Certificate in Accounting and Finance Business Law

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Meetings

Contents 1 Company meetings 2 General provisions as to company meetings 3 Chapter review

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24

Business Law

INTRODUCTION Learning outcomes

The overall objective of the syllabus is to give students an understanding of the legal system and commercial laws; and build a knowledge base of corporate laws.

Sources and process of legislation

LO On the successful completion of this paper, candidates will be able to demonstrate

References to Legal Acts

Section number references embedded in the learning materials refer to the following legal acts unless otherwise stated:

Act Chapters

Contract Act 1872 3-16

Partnership Act 1932 17

Negotiable Instrument Act 1881 18

Securities Act 2015 22

knowledge of the management of companies

LO 7.3.1 State the timing, matters and reports relating to statutory meetings

LO 7.3.2 State who can call statutory meeting

LO 7.3.3 State the timing, matters and reports relating to an annual general meeting using simple exmples

LO 7.3.4 State who can call an extraordinary general meeting

LO 7.3.5 State the timing and matters relating to an extra ordinary general meeting

LO 7.3.6 State who can call an extraordinary general meeting and at whose request it may be called and matters related thereto

LO 7.3.7 State the provisions relating to quorum for a general meeting

LO 7.3.8 State the provisions with respect to appointment of proxy and conditions applicable thereon

LO 7.3.9: Desscribe the provisions relating to notice/ agenda/ resolution/ voting/ polling/

minutes of meetings

LO 7.3.10 State the circumstances in which proceedings of the general meeting may be declared invalid

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Companies Act 2017 19-27

1 COMPANY MEETINGS Section overview

� Types of company meetings

� General meetings

� Statutory meeting

� Annual General Meeting (AGM)

� Extraordinary General Meeting (EGM)

� Calling of meetings by the Commission

� Declaring meeting as invalid

� Filing of resolutions

1.1 Types of company meetings

The companies have to hold and conduct a variety of meetings during their life and even during winding up as well. Some of them are mandatory as per the Act and the others are conducted on ‘as and when required’ basis. The broader categories of the meetings are as follows:

� Board of directors meetings

� General meetings

For the directors there may be certain committees in place so the meetings of those committees may also be held, termed as ‘Committee Meetings’. In certain cases companies have more than one class of members, so there may be meetings of various classes of members, termed as “class meetings”.

1.2 General meetings

Definition: General meeting

A general meeting is a meeting of the shareholders (members) of the company who are entitled by the company’s articles to attend and vote at such meetings.

In theory, general meetings allow the members to make decisions on matters of importance, and at times, restrict the powers of the directors. For example, the members in general meeting may:

� remove directors from office

� restrict the powers of the directors by altering articles of association of the company

� approve or disapprove dividends

In practice, however, the power of the shareholders in general meeting is often fairly limited. Resolutions at general meetings are usually proposed by the directors. Individual shareholders or a number of shareholders acting together possessing a described voting power may have the right to propose resolutions that all the members will vote on, but it is unusual for shareholders to exercise this right.

Many of the resolutions voted on by the members, particularly at annual general meetings, are routine.

General meetings are chaired by the chairman of the board of directors, and other directors also attend. However, the directors do not have a right to vote at a general meeting unless they are also a member of the company. They can then vote at the meeting as a member.

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Section B: Company Law - Chapter 24: Meetings

Business Law

A general meeting may be:

� a statutory meeting,

� an annual general meeting, or

� an extraordinary general meeting.

1.3 Statutory meeting [Section 131] Introduction

In case of a public company, the law requires it to hold a general meeting known as statutory meeting and deliver a report in such meeting called as a statutory report. This is actually the beginning phase of the company and the members usually do not know all other members nor all of them are familiar with management (directors and chief executive) of the company, so this meeting provides an opportunity to get to know each other and also the statutory report is an indicative of financial start-up of the company that can be helpful for understanding of the members of the company. Requirement to hold statutory meeting

Every public company having share capital is required to hold statutory meeting

However, a private company is not required to hold a statutory meeting but if such private company converts itself into a public company within one year of its incorporation, it shall also be required to hold a statutory meeting. Timing of statutory meeting

Companies as above are required to hold the statutory meeting within, the earlier of:

� 180 days from the date at which the company is entitled to commence business; or

� Nine months from the date of its incorporation

No statutory meeting shall be required if the AGM is held before the due date of statutory meeting.

