Extraordinary General Meeting (EGM) under the Companies Act, 2013

Extraordinary General Meeting (EGM) under the Companies Act, 2013

Introduction - An Extraordinary General Meeting (EGM) is a meeting of the members (shareholders) of a company held to consider and decide on urgent or special matters that cannot wait until the next Annual General Meeting (AGM). Unlike an AGM, which is held once every financial year, an EGM is convened whenever an important issue requiring shareholders' approval arises. The EGM enables companies to make timely decisions on significant corporate matters such as alteration of the Memorandum or Articles of Association, increase in share capital, mergers, borrowings, issue of shares, or removal of directors. It ensures that urgent business is addressed promptly while complying with the provisions of the Companies Act, 2013.

Meaning of EGM - An Extraordinary General Meeting (EGM) is any general meeting of the members of a company other than the Annual General Meeting (AGM). It is convened to transact special or urgent business that requires the approval of shareholders before the next AGM.

Legal Provisions Governing EGM - The EGM is mainly governed by the following provisions of the Companies Act, 2013:

• Section 100 - Calling of Extraordinary General Meeting
• Section 101 - Notice of General Meeting
• Section 102 - Explanatory Statement
• Section 103 - Quorum
• Section 104 - Chairman of Meetings
• Section 105 - Proxies
• Section 106 - Restriction on Voting Rights
• Section 107 - Voting by Show of Hands
• Section 108- Voting through Electronic Means
• Section 109 - Demand for Poll
• Secretarial Standard-2 (SS-2) issued by the Institute of Company Secretaries of India (ICSI)

Objectives of EGM - The main objectives of an EGM are:

• To obtain shareholders' approval for urgent matters.
• To consider special business that cannot wait until the AGM.
• To ensure compliance with legal requirements.
• To facilitate quick decision-making.
• To protect the interests of shareholders.
• To maintain transparency in corporate management.

Who Can Call an EGM? - An Extraordinary General Meeting may be called by:

1. Board of Directors - The Board of Directors may call an EGM whenever it considers it necessary to transact urgent business.

2. Members (Requisitionists) - Members holding at least one-tenth (10%) of the paid-up share capital carrying voting rights, or 10% of the voting power (where there is no share capital), may requisition the Board to convene an EGM under Section 100.

3. National Company Law Tribunal (NCLT) - If it becomes impracticable to call or conduct an EGM in the usual manner, the NCLT may order the meeting to be held and may issue directions regarding its conduct.

Notice of EGM - A minimum 21 clear days' written notice must be given to:

• Members
• Directors
• Auditors
• Other persons entitled to receive notice

The notice should specify:

• Name of the company
• Date, time, and venue of the meeting
• Nature of the special business
• Agenda
• Explanatory Statement under Section 102
• Proxy and e-voting instructions (where applicable)

An EGM may also be held at shorter notice if the required majority of members entitled to vote give their consent.

Explanatory Statement - Every item of special business must be accompanied by an Explanatory Statement under Section 102. It should include:

• Nature of the business.
• Material facts.
• Interest of directors, key managerial personnel (KMP), or their relatives, if any.
• Reasons for the proposed resolution.
• Relevant documents available for inspection.

The explanatory statement helps members make informed decisions.

Quorum for EGM - The quorum requirements for an EGM are the same as those for an AGM under Section 103.

Public Company

• Up to 1,000 members - 5 members personally present
• 1,001 to 5,000 members - 15 members personally present
• More than 5,000 members - 30 members personally present

Private Company

• 2 members personally present

If the quorum is not present within 30 minutes, the meeting is adjourned or dissolved as provided in the Companies Act and the Articles of Association.

Chairman of the EGM - The Chairman presides over the meeting and is responsible for:

• Conducting the proceedings.
• Maintaining order and discipline.
• Allowing discussions.
• Putting resolutions to vote.
• Declaring the voting results.
• Signing the minutes.

Business Transacted at an EGM - Only special business is transacted at an EGM. Common matters include:

• Alteration of the Memorandum of Association (MOA)
• Alteration of the Articles of Association (AOA)
• Increase or reduction of share capital
• Issue of bonus shares or rights shares
• Preferential allotment of shares
• Buy-back of shares
• Borrowing beyond prescribed limits
• Removal or appointment of directors
• Approval of mergers, amalgamations, or demergers
• Related Party Transactions requiring shareholders' approval
• Change in the company's name or registered office (where required)

Voting at EGM - Members may vote through:

• Show of Hands
• Poll
• Electronic Voting (E-voting), where applicable
• Postal Ballot, for matters permitted under the Act

Each resolution is passed by the required majority, depending on whether it is an Ordinary Resolution or a Special Resolution.

Proxy - A member unable to attend the meeting may appoint a proxy.Important points:

• A proxy need not be a member unless the Articles provide otherwise.
• The proxy form should generally be deposited at least 48 hours before the meeting.
• A proxy may vote on a poll and, where permitted, participate as provided by law.

Minutes of EGM - The proceedings of the EGM must be recorded in the Minutes Book. The minutes should:

• Be prepared within 30 days of the meeting.
• Contain a fair and accurate summary of the proceedings.
• Be signed by the Chairman.
• Be preserved permanently.

Role of Company Secretary in EGM - The Company Secretary plays a vital role by:

• Advising the Board on legal requirements.
• Preparing the notice and agenda.
• Drafting the explanatory statement.
• Ensuring compliance with the Companies Act, 2013 and Secretarial Standard-2.
• Arranging the meeting and e-voting facilities, where applicable.
• Verifying quorum.
• Assisting the Chairman during the meeting.
• Recording and maintaining the minutes.
• Filing required forms and resolutions with the Registrar of Companies (ROC).

Difference Between AGM and EGM

Importance of EGM - The Extraordinary General Meeting is important because it:

• Enables timely decision-making on urgent matters.
• Protects shareholders' rights by involving them in significant decisions.
• Ensures compliance with statutory requirements.
• Promotes transparency and accountability.
• Supports effective corporate governance.
• Helps companies respond quickly to changing business circumstances.

Advantages of EGM

• Quick approval for urgent business.
• Greater shareholder participation in major decisions.
• Ensures legal compliance.
• Facilitates corporate restructuring and strategic changes.
• Improves corporate governance and transparency.

Limitations of EGM

• Additional cost of convening the meeting.
• Time and effort required for organizing the meeting.
• Limited attendance by shareholders in some cases.
• Procedural and compliance requirements may be complex.

Conclusion

An Extraordinary General Meeting (EGM) is an important mechanism under the Companies Act, 2013 for obtaining shareholders' approval on urgent and special matters that cannot wait until the Annual General Meeting. It ensures that significant corporate decisions are made transparently and with the participation of the members. Compliance with statutory provisions relating to notice, explanatory statements, quorum, voting, and minutes is essential for the validity of the meeting. A properly conducted EGM strengthens corporate governance, protects shareholders' interests, and enables companies to respond efficiently to important business needs.

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