Companies Act Section 97 allows the NCLT to call an annual general meeting (AGM) if a company fails to hold one under Section 96. It grants the power of the Tribunal to call an AGM, letting even one member present in person or by proxy constitute a meeting. Learn how Section 97 of the Companies Act ensures valid AGMs, legal compliance, and the right of members to request the NCLT to call or direct the calling of an AGM.
Understanding Section 97 of Companies Act 2013
The Companies Act 2013 has provisions regarding corporate governance that ensure that the company is being run in a clear and legitimate manner. The important part of the act that must be looked at is Section 97. This confers on the National Company Law Tribunal (NCLT) the right to call for the annual general meeting (AGM) that has not been held under Section 96."
Under normal circumstances, companies are mandated to hold an AGM annually to discuss business performance, approve financial statements, and make crucial decisions. However, there are instances where companies fail to convene an AGM. In such cases, Section 97 empowers members to approach the NCLT to call or direct the calling of an AGM. This ensures that shareholder rights are protected even when the company’s management does not act as required by law.
Power of the Tribunal to Call Annual General Meeting
Section 97 of the Companies Act, 2013, enables the NCLT to call the AGM on behalf of the company. In case the company defaults in holding the annual meeting, an application can be made to the Tribunal by a member of the company. It is the discretion of the NCLT to pass the required directions in such matters. For instance, the Tribunal can fix the presence of one member, whether in person or by proxy, to constitute the meeting, thereby ensuring that the meeting of the AGM does not get delayed.
This is an important provision, as it prevents companies from circumventing their legal duties & shields the rights of the shareholders. This enforcement of the AG meeting by the Tribunal helps ensure that corporate accountability is upheld, and even token representation can validate the meeting of the AG converging in India.
Who Can Apply to the NCLT
Any member of a company who is concerned that the company has not held its annual general meeting can apply to the NCLT to have the meeting called. This makes corporate management answerable to its members. By providing this mechanism, Section 97 ensures that shareholders are not left powerless, even if the company’s directors fail to convene an AGM.
After the application is filed, the NCLT reviews the facts and can issue directions for conducting the AGM. The directions can include the date, venue, & quorum requirement for the meeting. A meeting conducted as per the directions of the NCLT shall be treated as a valid AGM, thereby making the resolutions undertaken binding & enforceable.
Procedure Under Section 97
The procedure under Section 97 is straightforward but legally binding. A member approaches the NCLT with a request to call an AGM. The Tribunal reviews the application and may direct the company to hold the meeting. If the company does not comply, the Tribunal can call or direct the calling of an annual general meeting of the company itself.
This provision also ensures flexibility; even if the member is alone in the meeting, either in attendance or by proxy, the NCLT can determine that the meeting is valid. This is very fundamental, especially in cases where company management is not cooperative or responsive. The reason is that it prevents companies from contravening the stipulated requirement in Section 96.
Significance of Section 97
The importance of Section 97 primarily involves shareholder rights & corporate accountability. It is not a situation where companies can disregard their duties & ignore the law. Shareholders have a clear remedy for companies that fail to hold the annual meetings.
The provision of the power to the Tribunal to convene an AGM in Section 97 enhances corporate governance. This is because the provision enhances transparency in decision-making processes and financial reporting. Furthermore, it puts the members at ease regarding their rights to vote, ratify accounts, and make key business decisions not being undermined by ineffective and careless management.
Practical Scenarios
Take the example where the private company has not held its AGM for two years. This may cause difficulty for the shareholders to demand that the company perform its duties. However, citing Companies Act Section 97, any shareholder can move the NCLT. The NCLT will then be able to allow one of the members present, either personally or through proxy, to form the AGM. This will also ensure that each resolution is valid.
Another theoretical application involves a situation where a company is functional but the board does not call an AGM to delay approvals and/or financial disclosure. Section 97 gives the NCLT the power to intervene, ensuring shareholder rights are upheld. It is therefore an important provision for shareholder members who want an avenue to hold the company accountable.
Key Points to Remember
⦁ The Companies Act Section 97 gives powers to NCLT for summoning an AGM in case of a default.
⦁ They can apply to the Tribunal to call a meeting."
⦁ The Tribunal has powers to issue directions to validate the AGM, especially when only one member is present either in person or by proxy.
⦁ The power of the Tribunal to convene an Annual General Meeting ensures transparency and accountability.
⦁ conducted under NCLT directions is considered a legally valid AGM.
This makes Section 97 a critical provision for maintaining corporate governance and protecting shareholders’ rights in India.
Why Section 97 is Crucial for Corporate Governance
A well-structured corporate governance system requires transparency, accountability, and participation. Section 97 ensures that no company can escape its requirements to hold AGMs. It is a commendable piece of legislation, as it has given power to the NCLT to deal with defaulting companies.
In addition, the section ensures that decision-making processes are protected. AGMs are the forums where shareholders vote on matters such as the approval of accounts, the appointment of auditors, the declaration of dividend amounts, and other important decisions that are strategic in nature. Section 97 ensures that such processes are not hindered even when the management is not proactive.
Conclusion
In conclusion, Section 97 of the Companies Act 2013 is a critical protective measure. It becomes functional when the NCLT calls an annual general meeting in circumstances when the company has failed to comply with Section 96. Any shareholder can make an application to the NCLT to hold an annual general meeting, and the NCLT will provide directions in such a manner that even a few members are required to form a valid annual general meeting.
By promoting accountability, protecting shareholdings, and adhering to compliance, Section 97 supports and further intensifies corporate governance in India.
For expert guidance on company compliance, AGM procedures, and legal assistance under Section 97, visit Callmyca.com to ensure your company remains fully compliant and protected.
