AGM related query
c...@bdone.co.in
Dear Professionals,
I have a query regarding general meeting, My Unlisted Public Company promoter holds 88 percent, outside shareholders hold 11.9 percent, and rest with few employees for the sake of quorum.
In Physical General meeting, I have to pass SR regarding Section 185, 186, but my promoters are related parties and outside shareholders won’t be coming, then those employee shareholders who are having 6 to 7 shares, can they pass Special Resolution?
Thanks & Regards
Aryan Ray
Gopal Rathnam
2. Unless a specific disqualification applies (e.g., your company is listed and SEBI LODR imposes additional related party voting restrictions, or your own Articles/shareholders’ agreement restrict voting), all members on record who are not legally disentitled can vote, including promoters, related parties and employees.
If, however, you decide (or your advisors opine) that promoters should not vote because of a particular related party structure, then only the remaining members “entitled to vote” (for example, those few employees) will form the voting pool for that resolution.
3. The Companies Act looks at votes of “members entitled to vote and voting” for testing whether a special resolution has passed. If promoters (88%) are treated as “interested/related” and abstain from voting on that item, and outside public shareholders (11.9%) also do not attend, then:- Only the employees who actually attend and vote (say holding 0.1% in total) will be counted for that resolution.
4. If all those employees vote for and none vote against, the “three times” test is satisfied and the special resolution is validly passed, because 100% of the votes cast are in favour and there are 0 votes against.
5. Quorum vs. voting:- Quorum for a general meeting is determined under section 103 based on number of members present, not on the percentage of shareholding they hold. For an unlisted public company, if members are less than 1000, quorum is 5 members personally present.
6. The promoters (even if interested) are physically present, they do count for quorum unless specifically excluded by your Articles; the Act excludes “interested directors” from Board quorum in some cases, not “interested members” from general meeting quorum.
7. Only employees come and the total number of members present reaches the statutory quorum of number, the meeting is validly constituted; once quorum is present at the start, the business (including SR under 185/186) can be transacted even if only a very small voting capital is actually represented.
GOPALRATHNAM-9886618696
c...@bdone.co.in
Dear GopalRathnam ji,
Thankyou so much for the in-depth explanation.
However, My related party point is in reference to Secretarial Standard 2 which states ‘A Member who is a related party is not entitled to vote on a Resolution relating to approval of any contract or arrangement in which such Member is a related party, except in case of a company in which ninety percent or more Members, in number, are relatives of promoters or are related parties.’
If the promoters are related, as the resolution is as per 185(3) approving the scheme of loan to MD, is the related party i.e. promoter is still entitled to vote?
Regards,
Aryan Ray
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