, may make an application to the National Company Law Tribunal. On receipt of the application, the Tribunal may call or direct the calling of an AGM and give such ancillary or consequential directions as the Tribunal thinks expedient. (Section 97)
What is the statutory time limit for holding an AGM?
- Every company should hold an AGM once each year.
- The first AGM of the company should be held within 9 months from the close of the first financial year. Besides this, it will not be necessary for the company to hold any separate AGM in the year of its incorporation.
- Subsequent AGMs of the company should be held within 6 months from the date of close of the relevant financial year.
- The gap between two AGMs shall not exceed 15 months.
(Subsection 1 of Section 96)
Can the Company seek an extension for holding AGM?
If a company is not able to hold an AGM within the time specified, it may seek an extension of time to hold the AGM from the Registrar of Companies. The Registrar may, for any special reason, extend the time period of holding the AGM up to 3 months. But no such extension will be granted by the Registrar for the holding of the first AGM. (Third proviso to Subsection 1 of Section 96)
What is an Extra-Ordinary General Meeting?
In terms of law, every general meeting of the members of a company other than an AGM is known as an Extra-Ordinary General Meeting (EGM).
An EGM is usually held between two AGMs. It is called upon to discuss/transact some urgent matter (special business) that cannot be postponed until the next AGM of the Company.
Who can call an EGM?
An EGM may be called by the Board itself or on the requisition of members. In some cases, it may also be called upon by the requisitionists themselves or by NCLT.
1) By the Board: The Board of directors of a company may, whenever it deems fit, call an EGM of members. (Subsection 1 of Section 100)
2) By the Board on the requisition of members: The members of the company may also make a requisition to the Board to hold an EGM. The Board will call the meeting on the requisition of members provided the requisition is made by:
- members holding at least 1/10th of the paid-up share capital of the company that carries voting rights (in case of a company having a share capital) or
- members holding at least 1/10th of the total voting power of the company (in case of the company not having a share capital) (Subsection 2 of Section 100)
The Board of directors should proceed to call the meeting within 21 days from the date of receipt of a valid requisition and the meeting should be held within 45 days of receiving the requisition. (Subsection 4 of Section 100)
3) By the requisitionists themselves: The EGM may also be called upon by the requisitionists themselves, in case the BOD fails to call the meeting on requisition. In that case, the requisitionists may call and hold the meeting within 3 months from the date of requisition made by them. (Subsection 4 of Section 100)
For this purpose, the company is required to reimburse all reasonable expenses incurred by the requisitionists in calling and holding the meeting. Such an amount will be deducted from the fee/remuneration payable to the directors who defaulted in calling the meeting. (Subsection 6 of Section 100)
4) By National Company Law Tribunal:
If a company is not able to call an EGM, the NCLT also has the power to direct the holding of the meeting. Any director or member of the company may also make an application to the National Company Law Tribunal for holding the EGM. (Section 98)
What is a valid requisition?
In order to be valid, the requisition should include all the matters for which the meeting is to be called. It should be signed by all the requisitionists and sent to the registered office of the company. (Subsection 3 of section 100)
Difference Between AGM and EGM
The table below compiles the important points of difference between an AGM and an EGM:
|Meaning of AGM||Meaning of EGM|
|The Annual General Meeting (AGM) is an annual meeting of the members of a company.||In terms of law, every general meeting of the members of a Company other than an AGM is known as an Extra-Ordinary General Meeting (EGM).|
|Applicability of AGM||Applicability of EGM|
|It is applicable to all companies except one person Company.||It is applicable to all companies.|
|Who can convene an AGM?||Who can convene an EGM?|
|The Board of Directors of a company has the authority to convene an AGM and in case it fails, the members can approach the appropriate authority to call the meeting.||An EGM can be convened by: |
1) By the Board
2) By the Board on the requisition of members
3) By the requisitionists themselves
4) By National Company Law Tribunal
|Mandatory to hold||Not mandatory|
|It is mandatory to hold an AGM once each year.||It is not mandatory to hold an EGM.|
|Nature of business transacted at AGM||Nature of business transacted at EGM|
|The objective of calling an AGM is to discuss/transact the ordinary businesses of the company. At times, members may also approve any special business.||An EGM is called upon to discuss/transact some urgent matter (special business) that cannot be postponed until the next AGM.|
|The time limit for holding the first AGM||The time limit for holding the first EGM|
|The first AGM of a company should be held within 9 months from the close of the first financial year.||There is no time limit prescribed for holding an EGM of a company.|
|The time limit for holding subsequent AGMs||The time limit for holding subsequent EGMs|
|Subsequent AGMs of the company should be held within 6 months from the date of close of the relevant financial year. The gap between two AGMs shall not exceed 15 months.||There is no time limit prescribed for holding an EGM of a company. An EGM is usually held between two AGMs.|
|Time and day of an AGM||Time and day of an EGM|
|An AGM should be held on any day other than a national holiday and during business hours, i.e., between 9.00 a.m. to 6.00 p.m. (Subsection 2 of Section 96)||An EGM called by the Board may be held on any day (including national holidays) and during any time of the day (including close of business hours). However, an EGM called by the requisitionists should be held during business hours and on a day that is not a national holiday. (As per SS-2)|
|Place/venue of an AGM||Place/venue of an EGM|
|An AGM of a company should be held at the registered office of the company or at some other place within the city, town, or village in which the registered office of the company is situated. |
However, in the case of an unlisted company, if all the members give their consent in writing or by electronic mode, the AGM can be held at any place in India. (Subsection 2 of Section 96)
|An EGM of a company is to be held at any place within India. However, an EGM of a wholly owned subsidiary of a company incorporated outside India may be held at a place outside India. (Proviso to subsection 1 of Section 100) |
As per secretarial standard-2 on general meetings, a meeting called by the requisitionists shall be held either at the registered office of the company or at some other place inside the city, town, or village wherein the registered office of the company is situated.
|Punishment for default in holding AGM||Punishment for default in holding EGM|
|If a company defaults in holding an AGM or in complying with any of the directions of the Tribunal, the company and every officer of the company who is in default shall be punishable with a fine not exceeding Rs. 1 lac, and in the case of continuing default, with a further fine not exceeding Rs. 5,000 for every day during which the default continues. (Section 99)||There is no penalty prescribed for not holding an EGM. However, if a company fails in complying with any of the directions of NCLT in connection with EGM, the same penalty levied u/s 99 applies.|
Conclusion (AGM vs EGM)
Both AGM and EGM are equally important for any company. Also, the process of conducting an AGM and EGM of a company is similar. The only key difference between the two meetings is that in an AGM, both ordinary and special business items are considered and approved. Whereas, in EGM, only items of special business are considered and approved. Both the meetings give an opportunity to the members to interact with the Company.
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