The meeting shall consider and approve report called “Statutory Report” which is sent to each member at least twenty one days before the date of statutory meeting (along with notice of the statutory meeting). Matters to be stated in statutory report

The statutory report shall include:

� total number of shares allotted by the company. The company shall distinguish between shares allotted for cash and otherwise than in cash. In case of shares allotted for a consideration otherwise than in cash, the consideration shall also be discussed in detail in the statutory report.

� total cash received against shares allotted;

� summary of receipts and payments prepared to a date not earlier by 15 days of the date of report;

� particulars of directors chief executive, secretary, auditor and legal adviser;

� particulars of any commission paid on issue of shares particularly against the shares issued to directors, chief executive and to the companies in which such persons are directors;

� particulars of any contract to be modified of which approval is required in the meeting; and

� extent of carrying out or not carrying out any underwriting contract along with reasons for not carrying out.

� Statutory Report should also contain a brief review of the state of affairs of the company since its incorporation and the business plan.

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Auditors’ report on statutory report

The statutory report should be accompanied by an auditor’s report in respect of correctness or otherwise of

� Allotment of shares;

� Cash received against shares allotted; and

� Receipts and Payments account of the company. Certification and filing of report

� Report shall be certified by the chief executive of the company and at least one director and in the case of a listed company also by the chief financial officer.

� One copy of the report, along with the auditor’s report, shall be filed with the registrar forthwith after sending report to the members.

The members may discuss any matter pertaining to the company in statutory meeting. However, resolution shall be passed only for those matters of which prior notice as per articles of the company has been duly given.

Directors shall make available a list of members, along with their particulars, to be produced at commencement of meeting and shall be open for inspection by any member during meeting

Meeting may be adjourned from time to time and any resolution passed in the adjourned meeting will be as effective as the original one.

1.4 Annual General Meeting (AGM) [Section 132] Requirement & purpose

All companies, except single member companies, are required by law to hold an annual general meeting (AGM), at which the members should be entitled to vote on certain resolutions. The meeting is called by the board of directors.

An AGM gives the members an opportunity to assess and discuss the company’s performance and situation because one of the main agenda items of such a meeting is consideration and discussion of audited annual financial statements. Without a meeting of this kind, the members of a large company that are not connected with the directors would be deprived of the opportunity to hear the directors give an account of themselves and the company’s achievements.

Besides consideration and adoption of audited financial statements, auditors’ and directors’ report, an AGM is also used to obtain shareholder approval for certain matters such as:

� the election or re-election of directors, if due on the date of AGM

� the approval of a final dividend, if declared by the directors

� the appointment or re-appointment of the auditors.

The AGM is therefore normally used to consider routine business. Most of the resolutions at an AGM are (ordinary) resolutions, but there may also be some special resolutions (defined in earlier chapters). Timing, place and notice period

� The first annual general meeting of a company shall be held within 16 months from the

case of listed companies such notice shall also be published in an Urdu and an English daily newspapers each having nationwide circulation and also the said notice to be transmitted to the Commission

� The SECP, in the case of a listed company and the Registrar, in the cases of other

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date of its incorporation and � Thereafter annual general meeting shall be held at least once in a calendar year within 120 days following the closureof its financial year.

companies may extend the time for holding of such meetings upto a maximum of 30 days. � At least 21 days’ notice shall be given to members for holding of a meeting, Further, in the

Section B: Company Law - Chapter 24: Meetings

Business Law

� AGM of a listed company is held in the town in which the registered office is situated or in a nearest city. Members of listed company, not residing in city where AGM is taking place and holding at least ten percent of share capital, on written request at least seven days before such meeting may require the company to provide the facility of video-link to attend annual general meeting of the company.

� AGM is called on the order of directors and not of the members

Annual General Meeting-Scenarios:

Suppose ABC limited is incorporated on 1st April 2010 and it opts for a financial year end of 30th June every year. It would be required to hold its first annual general meeting in next sixteen month time period. So it can opt to hold the first annual general meeting till 31st July 2011.

We assume that the company opted to hold the annual general meeting on 31st July 2011. From this date onward company will be required to hold the annual general meeting within 120 days of the close of financial year and at least once in a calendar year. Keeping all the above in view, what shall be the latest time on which company can hold its AGM in 2012?

The next financial year will close on 30th June 2012, so till when would the company be required to hold its AGM;? It should be 28th October 2012 because it cannot wait for more than 120 days from close of financial year.

XYZ limited, another company registered on 1st September 2010, Its financial year closes in 30th September each year. It held its first annual general meeting on 1st November 2011 which was well within 16 months from the date of its incorporation.

