Chairman Of the Company – Company Registration in Madurai

Powers of the chairman : conduct, validity and adjournment of meetings

The extent to which the chairman of a meeting can lawfully adjourn the meeting is a question of very strategic importance in the conduct of meetings. The law on this point is a mixture of two currents according to one of which a meeting cannot be adjourned without its own consent and according to the other a very practical residuary power lies with the chairman to adjourn where an orderly meeting is not possible. In between these two extreme principles there are many things the settlement of which essentially depends upon the facts as they eventually emerge at the meeting. to appoint a managing director. The proposed candidate claimed that he was the chairman of the meeting but this was objected to by some shareholders. Thereupon he acting as the chairman dissolved the meeting and left the meeting hall with his supporters. The rest of the members continued the meeting, elected a chairman and appointed another person as the managing director. The question of the validity of this appointment arose and the answer depended wholly upon the fact whether the meeting was lawfully adjourned. LS. MENTA, J. after review of cases observed as follows: “It is settled law that when once a meeting is called, no chairman can arbitrarily dispose of it. Its continuance or dispersion rests entirely on the will of the shareholders.

If a chairman should vacate the chair or adjourn the meeting regardless of the views of the majority, those remaining even if a minority can appoint a chairman and conduct the business left unfinished by the former chairman.  “The above cases clearly established the principle that where a meeting is unlawfully adjourned by the chairman thinking that he is not likely to succeed in his object, the remaining members do  possess the right to continue the meeting and conduct the business left untranslated by the chairman”. On the other hand in United Bank of India Ltd. v. United India Credit and Development Co. Ltd., it was held that every chairman has the right to make a bona fide adjournment. This “by no means interferes with the right which every chairman has to make a bona fide adjournment, whilst a poll or other business is proceeding, if circumstances of violent interruption make it unsafe, or seriously difficult for the voters to tender their votes; nor of adjourning the place of polling, if the ordinary place used for that purpose be insufficient, or greatly inconvinient. In most of such cases, the question will turn upon the intention and effect of the adjournment, if the intention and effect were to interrupt and procrastinate the business, such an adjournment would be illegal; if, on the contrary, the intention and effect were to forward or facilitate it, and no injurious effect were produced, such an adjournment would, it is conceived, be generally supported.”

Assembly in one room not necessary

In order that a meeting be validly constituted it is not necessary for all the members to be physically present in the same room. A valid meeting can take place even if the attending shareholders are at different places provided that all steps are taken to address the shareholders sitting at places different from the main venue where the meeting is to be held and that there should be adequate audio-visual links to enable the members in all the locations to see and hear what was going on in the other rooms. On the facts, since the audio-visual arrangement did not work at the morning meeting, the meeting was incapable of transacting any business. However, it was still a valid meeting so as to enable the chairman to exercise his powers under the Companies Act, and the articles of association of the particular company. The Court had to face formidable cases like, where a meeting which had excluded through lack of notice persons entitled to attend was held to be invalid for all purposes and was also not capable of adjourning itself; Portuguese Consolidated Copper Mines Ltd., where a Board meeting of which inadequate notice was given was held to be not capable of adjourning itself and the Canadian case of McLaren v. Jisken, where an inquorate meeting adjourned itself and the reassembled meeting and the business done at it were both held to be invalid.

Did the chairman have power to adjourn the meeting?

Supposing that the meeting was valid, did the chairman have the power to adjourn it? The articles of the company enabled the chairman to adjourn a meeting only with its consent, and, therefore, the chairman had to obtain consent of the meeting before pronouncing its adjournment. The Court noted the state of common law on the point and found that a chairman has no general right to adjourn a meeting at his own will and pleasure [National Dwellings Society v. Sykes] but that it is clearly established that a chairman has such power when unruly conduct prevents the continuation of business.

 The Court also found it to be established that when in an orderly meeting a poll is demanded on a motion to adjourn and such poll cannot be taken forthwith, the chairman has power to suspend the meeting with a view to its continuance at a later date after the result of the poll is known. The Court said that though the power of the chairman to stand o the proceedings to another time may not be a power of adjournment, but it appears that there is a residual power in the chairman to take such steps as would, in the ordinary usage of the word, amount to an adjournment. The conclusion of the Court on this point was that but for the provision in the articles the chairman would have had the power of adjournment because it was impossible for him, in the circumstances as they developed, to give to the members an equal opportunity of debating and voting. On the facts of the case the Court said that “in any circumstances where there is a meeting at which the view of the majority cannot be validly ascertained, the chairman has a residual common law power to adjourn so as to give all persons entitled a reasonable opportunity of voting and speaking at the meeting”.

