CHAPTER 11 MEETINGS.doc

7/27/2019 CHAPTER 11 MEETINGS.doc

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DR. MD. ABDUL JALIL, COMPANY LAW, 2013

CHAPTER ELEVEN: MEETINGS AND RESOLUTIONS IN A COMPANY

MEETINGS

Companies hold different types of meeting. Those meeting are basically three types:They are:

i. Statutory meetingii. Annual general meetingiii. Extra-ordinary general meetingiv. Class meeting

i. Statutory Meeting

Only public companies limited by shares are required to hold statutory meetings.Other companies are exempted to hold statutory meeting. Statutory meeting is heldonce in the life time of public company limited by shares and is held at the beginningof company business. Every public company limited by shares must hold statutory

meeting not less than one month and not more than three month after the companyhas receive certificate of commencement of business.

ii. Annual General Meeting

Every company must hold annual general meeting in every year. The meeting mustbe held within fifteen months from the last annual general meeting. However, for thefirst annual meeting eighteen months time is given to hold the meeting. So, thecompany must hold the first annual general meeting within eighteen (18) monthsfrom the date of its incorporation.

If the company fails to hold annual general meeting within the time limit mentionedabove, the company as well as every officer of the company in default shall be guiltyof an offence. When a company fails to hold annual general meeting within the timelimit, any member can file a petition to the court requesting to order the company tohold the meeting immediately. The court may receive the petition and may order thecompany hold the meeting immediately after it has received an application from anymember of the company. [Section 143 (4) (b) of Companies Act 1965]

iii. Extraordinary General Meeting

A company may hold extraordinary general meeting whenever needed. Statutorymeeting is held once in the life time of the company and annual general meeting is heldonce in a year. In the middle of the two annual general meeting urgent situation mayarise to make some resolution. In such situation, extraordinary general meeting held bythe company to pass urgent resolution or to make some urgent decision. So, we can saythat any meeting other than statutory or annual general meeting is known asextraordinary general meeting and it is called in urgent situation. Extraordinary generameeting is called by written requisition. A written requisition is a written notice given todirectors requiring them to call an extraordinary general meeting.

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Two or more members holding not less than one-tenth of the company paid up capitacarrying voting right may call extraordinary general meeting by submitting a requisition.Where the company does not have share capital, for example a company by guarantee,members not less than one tenth of total voting right may call an extraordinary generalmeeting by requisition. Directors also my call for an extraordinary general meeting inaccordance with articles of association. For calling extraordinary general meeting 14 or21 days prior notice must be sent to every member of the company. If the company

desires to pass ordinary resolution 14 days prior notice must be sent to every memberand if the company desires to pass special resolution 21 days prior notice must be sentto every member of the company.

Class Meeting

There is another type of meeting known as class meeting might be held by the companyClass meeting is held for a specific class of shareholders for example preferenceshareholders. Class meeting might be held for specific purpose such as for variation of aclass right.

RESOLUTION:

Companies hold different meeting to decide different matters related to the companybusiness and to pass different resolution. Companies basically pass the following twotypes of resolutions:

i. Ordinary resolutionii. Special resolution

Ordinary Resolution

Ordinary resolution is passed at the general meeting by simple majority votes by themembers present at the meeting. Simple majority vote means 51% or more votes. If51% or more members are present at the general meeting vote for the resolution anordinary resolution can be passed.

Special Resolution

Special resolution is passed by three-fourth majority votes by members present at themeeting. For passing special resolution 21 days prior notice must be issued to everymember of the company. The notice must mention the purpose of calling the meeting.

Proceedings at the General Meeting

At the general meeting proceedings of the meeting must be observed. Proceedingsmean the procedure to be followed in the general meeting. The proceedings in thegeneral meeting are as follows:

i. Issuing notice for the meetingBefore the meeting is held a notice should be sent to each and every member of thecompany. It is fundamental right to every member to receive notice of the meeting. 21

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days or 14 notice should be sent depending on the type of the resolution to be passed. Ifthe company decides to pass special resolution 21 days prior notice should be sent tothe members. If the company decides to pass ordinary resolution, 14 days prior noticeshould be sent to the members.

ii. Quorum

The general meeting must fulfill the quorum requirement if it wants to pass anyresolution. To pass any resolution in the general meeting, there must have at least twomembers present at the meeting. Two members will make the quorum. Less than twomembers present at the meeting cannot make pass any resolution.

iii. Chairman

There must have a chairman of the general meeting who will preside over the meetingUsually, the chairman of Board of Directors becomes the chairman of the generameeting. In the absence of the chairman, the members present at the meeting mayappoint any member whom they think suitable and qualified may make chairman of the

meeting. The function of the chairman is to make sure that the meeting is conductedproperly and in accordance with the rules.

