A statutory meeting is held once during the life of a company. Generally, it is held just after a company is incorporated. Every public company, limited either by shares or by guarantee, must positively hold a statutory meeting as soon as the company is incorporated.
● A statutory meeting should be held between a minimum period of one month and a maximum period of six months after the commencement of business of the company.
● A meeting before a period of one month cannot be considered as a statutory meeting of the company.
● The notice for a statutory meeting should mention that a statutory meeting is going to be held on a specific date.
● Private companies and government companies are not bound to hold any statutory meetings.
● Only public limited companies are bound to hold statutory meetings within the specified period of time.
Procedure of the Statutory Meeting
The board of directors must forward a statutory report to every member of the company. This report must be sent at least 21 days before the meeting. Members attending the meeting may discuss topics regarding the formation of the company or topics related to the statutory report.
● No resolutions can be taken in the statutory meeting of the company.
● The main objective of the statutory meeting is to make the members familiar with the matters regarding the promotion and formation of the company.
● The shareholders receive particulars related to shares taken up, moneys received, contracts entered into, preliminary expenses incurred, etc.
● The shareholders also get a chance to discuss business ideas and methods and the future prospects of the company.
● An adjourned meeting is called if the statutory meeting does not meet a conclusion.
● According to section 433 of the Companies Act, 1956, a company may be subjected to winding up if it fails to submit a statutory report or fails to conduct a statutory meeting within the aforementioned period.
● However, the court may order the company to submit the statutory report and to conduct the statutory meeting and impose a fine on the persons responsible for the default instead of directly winding up the company.
Adjournment of Statutory Meeting
According to section 165(8) of the Companies Act, a statutory meeting may be adjourned from time to time. Any resolution on which notice has been given according to the provision of the Companies Act may be passed whether the resolution was taken up before or after the last meeting.
● The adjourning meeting has the same power as the original statutory meeting.
● The power to adjourn depends on the decision of the meeting.
● The meeting cannot be adjourned by the chairman without the consent of the members of the meeting.
● The chairman is expected to adjourn the meeting if the members wish to do so, without invoking any discriminatory powers given to the chairman by the articles of association of the company.
● Usually, the chairman is not bound to adjourn a meeting even if majority of the members wish for the adjournment.
● The statuary meeting provides an exception in the rule that only unfinished business at the original meeting must be carried out at the adjourned meeting.
● Members have the right to initiate new topics of discussion in the adjourned meeting.
● The advantage of adjourned meetings over statutory meetings is that a resolution can be passed in an adjourned meeting, which is not possible in the case of the latter.
● If any resolution is needed to be passed based on the topics discussed in the statutory meeting, it must be passed at an adjourning meeting to go in accordance with the law.
Default
In case of any default made in filing the statutory report or in conduct of the statutory meeting, the members responsible will be liable to fine according to section 165(9) of the Companies Act. The fine may extend to INR 5000.
The court can also order compulsory winding up of the company in accordance to section 433(b) of the Companies Act if the statutory meeting is not held within the prescribed time.
Statutory Report
The board of directors must forward a statutory report to every member of the company. This report must be sent at least 21 days before the meeting.
The particulars to be mentioned in the report are as follows −
● The total number of allotted shares with the account of fully paid and partly paid shares and the reasons for considerations and extension of the partly paid shares
● The net amount of cash collected after the allotment of shares
● A brief insight, i.e., an abstract of receipts and payments made within 7 days of the date of the report, balance remaining in the hands of the company and an estimation of the preliminary expenses of the company
● The names, addresses, and designations of the directors, managers, secretaries, and auditors along with the change log in case of any replacements made from the date of incorporation of the company
● The details of any modifications or contracts to be submitted in the meeting for approval
● The limit of non-carrying out of any underwriting contract along with justified reasons for the non-carrying out of the aforementioned contracts
● The arrears due on the calls of every manager and director
● Details on the context of commission or brokerage paid to any director or any manager for the issue of sale of shares or debentures