Was the power of adjournment fairly exercised

The third question before the Court was whether the power of adjournment was validly exercised? The Court said that the chairman’s decision to adjourn would be invalid not only if taken in bad faith but also if he failed to take into account relevant factors, or took into account irrelevant factors, or reached a conclusion which no reasonable chairman could have reached having regard to the purpose of his power to adjourn. The Court said that on the facts the chairman failed to take into account the following relevant factors: the attempts by the members to adjourn the meeting sine die, their objections to the adjournment until the afternoon, that the members present at the morning meeting who could not attend the afternoon meeting would be unable to vote since it was too late for them to deposit proxies, that it was not urgent for the meeting to proceed that afternoon given that the deadline for the completion of the merger was not until 31st March, 1989 and finally that it would have been possible to terminate the meeting and reconvene it at a later date.

For testing the reasonableness of the conduct of the chairman, the Court said that the test would be the same which is applicable on judicial review in accordance with the principles of Associated Provincial Picture Houses Ltd v. Wednesbury Corp., A similar position developed in the Australian case of Bell Resources Ltd y. Turm Bridge Pty. Ltd., where also the venue of the meeting was likely to prove to be too small and therefore Board of directors purported to cancel the notice summoning the meeting and instead summoned the meeting at the next day at a different hotel. It was held that Board of directors had no power to do so and some persons who assembled at the place next day did not constitute the Annual General Meeting of the company.

Duty of chairman to answer questions at general meetings

The chairman of the annual general meeting is expected to act reasonably and reply to all reasonable questions raised by the shareholders relating to accounts or any other matter relating to the agenda if the information is available at the meeting. The chairman, however, has a right to exclude from the discussions anything which he thinks is irrelevant to the proceedings or detrimental to the interest of the company. This can be inferred from the provisions of s. 193(5) (corresponding to s.118(5) of the 2013 Act) which enables the chairman to eliminate such matters from the minutes of the meeting. Irregularities in procedure and interference by court at general meetings

Where there is no fraud or where the individual or corporate rights of members are not affected, irregularities in general meetings may be treated as matters of domestic concern or ‘in-door management’ as they are usually called so as not to enable the Court to interfere, the principle being that such irregularities or defects can be cured by calling a fresh meeting duly observing all the formalities. This is based on the well-known rule enunciated in Poss v. Harbotle. Also it may be appreciated that such irregularities may be waived if all those entitled to object, assent to the waiver.

Chairman’s power of expulsion

The Chairman has powers to expel a member from the meeting if he seriously interferes with the conduct of the meeting. Expulsion must be made only after the member concerned has been warned of his conduct and its consequences. Minimal force must e used. If possible, the approval of the majority can be obtained for the expulsion.

Chairman’s power to withdraw resolution

A special resolution was tabled at an extraordinary general meeting. The chairman unilaterally withdrew the resolution without taking the members into confidence and then prevented them from expressing their opinion on the subject matter of the resolution. The CLB ordered that the members had the right to elect a new chairman and conduct the business of the meeting pertaining to the resolution.

Chairman’s power as to amendments to resolution

Any amendment to a resolution which fairly arises and which is specified in the notice of the meeting and which is within the scope of the notice may be proposed and passed at the meeting. The Chairman has no right to refuse to put such an amendment before the meeting.  Where the chairman refused to put the amendment and the resolution was set aside. The Court said. “Amendment which was moved was definite, and that the chairman was wrong in refusing to put it to the meeting as the Chairman after consulting the solicitor of the company had deliberately ruled that no amendment could be put.”

In permitting an amendment, the Chairman has in reference to special resolutions to keep this legal requirement in mind that there has to be a complete identity between the substance of the resolution as it was notified to the members and as it was passed at the meeting. Generally a resolution or an amended resolution is to be moved by one voter and seconded by another, but if the chairman chooses, he may put it to vote without these formalities.

Chairman’s declaration as to result of voting

When voting takes place by show of hands, the Chairman’s declaration as to the result of voting is conclusive evidence that the resolution was passed or not passed. When the declaration is without taking a count of the number or proportion of the votes recorded in favor or against the resolution. Further the formalities such as the showing of hands must be complied with even when the motion is unopposed.

No power of deciding validity of pledge of shares with voting rights

Where a shareholder pledged his shares with a bank along with voting rights and the bank had lodged the documents with the company for the purpose of exercising voting rights, it was held that the chairman had no power to examine the validity of the documents. For more details for Company Registration in Madurai, kindly visit our website and feel free to contact us. We are here to help you… Thanks for reading!!!!