What is the latest date by which company can hold its second AGM? Come on, it’s within 120 days of close of financial year. I am sure you are not missing the point of holding at least one AGM a year, so latest date should be 31st December 2012.

1.5 Extraordinary General Meeting (EGM) [Section 133] Purpose

As seen in last chapters, Act requires various matters of the company to be approved by its members by a resolution, for example alteration in articles or memorandum of association of the company. For this purpose it is not always possible to defer the approval of such matters till annual general meeting hence the directors need to call a general meeting for obtaining approvals of members, such meeting is known as extraordinary general meeting (EGM).

Definition: Extraordinary General Meeting (EGM) Every general meeting of a company other than annual general meeting and the statutory meeting is called extra-ordinary general meeting.

Calling of EGM

Directors should call the meeting on such valid requisition as discussed above, however, if they do not proceed to call a meeting within twenty one days of filing of the requisition, the rquisitionist themselves should call a meeting. The meeting so called by the rquisitionist should be called as nearly possible in such a way as the meetings called by the directors are held. After filing a requisition for the holding of an EGM, the meeting should be held and conducted within 90 days of filing of the same either by the directors or by the requisitionists otherwise the requisition shall be expired. Any reasonable expenses incurred by the rquisitionist due to failure of the directors to convene a meeting shall be repaid by the company to the requisitionists and company shall deduct this money from the remuneration payable to the directors in default.

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Directors of the company are entitled to call and hold an EGM on their own motion whenever they feel the need for it to get some approvals from shareholders. Members holding not less than ten per cent of total voting power of the company in case of a company having share capital and not less than ten percent of all members in case of other companies may also require the holding of such a meeting. They shall file a proper written requisition for this purpose which shall include the objects of the meeting and shall be signed by the rquisitionist in this behalf.

The notice of the meeting is required to be sent to the member’s at least twenty one days before the date of the meeting similarly as of the notice of AGM. However, in case of unlisted companies, if all the members entitled to attend and vote at any extraordinary general meeting so agree, a meeting may be held at a shorter notice. .

1.6 Calling of meetings by the Commission Commission’s power to call meetings [Section 147]

Commission has been given powers to call general meeting of the company if the company makes a default in calling an annual general meeting or a statutory meeting or the directors do not proceed to call an extraordinary general meeting on the requisition the member. While calling such meetings, the commission may give such incidental directions as it deems fit. Such directions may include a direction that even one member present in the meeting shall be treated as a quorum of the meeting for the purpose of that meeting. The Commission may also advise the cost and expenses of such meeting to be borne by any officers of the company including directors of the company.

1.7 Declaring meeting as invalid [Section 136]

When there are material defects or omission in the notice or irregular proceedings of the meeting, members having ten percent or more voting rights can apply to court within 30 days of the meeting.

Court may on such a petition declare such proceedings or any part of the such meeting invalid and may also direct holding of fresh general meeting

1.8 Filing of resolutions Filing of resolutions [Section 150]

Company is required to file all special resolutions passed by it with the registrar. The company shall file all the special resolutions passed by it within fifteen days of passing the same with the registrar. Such copy to be filed shall be authenticated by a director or secretary of the company.

Company shall keep all the special resolutions currently intact with its articles of association and whenever any person asks for a copy of the articles of association he shall be provided with a copy of such special resolutions as well.

Normally the resolutions require certain additional documents to be filed with the registrar as well. For example, if the company passes a special resolution to alter the articles of association, it shall file the altered copy of articles of association as well to the registrar along with the special resolution. However, sometimes the special resolutions may be filed alone for example if the company has passed a special resolution for investment in associated company, it shall only file the copy of resolution.

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Section B: Company Law - Chapter 24: Meetings

Business Law

2 GENERAL PROVISIONS AS TO COMPANY MEETINGS Section overview

� Notice of meeting � Quorum of meeting

� Voting in meetings

� Proxies

� Minutes and Resolution

� Representation at meetings

2.1 Notice of meeting [Section 134 and 140] General provisions

Notice of meeting is a formal document sent to each member at his registered address or such address which he has supplied to the company for communication purpose in case where he has no registered address in Pakistan.

Further the notice of a general meeting shall also be sent to the auditors of the company.

This notice shall state place, day and time of the meeting and in case any resolution is to be passed in the meeting which is other than the ordinary business. The notice may be served to members against an acknowledgement or by post or courier service or through electronic means or any other specified manner.

