Conduct Meetings

Question 1

Saturday

Answer 1

Provisions for Meetings and Votes [Section 134]

1. Notice of Meeting

A formal notice must be sent to each member at their registered or provided address in Pakistan.

Modes of Sending Notice:

Acknowledgment receipt, post, courier, electronic means, or other specified methods.

Details in Notice:

Meeting place, date, and time.

Business agenda to be transacted.

Recipients of Notice:
i. All members or class of members.
ii. All directors.
iii. Any person entitled due to the death or bankruptcy of a member (upon notification).
iv. Company auditors.

Accidental Omission/Non-Receipt:
Failure to serve or receive the notice accidentally will not invalidate the meeting’s decisions.

Example:
ABC Ltd. sent notices for its AGM via courier and email. If Mr. Ali didn’t receive it due to a courier mishap, the meeting’s resolutions remain valid.

2. Facility of Video-Link

For listed companies, if members holding 10% (or specified percentage) of paid-up capital reside in the same city, they may request video-link facilities for the meeting.

Example:
XYZ Ltd. receives a request from Lahore-based shareholders holding 12% of shares. The company must provide a video-link for them to attend the meeting remotely.

3. Participation in Meetings

Members can attend meetings:

Personally,

Via video-link,

Through a proxy.

Example:
Mr. Ahmed, a shareholder, cannot attend the meeting in person, so he participates via video-link.

4. Ordinary and Special Business

In AGMs, all business is considered special except:
i. Reviewing financial statements and reports.
ii. Declaring dividends.
iii. Electing or appointing directors in place of retiring ones.
iv. Appointing auditors and setting their fees.

Example:
Agenda items like director elections are ordinary, while amending company bylaws is special business.

5. Statement of Material Facts for Special Business

Special business notices must include all relevant details, such as the nature and extent of directors’ direct/indirect interest and document inspection details.

Example:
If a meeting involves approving a director’s contract, the notice must explain the director’s interest in the deal and the inspection time/location of the contract.

Provisions for Presiding and Voting in Meetings

1. Presiding the Meeting

Chairman of the Board: Presides over the general meeting.

If No Chairman or Unavailable:

Any director present can be elected as chairman.

If no director is present or willing, members elect one among themselves.

Example:
At XYZ Ltd.’s AGM, the chairman is absent, and no director volunteers to preside. The members elect Mr. Ali, a shareholder, to chair the meeting.

2. Number of Votes

For Companies with Share Capital:

Votes are proportionate to the paid-up value of shares or securities with voting rights.

Fractional votes are not counted.

Different classes of shares may have varying voting rights based on their paid-up value.

Example:
A member holds 100 ordinary shares and 50 preference shares. If ordinary shares have 1 vote per share and preference shares have 0.5 votes per share, the member has 125 votes (100 + 25).

For Companies Limited by Guarantee (No Share Capital):

Each member gets one vote.

Example:
In a company limited by guarantee, Mr. Ahmad, a member, has one vote regardless of other contributions.

Voting Methods on a Poll:

Personally,

Via video-link,

By proxy,

Through postal ballot.

3. Right to Vote

Members with voting rights cannot be restricted from casting their votes.

Articles of Association cannot override this right.

Example:
If ABC Ltd.’s articles state that members with unpaid dues cannot vote, such a clause is invalid.

4. Single Member Company (SMC)

Legal requirements for meetings (general, board, or director elections) are considered fulfilled if:

The decision is recorded in the minutes book.

The sole member or director signs the minutes.

Example:
Mr. Usman, the sole member of a single-member company, decides to re-elect himself as a director. He records and signs the decision in the minutes book to comply with the law.

Voting by Show of Hands [Sections 141 & 142]

1. Voting by Show of Hands

In a general meeting, resolutions are decided by a show of hands unless a poll is demanded.

Example:
During XYZ Ltd.’s AGM, the chairman asks members to vote on a resolution by raising hands. If no one demands a poll, the decision is finalized based on the hands raised.

2. Declaration by Chairman

The chairman declares whether the resolution:

Has been passed or not passed.

Passed unanimously or by a particular majority.

This declaration serves as conclusive evidence without needing proof of exact votes.

Recording such a declaration in the meeting’s minutes is also valid evidence.

Example:
At ABC Ltd.’s meeting, the chairman declares a resolution passed by a majority after counting raised hands. This declaration, recorded in the minutes, is enough to confirm the result without verifying individual votes.