iv. Voting Right

The members present at the general meeting has right to vote when any resolution ispassed. The members may vote in person or through proxy. A member may appoint aproxy who can vote at the general meeting on his behalf as his agent. Voting right is afundamental right to every member. If any member is not issued notice for a meetingand he is absent in the meeting due to ignorance of the meeting and in that meeting anyresolution is passed, he can challenge the validity of the resolution passed, even he canfile a petition in the court to set aside the resolution passed. In Pender v. Lushington(1877) 6 Ch. 70, the Court of Chancery in England held that a denial of a membersvoting right at the general meeting amounts to an infringement of his personal right inrespect of which he can maintain personal legal action in the court.

v. Resolution of the meeting

A general meeting is held to pass a resolution. A company may pass two types ofresolutions in the general meeting such as ordinary resolution and special resolution. Topass ordinary resolution simple majority vote is needed and to pass special resolutionthree-fourth majority votes needed.

vi. Minutes of the meeting

The minutes of the general meeting must be written down and sign by the chairman. Alminutes of general meetings must be kept in the minutes book which is kept by thesecretary of the company in the companys office. Every member has a right to haveaccess to the minutes of the meetings and may have a copy with reasonable fees.

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If the above proceedings are followed at a general meeting, we can say that the meetinghas been a valid meeting. A valid meeting is a meeting which is convened, constitutedand conducted properly. Irregularities or defects in proceedings will not make themeeting or resolution invalid unless the court is of the opinion that substantial injusticehas been caused which may not be remedied by an order of the court.

Validity of the resolution passed

To pass a valid resolution the meeting must make sure that it follows all the proceedingsand requirements make the meeting and resolution valid. If minor irregularities ordefects are found, the court usually does not hold the resolution invalid. However, if thecourt is of the opinion that there has been failure of justice for irregularities and for notcomplying with the proceedings of the meeting, the court my declare the resolutionpassed as invalid and may order to set aside the resolution passed.

A proceeding passed under the Companies Act 1965 (Malaysia) may not be invalidatedjust because of any procedural irregularity. Section 355(1) of the Act provides:

No proceeding under this Act shall be invalidated by any defect, irregularity ordeficiency of notice or time unless the court is of the opinion that substantialinjustice has been or may be caused thereby which cannot be remedied by anyorder of the court.

Importance of having meeting and passing resolutions

It is very important to hold different types of meeting whenever needed. Statutorymeeting and Annual general meeting are compulsory for companies. The purpose ofholding meeting is to pass different types of resolution and passing resolution isimportant to accelerate the business activities. However, the resolution passed mustbe valid and just for all stakeholders in the company.

Meetings and Resolutions: An Islamic Perspective

Resolutions are passed by way of mutual consultation (shurah) of directors ormembers of the company. Allah (s.w.t.) has asked people to take decision throughshurah. Allah says in Surah Ash-Shura (42): 38 that: Waamruhum shura bainahumwhich means the believers make their decision through mutual consultation (shura).

Islam accepts meetings and resolutions passed if proper procedure is followed. Thecourt can set aside the resolution passed if it causes injustice to shareholders andother stakeholders. Example: Surah An-Nisa (4): 58, 135; Surah Al-Araf (7): 29. Surahal-Hujurat (49): 9-10.

In a hadith prophet (s.a.w.s.) said: The man who is most hateful to Allah is the onewho quarrels and disputes most. (Bukhari; Muslim). So, the members of a companyshould not quarrel and dispute while making any resolution. They need to passresolution peacefully by following the rules and regulations.

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The information presented in the general meeting must be accurate, true and fair. Inthis regard prophet (s.a.w.s.) said in a hadith that:

Truthfulness leads to righteousness and righteousness leads to paradise. Inaddition, a man keeps on telling the truth untill he becomes a truthful person.Falsehood leads to wickedness and evil-doing and wickedness leads to the (Hell)fire and a man may keep on telling lies till he is written before Allah as a liar.

(Sahih al-Bukhari).

The members of a company have right to protest against any resolution passed whichgoes against the interest of minority shareholders. In this regard prophet (s.a.w.s.)said in a hadith that:

Whoever among you sees something abominable should rectify it with his hands;and if he has not strength enough to do it, then he should do it with his tongue andif he has not strength enough to do it, then he should abhor it from his heart andthat is the least of faith. (Sahih Muslim, Sunan Tirmidhi and Sunan Ibn Majah).

If any corruption is committed by any director it is the duty of every director and theauditor to expose it to the members of the company. In this regard Imam al-Nawawistipulated that:

One who is not to be exposed must be a person who is not known for harmfulnessand corruption. But if he is corrupt, it is advisable that such a person is to be exposed.If his corruption is not exposed, he will be encouraged to do more harm, corruptionand violation of what is inviolable as well as embolden others to follow the suit. So, hemust be reported to authorities if an evil that is entailed by such reporting is notfeared.

The above statement of Imam al-Nawawi is relevant for both chapter 11 and 12.

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CHAPTER 11 MEETINGS.doc