Annual General Meeting is the important mechanism by which the shareholders can have a control in the functioning of the company

Annual General Meeting is the important mechanism by which the shareholders can have a control in the functioning of the company. Discuss.



The term Company is used to describe an association of a number of persons, formed for some common purpose and registered according to the law relating to companies.

Lord Justice Lindley defines: “By a company is meant associations of many persons who contribute money or money’s worth to a common stock and employ it for a common purpose. The common stock so contributed is denoted in money and is the capital of the company. The persons who contribute it or to whom it belongs are members. The proportion of capital to which each member is entitled is his share. “


A shareholder or stockholder is an individual or institution (including a corporation) that legally owns one or more shares of stock in a public or private corporation. Shareholders own the stock, but not the corporation itself (Fama 1980).

Stockholders are granted special privileges depending on the class of stock. These rights may include:

  • The right to sell their shares,
  • The right to vote on the directors nominated by the board,
  • The right to nominate directors (although this is very difficult in practice because of minority protections) and propose shareholder resolutions,
  • The right to dividends if they are declared,
  • The right to purchase new shares issued by the company, and
  • The right to what assets remains after a liquidation.

Stockholders or shareholders are considered by some to be a subset of stakeholders, which may include anyone who has a direct or indirect interest in the business entity. For example, labor, suppliers, customers, the community, etc., are typically considered stakeholders because they contribute value and/or are impacted by the corporation.


Shareholders in the primary market who buy IPOs provide capital to corporations; however, the vast majorities of shareholders is in the secondary market and provide no capital directly to the corporation.

Therefore, contrary to popular opinion, shareholders of public corporations are NOT the

(1) Owners of the corporation,

(2) The claimants of the profit, or

(3) Investors, as in the contributors of capital.


It is an annual meeting of body of members. Every company is required to call at least one meeting of its shareholders each year. This meeting is known as annual general meeting. Every company whether public or private, having share capital or not, limited or unlimited must hold this meeting. The first annual general meeting of a company must be held within eighteen months from the date of its incorporation, and then no meeting will be necessary for the year of incorporation and the following year. Like for example, if a company is incorporated in January 1960, its first annual general meeting should be held within eighteen months, i.e., up to June 1961 and then no meeting will be necessary either for 1960 or 1961. Therefore, one annual general meeting must be held every year. The gap of one meeting and the next should not be more than fifteen months. The Act provides no provision for the deferment of the first AGM.

If a company fails to hold this meeting, two consequences will follow. Firstly, any member can apply to the CLB and latter will order the calling of the meeting. An application can be made by any member under Section 167 of the Act. This means that a company is not competent to invoke the provisions of Section 167 because a company cannot seek directions against itself. The CLB can give any ancillary or consequential directions which it thinks expedient in relation to the calling and conducting of the meeting. A meeting held in pursuance of this order will be deemed an annual general meeting of the company. This power has been vested exclusively in the CLB. The court cannot exercise it even under its inherent powers.

Secondly, the failure to call this meeting either generally or in pursuance of the order of the CLB is an offence punishable with fine. The penalty is imposed upon the company as well as every officer “who is in default”.

The registrar has been given the power, for any special reason, to extend the time for holding an AGM for a period of only three months. But the time for holding the first AGM of a company is never extended.


AGM is an important institution for the protection of the shareholders of a company. The ultimate control and destiny of a company should be in the hands of its shareholders. Thus, shareholders should meet together at least once in a year to review the working of the company. This meeting affords that ­opportunity. It is in this meeting that directors will come up for re-election. Auditors retire at this meeting enabling the shareholders to consider whether they should be re-appointed or replaced. Dividends are declared at this meeting. Chairman delivers a speech listing the advances of the company during the year. Directors have to present annual accounts for the consideration of the shareholders. A failure to present the accounts is a punishable offence. The shareholders can ask any questions relating to the accounts or affairs of the company.


Another important requirement of a meeting is the notice which is given to the members of the meeting. The word ‘notice’ means and connotes giving of information. However, it has a technical meaning in the law of meetings and is the base of the rule that summons should be issued to all those who have right to participate in the meeting. The notice has to specify the time, place and date of the meeting, as well as its purpose. The Agenda is the necessary part of the notice and it either accompanies the notice or is detailed in the body of the notice itself.


Notices may be oral, written, or in the form of an advertisement. It is usually advisable to give written notice even where oral evidence is sufficient in law; and as to notice by advertisement this form is usable where the interested party can be traced or where it is prescribed by any statute or rule.


The notice of the meeting should be issued in a form if prescribed, therefore, by the bye-laws or the rules of the organization. The issuance of the notice is a ministerial act, but it is to be done under the authority of the Chairman, Committee or the Registrar as the case may be; and the form or the contents must disclose the same.


The venue needs to be as accessible as possible. Try to find out beforehand if attendees have particular requirements, e.g. wheelchair access, translation services. It is useful if the venue has a microphone.


