Section 100 of the Companies Act, 2013 empowers the shareholders fulfilling the below criteria to call for an EGM:
- In the case of a company having a share capital- holding 1/10th of paid-up share capital
- In the case of a company not having a share capital- holding 1/10th of the total voting power
In case valid requisition is received, Board is bound to call EGM within 21 days failing which the requisitionists themselves can call the meeting within 3 months
This provision is being increasingly used by minority shareholders off late to protect their interest and invoke their rights. We are discussing few cases here.
(1) Zee Entertainment Enterprise Limited
This is the most interesting case in which Division Bench of the Bombay High Court has held that on a plain and literal reading of Section 100(4), the expression "valid requisition" is restricted to numerical and procedural compliances with the requirements of Section 100, and nothing further. It was held that
(i) the word 'valid' had no reference to the 'object' of the requisition, but rather to the requirements in the Section itself;
(ii) an eligible shareholder is not bound to disclose the reasons for the resolutions proposed to be moved at the requisitioned meeting;
(iii) the reasons provided are not subject to judicial review;
(iv) there is no discretion vested with the Board to sit in judgment over 'any matter' to be placed for consideration at a requisitioned EGM;
(v) the Board has a mandatory obligation to call the EGM, if the procedural and numerical requirements specified under Section 100 are met;
(2) Dhanlaxmi Bank
Most recent case in which minority shareholdersof the Bank (collectively holding 13.5% shares) have given notice to the Bank for calling EGM over the deteriorating performance of the company while comparing the financial results of last two quarter accusing company that it has lost its control over the expenditure (as cost to income ratio has risen to alarming rate).
(3) McDowell Holdings Limited
Earlier this year a group of minority shareholders of the company (collectively holding 15% shares) have requested an EGM and proposed the appointment of five members to the board after the stock exchanges suspended the company's share trading citing insufficient board strength. However,the company to this date hasn't appointed the required number of directors. The company is currently under Corporate Insolvency Resolution Process (CIRP).
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