Voting by Poll [Sections 143, 144 & 145]

1. Demand for Poll

A poll can be initiated:

By the chairman’s own decision before or during the declaration of results from a show of hands.

On demand by members present (in person, via video-link, or by proxy) holding at least 1/10th of the total voting power.

Members demanding the poll can withdraw their request at any time.

Example:
In ABC Ltd.’s meeting, members holding 15% of voting power demand a poll after a show of hands for a resolution. The chairman is obligated to conduct the poll.

2. Poll through Secret Ballot

The chairman may conduct the poll through a secret ballot either on his own or upon demand by eligible members.

Secret ballots ensure confidentiality in voting.

Example:
In XYZ Ltd.’s AGM, a poll for approving a merger is conducted through a secret ballot upon demand by members holding 12% voting power.

3. Time of Taking Poll

Poll on chairman election or adjournment questions: Conducted immediately.

Poll on other matters: Must be conducted within 14 days as directed by the chairman.

Example:
If members demand a poll to elect a new chairman, it must happen immediately. However, a poll on a dividend resolution can be scheduled within 14 days.

4. Conduct and Result of Poll

The chairman or their nominee, along with a representative of the demanding members, oversees the poll process.

The chairman announces the poll results.

The poll result becomes the final decision of the meeting for the resolution in question.

Example:
During a poll for director re-election, the chairman and a member representative scrutinize votes. The chairman declares the result, which becomes the meeting’s decision.

Proxies [Section 137]

A proxy is a person appointed by a company member to attend, speak, and vote on their behalf in a company meeting. Below is an explanation of the key points in simplified terms along with examples:

1. Right to Appoint a Proxy

Who can appoint?
Any member of a company with voting rights can appoint someone to represent them at a meeting.

Exception:
If a company doesn’t have a share capital, proxies are not allowed unless the company’s articles (rules) specifically permit it.

Example:
A shareholder of XYZ Ltd. cannot attend the annual meeting. They appoint their friend to attend and vote on their behalf.

2. Only One Proxy Per Meeting

A member can appoint only one proxy for a meeting.

If multiple proxies are appointed and multiple forms are submitted, all forms will be invalid.

Example:
If Ali, a shareholder, appoints both Ahmad and Sara as proxies for the same meeting, neither proxy can represent him since it violates this rule.

3. Who Can Be a Proxy?

By default, proxies must be company members unless the company’s articles allow a non-member to act as a proxy.

Example:
In ABC Ltd., only shareholders can be proxies, but if its articles state otherwise, Ali can appoint his lawyer, who is not a shareholder, to act as a proxy.

4. Notice and Proxy Form

Notices for company meetings must clearly mention:

Members’ right to appoint a proxy.

The proxy’s right to attend, speak, and vote in the member’s place.

The notice must also include a proxy form.

Example:
The notice for ABC Ltd.’s meeting states: “Members may appoint proxies to attend, speak, and vote on their behalf. Enclosed is the proxy form for your convenience.”

5. Proxy Instrument

The proxy form must:

Be in writing.

Be signed by the member (or an authorized person if it’s a company).

If the form matches the format in Table A (First Schedule), it is valid even if it does not meet additional requirements in the company’s articles.

Example:
If Ali appoints a proxy using a form matching Table A, the company cannot reject it for minor non-compliance with its internal rules.

6. Time Limit for Submission

Proxies must be submitted at least 48 hours before the meeting.

The company cannot enforce a shorter submission period, even if stated in its articles.

Non-working days are excluded from the calculation.

Example:
If a meeting is on Monday at 10 AM, proxies must be submitted by Thursday at 10 AM, excluding weekends and public holidays.

7. Rights of the Proxy

Proxies have the same rights as members during the meeting, including:

Demanding a poll (a formal voting process).

Choosing to abstain from voting or partially exercising voting rights.

Note: Any rules in the company articles restricting these rights are invalid.

Example:
Ali’s proxy demands a poll on a major decision and then chooses not to vote on another issue. These actions are within the proxy’s rights.

8. Inspection of Proxy Forms

Members entitled to vote can inspect the proxy forms lodged with the company during business hours.

Example:
If Sara wants to verify who has submitted proxies before the meeting, she can request access to the records during working hours.

This structured understanding helps clarify the rules about proxies, ensuring both compliance with the law and transparency in company meetings.

Representation of Body Corporate at Meetings (Section 138)

1. Body Corporate as a Member

A body corporate (e.g., a company or corporation) that is a member of another company can authorize an individual to represent it at meetings.

