In today’s competitive environment, many individuals are in the process of forming companies to reap the benefits of equity investments and the advantage of economies of scale. The formation and running of any company is fraught with multiple complexities and compliance formalities. One of the significant and mandatory compliance is the holding of necessary meetings at specified frequencies.
Company meetings can be of different types and depend on the structure of the specific company. For example, a private company may have a different set of meetings to be held as compared to a public company. Also, the meetings are held at all levels of the organization. The two common types of meetings that are held at the top leadership levels are Board Meeting and the Extraordinary General Meeting.
Board Meeting vs Extraordinary General Meeting
The main difference between a Board Meeting and an Extraordinary General Meeting is that Board Meeting is an annual meeting which is conducted to discuss the business in general, while an Extraordinary General Meeting is a meeting which is conducted to discuss a specific urgent business purpose and not held as per any specified frequency.
However, the above is not the only difference. A comparison between both the terms on certain parameters can shed light on subtle aspects:
Comparison Table Between Board Meeting and Extraordinary General Meeting (in Tabular Form)
| Parameter of Comparison | Board Meeting | Extraordinary General Meeting |
|---|---|---|
| Meaning | Board Meeting is a type of meeting conducted to discuss general business performance and plans | Extraordinary General Meeting is a meeting to discuss a specific subject or an area of immediate concern |
| Purpose | Discuss general operations and results of business including financial results and also to discuss plans and vision of the company | Discuss any specific areas of concern or to pass any special resolution or to discuss any immediate or urgent burning issues |
| When conducted | For public companies- The first meeting has to be conducted within 30 days of incorporation and there should be at least 4 meetings held on an annual basis | Anytime depending on the gravity of the situation/purpose to be discussed |
| When first meeting held | Within 30 days of incorporation of the company | Can be conducted any time depending on the need |
| Mandatory | Yes | No |
| Pre-scheduled | Yes | No, but depends as certain notifications may need to be sent |
| Participation of top leadership | No | Yes, because the issues being discussed are critical and requires brainstorming and solution from top minds of leadership |
| Called by | Board of directors | Called by the board of directors or on the request of certain specific shareholders |
| Relevant section in Indian Companies Act 2013 | Section 173- Meetings of Board | Section 100-Calling of Extraordinary General Meeting |
What is Board Meeting?
Board Meeting as the name indicates is a meeting of the Board i.e. the Board of Directors of the company. The Board of Directors is responsible for envisioning the objectives and mission of the company and putting the said objectives into implementation. The Board Meeting is a meeting discussing how far the company has reached in achieving the goals and what are its plans for the future.
Board Meeting is a meeting which is requested by the directors i.e. the board. All members (i.e. the shareholders) are supposed to attend this meeting to understand how the company is putting into practice the money invested by the shareholders.
Board Meeting is a mandatory meeting. Board Meeting has to be compulsorily held within 30 days of incorporation of a company. Further, there is a requirement that in a year there should be at least 4 Board Meetings. Additional compliance requires that there should not be a gap of more than 120 days between two Board Meetings.
Board Meeting requirements are prescribed by the Government from time to time. For example, a One Person Company, or a small company or a dormant company shall have at least one Board Meeting being conducted on a half-yearly basis, and additionally the gap between the two Board Meetings should not be less than ninety days.
The participation of the board of directors in the Board Meeting can be done preferably in person. The other alternative is to engage in a video conferencing mode or even through any other audiovisual method. The recording of the meeting proceedings has to be stored.
Board Meeting has to be conducted after giving prior notice specifying the time and place of the meeting. It is required to provide at least 7 days notice for the Board Meeting. In certain cases, Board Meeting may be called at a shorter notice to discuss any urgent matters but in this case at least one independent director, if any, shall be present at the meeting.
What is Extraordinary General Meeting?
Extraordinary General Meeting as the name implies is a meeting being called by the board to discuss any extraordinary issues. Extraordinary General Meeting is called by the Board of Directors as they deem fit having due regard to the issue to be discussed and the interests of the shareholders.
Extraordinary General Meeting is being held to deliberate on some urgent and burning topics or issues being faced by a company. Extraordinary General Meeting requires the participation of all top-level executives as the subject being discussed in this meeting is a serious one and of immediate concern to the company.
Extraordinary General Meeting can be called on the requisition being made by a certain category of majority shareholders. This can mean in the case of a company that has a share capital, shareholders who hold not less than 1/10th of such paid-up share capital which carries voting rights. In the case of a company that does not have a share capital, shareholders who hold not less than 1/10th of the total voting power on the date of request of holding the meeting. The shareholders making the request need to set out the matters for discussion in the requisition.
The Board of Directors will have to hold the Extraordinary General Meeting within 21 days of the date of a request being made by certain shareholders. The concerned shareholders also have the right to hold the Extraordinary General Meeting in case of failure by the Board of Directors in adhering to their request.
Main Differences Between Board Meeting and Extraordinary General Meeting
- A Board Meeting is held to discuss ongoing operations, company performance, results, and plans. Extraordinary General Meeting is held to discuss any urgent or problematic issue facing the company and which is of immediate concern to a company.
- Board Meetings shall be held within 30 days of incorporation. Extraordinary General Meeting does not have any such requirements.
- Board Meeting for a public company has to be held 4 times in a year. Extraordinary General Meeting does not have such requirements.
- Board Meeting is called upon by the Board of Directors. Extraordinary General Meeting is called by the Board of Directors or by the Board of Directors on request of shareholders with a certain stake in the company.
- Board Meetings may not require participation of all top-level leadership people. Extraordinary General Meeting requires the participation of all top-level executive leadership.
- Board Meeting is detailed under Section 173 of the Indian Companies Act 2013. Extraordinary General Meeting is dealt with under Section 100 of the Indian Companies Act 2013.
Conclusion
Board Meeting and Extraordinary General Meeting are two important meetings for a company. Both the meetings are held for a different purpose and carry certain compliance mandates as prescribed by law.
From a practical perspective, it is important to know that as a shareholder or member of any company, there is a right to participate in the Board Meeting and Extraordinary General Meeting to assess company performance and the benefits of equity investment. At the same time, an additional right is available for requesting for an Extraordinary General Meeting to be held but which right is available only to certain shareholders only.
References
- https://accessbankplc.com/AccessBankGroup/media/Documents/EGM-2019.pdf
- https://www.ncbi.nlm.nih.gov/pmc/articles/PMC5943766/
- https://www.jstor.org/stable/20236668