General Meeting Notice: 21 Clear Days, Who Gets It, and the Explanatory Statement

A resolution is only as sound as the meeting that passed it. Sections 101 and 102 of the Companies Act, 2013 set out how a general meeting is called: the notice period, what the notice must say, who must receive it, and the statement that must accompany special business. This article covers those two sections. Members' power to requisition a meeting (s.100) is a separate topic.

Twenty-one clear days, with a 95 per cent exception

"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 maybe prescribed" (s.101(1), Companies Act 2013). The word "clear" matters: the Act asks for twenty-one clear days, not merely twenty-one days on the calendar, so plan the dispatch date with room to spare rather than counting to the last day.

A meeting can be called on shorter notice only with consent, "in writing or by electronic mode", and the thresholds differ by meeting type (first proviso to s.101(1)):

Annual general meeting (AGM): consent of "not less than ninety-five per cent. of the members entitled to vote thereat".
Any other general meeting, company with share capital: consent of members who are a majority in number of the members entitled to vote and who represent not less than ninety-five per cent of the part of the paid-up share capital that gives a right to vote at the meeting.
Any other general meeting, company without share capital: members having not less than ninety-five per cent of the total voting power exercisable at the meeting.

Two points follow from the wording. First, the test for a general meeting other than an AGM is double: head count and value. A single holder of 96 per cent cannot shorten the notice alone if the company has several members. The "majority in number" limb would fail. Second, under the second proviso to s.101(1), a member who is entitled to vote only on some resolutions is counted for those resolutions and not for the others.

What the notice must contain

"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" (s.101(2)). All four particulars are required, together with the business statement. A notice that names the venue and date but leaves out the hour does not meet the sub-section.

Who must receive the notice

Notice of every meeting must go to (s.101(3)):

every member, the legal representative of a deceased member, or the assignee of an insolvent member;
the auditor or auditors of the company; and
every director of the company.

Directors and auditors are on the list even where they have no vote on the business. Keep the member register, and the auditor and director contact details, current before each dispatch.

Accidental omission

"Any accidental omission to give notice to, or the non-receipt of such notice by, any member or other person who is entitled to such notice for any meeting shall not invalidate the proceedings of the meeting" (s.101(4)). The protection is for accidental omission or non-receipt. The sub-section does not say that deliberate exclusion of a member is protected, so do not rely on it where a notice was left out on purpose or an outdated address was knowingly used. Keep proof of dispatch for every recipient.

The explanatory statement for special business

A statement of material facts must be annexed to the notice for "each item of special business" (s.102(1)). It must set out:

(a) Interests: "the nature of concern or interest, financial or otherwise, if any" of every director and the manager (if any), every other key managerial personnel (KMP), and the relatives of those persons; and
(b) Decision facts: "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".

What counts as special business

For an AGM, all business is deemed special except four items (s.102(2)(a)):

consideration of financial statements and the reports of the Board of Directors and auditors;
declaration of any dividend;
appointment of directors in place of those retiring; and
appointment of, and fixing of remuneration of, the auditors.

For any other meeting, such as an extraordinary general meeting (EGM), "all business shall be deemed to be special" (s.102(2)(b)), so every item needs the statement.

Shareholding in another company

Where an item of special business "relates to or affects any other company", the statement must also give the shareholding of every promoter, director, manager and other key managerial personnel in that other company, if it is not less than two per cent of that company's paid-up share capital (proviso to s.102(2)).

Documents referred to

Where an item refers to a document that is to be considered at the meeting, the statement must specify the time and place where the document can be inspected (s.102(3)).

Consequences of poor disclosure

Suppose a promoter, director, manager or KMP discloses too little in the statement, and a benefit accrues to that person or their relatives, directly or indirectly. That person holds the benefit in trust for the company. They are liable to compensate the company to the extent of the benefit (s.102(4)). In addition, on default in complying with the section, each promoter, director, manager or KMP in default is liable to a penalty of ₹50,000 or five times the amount of benefit accruing to that person or any relative, whichever is higher (s.102(5)).

A worked example: can an EGM be held tomorrow?

A private company has four members holding 40, 30, 20 and 10 per cent of the voting capital. All four are entitled to vote on the business. The founders want an EGM tomorrow and have consents from the three largest holders.

Head count: three of four is a majority in number. This limb is met.
Value: 40 + 30 + 20 = 90 per cent, which is below 95 per cent. The value limb fails, so the consent is insufficient (s.101(1), first proviso, (ii)(a)).
With the fourth member: four of four in number and 100 per cent in value. Both limbs are met.

If the same company were holding an AGM, the test is 95 per cent of the members entitled to vote (s.101(1), first proviso, (i)). Three of four members is 75 per cent, so that consent also fails. In both cases, collect the written or electronic consents before the shorter notice goes out, and keep them with the minutes.

Drafting the statement members can decide on

The standard in s.102(1)(b) is that members can understand the meaning, scope and implications of the item. For a related-party contract, for example, a statement would name the counterparty, say how each interested director, KMP or relative is connected to it, state the value and term, and explain what happens if the resolution is not passed. A statement that only repeats the resolution text gives members little to decide on. Prepare the statement before the notice is finalised, so that the interests of directors and KMP are checked at the outset and not discovered after dispatch.

What to do now

Next step: Fix the meeting date, then count back at least twenty-one clear days to get the latest dispatch date, or collect shorter-notice consents meeting the thresholds above (s.101(1) and its provisos).
Deadline: The notice must be given not less than clear twenty-one days before the meeting (s.101(1)).
Before sending: Confirm the notice states place, date, day and hour plus the business (s.101(2)); that it goes to members, auditors and every director (s.101(3)); and that an explanatory statement is annexed for each special item (s.102(1)).
Consequence of getting it wrong: a director, manager or KMP whose insufficient disclosure leads to a benefit must hold it in trust and compensate the company (s.102(4)), and faces a penalty of ₹50,000 or five times the benefit, whichever is higher (s.102(5)).

Have a CA review your facts before you act or file.

FAQ

How much notice does a general meeting need?
Not less than clear twenty-one days, in writing or through electronic mode, unless shorter-notice consent is obtained at the 95 per cent thresholds in the first proviso to s.101(1).

Who must receive the notice?
Every member (with legal representatives of deceased members and assignees of insolvent members), the auditor or auditors, and every director (s.101(3)).

Does a lost notice invalidate the meeting?
Accidental omission or non-receipt does not invalidate the proceedings (s.101(4)). The sub-section is silent on deliberate omission.

What must the explanatory statement contain?
For each special item: the nature of concern or interest of directors, the manager, KMP and their relatives, plus the facts members need to understand the meaning, scope and implications (s.102(1)). Add shareholdings of two per cent or more where another company is affected (proviso to s.102(2)), and where to inspect any document referred to (s.102(3)).

Which AGM business needs no explanatory statement?
Only the four items in s.102(2)(a): financial statements and reports, dividend, retiring directors' replacement, and appointment and remuneration of auditors.

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