This authorization must be done through a resolution passed by the board or the governing body of the corporate member.

The authorized individual can exercise all rights on behalf of the corporate member, such as attending, speaking, and voting.

Example:
Company A, which is a shareholder in Company B, authorizes its director, Mr. Ali, via a board resolution, to attend and vote at Company B’s annual general meeting on its behalf.

2. Body Corporate as a Creditor

If a body corporate is a creditor of another company, it can also authorize an individual to represent it in meetings of the creditors.

The process is the same: the authorization is granted via a resolution of its board or governing body.

The authorized person has the same rights as the body corporate in such meetings.

Example:
Bank XYZ, a creditor of Company PQR, appoints its manager, Ms. Sara, through a resolution to represent it at a meeting of Company PQR’s creditors to discuss a restructuring plan.

Representation of Government at Meetings (Section 139)

1. Power to Appoint

The Federal Government or Provincial Government, if it is a member of a company, can appoint any individual to act as its representative in:

General meetings of the company, or

Meetings of a specific class of members.

The appointment is typically made by the Minister-in-Charge or the relevant authority.

Example:
The Federal Government, holding shares in a public-sector enterprise, appoints Mr. Khan to represent it at the company’s annual general meeting.

2. Rights of the Appointed Individual

The individual appointed by the government is, for all purposes, treated as a member of the company under the Companies Act.

They can exercise the same rights and powers as the government, including:

Voting on resolutions,

Speaking at meetings, and

Appointing proxies if required.

Example:
The Provincial Government appoints Ms. Fatima to attend a class meeting of preferred shareholders in a state-owned company. Ms. Fatima can speak, vote, and even appoint a proxy if needed, acting as though she is the Provincial Government.

This structured representation ensures clarity in participation for bodies corporate and governments, safeguarding their rights in corporate meetings.

Quorum of General Meeting (Section 135)

1. Meaning of Quorum

Quorum refers to the minimum number of members required to be present for a general meeting to legally transact business.

If a meeting proceeds without the required quorum, any decisions or business conducted in that meeting will be invalid.

Example:
If the quorum for a meeting is 10 members but only 8 are present, any resolutions passed in that meeting will have no legal effect.

2. Minimum Quorum Requirements

3. Larger Quorum

A company may choose to set a higher quorum requirement in its articles of association.

This flexibility allows companies to align quorum requirements with their unique needs.

Example:
A company’s articles specify that for general meetings, at least 15 members must be present instead of the statutory minimum.

4. Absence of Quorum

If the quorum is not present within 30 minutes of the scheduled time for the meeting, the outcome depends on how the meeting was called:

Meeting Called by Members’ Requisition:
The meeting is dissolved if quorum is not met.

Meeting Called by Directors:
The meeting is adjourned to:

The same day in the next week,

At the same time and same place.

Example:

A meeting scheduled for Monday at 10 AM by directors fails to meet quorum. It will automatically adjourn to the following Monday at 10 AM.

This structure ensures that business decisions are made with adequate member participation, upholding the integrity of the decision-making process in company meetings.

Quorum at Adjourned Meeting

1. Quorum for an Adjourned Meeting

If the required quorum is not present within 30 minutes at an adjourned meeting, the members who are present will form the quorum.

Minimum Requirement: At least two members must be present, whether in person or via video link.

This rule applies unless the articles of association specify otherwise.

Example:
At an adjourned meeting of ABC Ltd., only two shareholders join via video link. This satisfies the quorum requirement, and the meeting can proceed.

Court Declaring a General Meeting Invalid (Section 136)

1. Petition Criteria

Members holding at least 10% of the total voting power can file a petition to challenge the validity of a general meeting.

The petition must prove that a material defect, omission, or irregularity:

Occurred in the notice of the meeting, or

Affected the proceedings in a way that prevented members from exercising their rights effectively.

Example:
If members were not notified about a key resolution in advance, leading to unfair voting, a group with at least 10% voting power can petition the court.

2. Time Limit

The petition must be filed within 30 days of the disputed meeting.

Example:
A meeting held on January 1 can be challenged only until January 31.

3. Court Order

If the court finds merit in the petition, it can:

Declare the meeting (or part of it) invalid, and

Direct the company to hold a fresh general meeting to address the issue.

Example:
If a court declares that a vote on a key resolution was invalid due to irregularities, the company may be ordered to reconvene the meeting to properly conduct the vote.

These provisions ensure fairness in company meetings by addressing quorum flexibility and providing a legal mechanism to rectify procedural defects.