If the meeting is required to discuss and transact any special business, there shall be annexed to the notice of the meeting all material facts concerning such business. This statement is commonly known as statement of material facts. Theoretically, this statement must be so comprehensive and self-explanatory that every member of the company can reach a decision on the proposed resolutions after studying this statement.

Definition: Business in context of meeting

Any activity or agenda item to be discussed in a meeting is known as a business. The businesses in general meetings of the company are of two types:

� Ordinary business

� Special business

Following are four oordinary businesses and apart from this rest of all are special businesses to be undertaken in a general meeting.

� Consideration of financial statements and the reports of the directors and auditors;

� The declaration (approval) of a dividend;

� The appointment and fixation of remuneration of auditors; and

� The election or appointment of directors.

� Point to be noted here is that ordinary business is conducted by way of an ordinary resolution except the election of directors which has its own procedure discussed later.

The members having not less than ten per cent voting power in the company may also give notice of a resolution.

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2.2 Quorum of meeting [Section 135]

Definition: Quorum

Quorum means certain minimum number of members of a company as is fixed as competent to transact business in a general meeting of members in the absence of the other members. Any business transacted in a meeting without quorum shall be void.

Quorum of meeting

The minimum quorum of the meeting has been fixed by the Act, however, the company may fix a larger number of members as quorum of the meeting by its articles of association.

The Act provides that unless a larger number is fixed by the articles, the minimum quorum shall be:

� in case of a public listed company - Ten members, present personally or through video link in the meeting, representing 25% voting powers, either on their own account or as proxies, in the meeting.

� in case of any other company having share capital - two members, present personally or through video link in the meeting, representing 25 % of total voting powers, either on their own account or as proxies.

� in case of a company not having share capital - as provided in the articles. Presence/Absence of quorum

If the required quorum is not present at the meeting within half an hour from the time appointed for the meeting, it shall be:

� dissolved, if called upon the requisition of members; and

� adjourned to the same day in the next week at the same time and place if called by the directors on their own.

If a quorum is not present at an adjourned meeting, as above, within half an hour from the time appointed for the adjourned meeting, the members present in the meetings either personally or through video link, not being less than two, shall be a quorum, unless the articles of association provide otherwise.

2.3 Voting in meetings [Sections 135, 141 and 142]

In a company having share capital a member shall have votes proportionate to the paid up value of the shares held by him and in a company not having share capital, each member shall have one vote.

In any company voting is done by show of hands unless a poll is ordered by chairman of the meeting or the demand for poll is raised by any person having not less than 10% of the voting power. On show of hands every member shall exercise one vote however on a poll votes may be casted personally or through proxy.

The chairman of the meeting shall declare the results of the show of hands i.e. whether a resolution has been carried or not, unanimously or by a particular majority. An entry in the minute books of the company shall be the evidence of such result unless contrary is proved.

Note: please note carefully that we have used the word ‘proportionate to the paid up value of shares’ rather than ‘equal to the paid up value of shares’. This is because of the various classes of share capital in the company. If the company has more than one class of shares then voting rights of one class may differ from other but whatever the difference may be the voting rights shall have regard to the paid up value of shares.

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Section B: Company Law - Chapter 24: Meetings

Business Law

Provisions relating to poll [Section 143]

Demand for poll

Chairman of the meeting may order a poll to be taken instead of voting by show of hands or after seeing the result of voting by show of hands; however persons having at-least 10% of the voting power are entitled to demand a poll from chairman before or on the announcement of result of polling by show of hands by the chairman of the meeting

The demand for poll may be withdrawn at any time by the person or persons who made the demand. Time of taking poll [Section 145]

A poll demanded on the election of a chairman or adjournment of a meeting shall be taken forthwith. In all other cases, poll shall be taken at such time as the chairman of the meeting may decide; however, such time shall not be more than fourteen days from the day on which it is demanded.

When a poll is taken, the chairman or his nominee and a representative of the members demanding the poll shall scrutinize the votes given on the poll and the result shall be announced by the chairman.

The chairman shall have power to regulate the manner in which a poll shall be taken.

The result of the poll shall be deemed to be the decision of the meeting on the resolution on which the poll was taken.

Although it is significant to note that the resolution passed at an adjourned meeting is considered to have been passed on the day on which it is actually passed and not on any earlier date [Section 146].

However this shall not be the case with the date of poll being other than the date of meeting itself because the result of the poll, whenever it is taken, shall be considered as the decision of the meeting in which poll is demanded.