When notice is necessary, the following general rules must be observed:–

1. Every person entitled to attend the meeting must be summoned, unless he is beyond reasonable summoning distance or is too ill to attend.

2. The notice must be frank, clear and free from trickiness, and if any special business is to be transacted, this must be clearly stated.

3. The notice must be strictly served in accordance with the regulations of the body on whose behalf it is given, and if any particular method is prescribed but the Act of Parliament this must also be observed.

4. The appropriate body at a subsequent meeting may ratify an irregular notice.

In case of meetings, it must be kept in mind that no business of an important nature is omitted from the notice. The notice must be definite as a contingent notice is not a sufficient notice.

Notices are not scrutinized with a view to criticizing them excessively. The true test would appear to be the meaning, which they would convey to ordinary minds; the courts do not examine them to find defects in them.


Agenda literally means the things to be done; hence, it denotes the programmed or list of business to be transacted at a meeting. It is a simple statement of subject or matters to be considered at a meeting. Therefore, Agenda by its etymology is a list of matters to be dealt with at a meeting and connotes things to be done.


With regard to the meetings of any body or society where the transaction of business is necessary, the preparation of agenda is indispensable. By calculating this prior to the meeting members have an opportunity of considering beforehand the business to be transacted. Great care and precaution should be taken in the compilation of agenda, for if it is well drawn up and includes all the business that is to be conducted at the meeting, it will facilitate the disposal of business thereat, and tend to create a harmonious feeling among all concerned.

The agenda be prepared under the direction of those authorized to convene the meeting and will set out in chronological sequence the various items of business to be transacted and the matters for discussion. These may include-

1. Appointment of Chairman

2. Reading of correspondence relating to the meeting

3. Reading and verification of the minutes of the preceding meeting

4. Adjourned business

5. Laying reports and accounts before the meeting for adoption or approval

6. Special business as indicated in the notice of the meeting

7. Consideration and discussion of motions the terms of which should appear

8. General business


Meetings are great for people who work best face to face. The advantage of meetings is it allows them to see the progress of what they are doing or what are others are doing in terms of everyday work or projects. Meetings are a great way to explain complex and non-complex ideas and offer a great format to exchange ideas and really think them out. Meetings are a great way to communicate lots of information a short amount of time and create a “game plan for the future ahead.”

Some of the advantages of the meetings are:

· It helps in developing better solutions than any one individual can do.

· It provides free interchange of ideas, thereby stimulating and clarifying thinking.

· Group decisions promote more effective coordination of subsequent action plans.

· The biggest merit is that meetings help in building good working relationships.


From the indicative list above, we can see that it is an open and a rare opportunity for shareholders to meet the top management of a company we have invested in. This is the time when we get to go through the company’s financial performance and future prospects of the company with the people driving the company. As its part-owner, shareholders are entitled to know the company’s potentials to make sure our investment is sound.

However, investors must also be careful of the positive impressions given by the management during the AGM. Sometimes, these are just too good to be true. Therefore, we should use our own judgment and observation to determine whether the future projections or new projects proposed are realistic in generating profit, or are merely attempts to woo shareholders to invest in shaky business deals.

Some shareholders do not even know who the board of directors are when buying shares of a company. When we attend a company’s AGM, we get to see the directors in person, understand their background and analyze whether these people have relevant expertise in the business of the company. We also get to know how much the company is paying them, and whether shareholders’ money is well spent on people who can actually drive the company to further success and growth.

The declaration of dividend is one item on the agenda all shareholders are interested in, as this is the money going back into every shareholder’s pocket. We will get to know first-hand the dividend declared for the year and to check whether it is in line with the company’s dividend policy.

During the Q&A session, shareholders are given the chance to ask questions. However, some companies may require interested participants to pre-register for this. Serious shareholders should get hold of a copy of the annual report and go through it before attending the AGM to fully utilize this opportunity for clarification.

As shareholders, we need to understand our right and have the correct mindset. Even though we may only carry one vote, the minority shareholders’ voice will be heeded by the management if every minority shareholder is able to cast a vote in the AGM. However, if everyone still thinks that the one vote will not make any difference, we will be putting our money at the mercy of the management and the major shareholders, hoping that whatever they do will maximise value for all shareholders.

So remember, attending the AGM is important for every shareholder of the company.


# Singh Avtar, Company Law, (Lucknow: Eastern Book Company) 2007

# Kumar Niraj, Law of Meetings, (New Delhi: Bharat Law House) 2008

# Govilkar V.D., Law of Meetings, (New Delhi: LexisNexis Butterworths Wadhwa Nagpur) 2009

# Dr. Niraj Kumar, Law of Meetings, (New Delhi: Bharat Law House) 2008 P 164

# Radha Kishen v. Municipal Committee, Khandwa 61 I. A. Page 125

# T.V. Mathew v. Nadukara Agro Processing Co. Ltd, (2002) 108 Comp Cas 130 Ker