2.4 Proxies [Section 137] Requirements for a proxy

Proxy is a person appointed to vote and speak on behalf of a member in a general meeting of the company. Proxy is entitled to, on behalf of the original shareholder, all the acts which the original shareholder is entitled to do himself in the meeting. Broadly proxy has got following rights

� to speak and vote at the meeting;

� to demand a poll;

� to abstain from voting, on a question on which poll is demanded.

Notice of meeting must specifically mention the right of the shareholder to appoint proxy on his behalf and attached to the notice should be a blank proxy form for facilitation of the shareholder. The document to appoint proxy shall be in writing and signed by the appointer or his authorized agent

A member cannot appoint more than one proxy to attend any one meeting. If more than one proxy is appointed for any one meeting, all appointments of proxies shall be invalid. Further a proxy must be a member unless articles permit to appoint a non-member as proxy.

The instrument for appointment of proxy has been provided in Regulation 43 of table A in the first schedule to the Companies Act 2017. If the instrument is valid as per that regulation, company shall not reject or question its validity for non-compliance of any additional terms or conditions attached to such instruments by the company itself and shall accept the instrument as proper.

In order to be effective, proxies shall be lodged with the company at least 48 hours before the meeting and any provision to the cotrary in the company's articles shall be void. In calculating the period mentioned above, no account shall be taken of any part of the day that is not a working day.

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Note:

In case of companies not having share capital members are not entitled to appoint another person as their proxy.

2.5 Minutes and Resolution [Section 146, 151, 152 and 178] Minutes of proceedings of general meetings and meeting of directors

Every company is required to maintain records of copies of all resolutions of members passed otherwise than at general meetings and a fair and accurate summary of all proceedings of meetings of directors, member or committees of directors along with names of participants in properly maintained books at it registered office. A copy of the minutes of meetings of the board of directors shall be furnished to every director within fourteen days of the date of meeting.

Signatures of the chairman of meeting or of the chairman of next succeeding meeting shall be sufficient evidence of the proceedings unless contrary is proved.

The books containing the minutes of proceedings of the general meetings shall be open to inspection by members for at least two hours on each day without charge during the business hours.

Members of the company can demand a certified copy of the minutes of general meeting, any time after 7 days from meeting, which the company shall provide to them within seven working days of receipt of his request.

The records must be kept at the registered office of the company from the date of the resolution, meeting or decision in physical and electronic form and it shall be preserved for at least twenty years in physical form and permanently in electronic form. Resolution passed at adjourned meeting [Section 146]

Where a resolution is passed at an adjourned meeting it shall be treated as having been passed on the date on which it was in fact passed. It shall not be deemed to have been passed on any earlier date. Passing of resolution by the members through circulation [Section 149]

Except for ordinary businesses of AGM, members of a private company or a public unlisted company (having not more than 50 members), may pass a resolution (ordinary or special) by circulation signed by all members for time being entitled to receive notice of a meeting.

Resolution shall be circulated, together with necessary papers, if any, to all the members. Such resolution shall be noted at subsequent meeting of the members and made part of the minutes of that meeting. Any such resolution shall be as valid and effectual as if it had been passed at a duly convened general meeting

A members’ agreement to such a written resolution, once signified, may not be revoked.

2.6 Representation at meetings Representation of certain corporations at meetings of companies and of creditors [Section 138]

If a company is a member of another company, it may authorise any of its officials or any other person to act as its representative at any meeting of that other company and such representative shall be entitled to exercise, on behalf of the company, the same powers, which an individual shareholder of that other company possesses at the meeting.

Similarly if a company is the creditor of another company, it may authorize any of its officials or any other person to act as its representative at any meeting of creditors of that other company held in pursuance of the Companies Act, 2017 and such representative shall be entitled to exercise all such powers as the company has as a creditor of that other company.

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Section B: Company Law - Chapter 24: Meetings

Business Law

Representation of federal government and provincial government at meetings of companies: [Section 139]

Being a member of the company the Federal Government or Provincial Government may appoint any person to act as its representative at:

� any meeting of the company; or

� any meeting of any class of members of the company.

Such person shall be deemed to be a member of such company and he shall be entitled to exercise the same rights and powers, including the right to appoint proxy, which the Federal Government or the Provincial Government has as a member of the company.

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3 CHAPTER REVIEW Chapter review

Before moving on to the next chapter check that you now know: � Different types of meetings of the company

� Rights and duties regarding calling and holding of meetings

� Various provisions regarding notices, quorum and minutes of the meetings.

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Section B: Company Law - Chapter 24 Meetings