Imagine a company suddenly needs approval from its shareholders for an important decision — maybe appointing a new director or approving a major change in business strategy. Waiting for the next Annual General Meeting (AGM) could take months, and the decision may be urgent.
This is where an Extra-Ordinary General Meeting (EGM) comes into the picture. In Indian company law, an EGM is a meeting of shareholders held whenever important matters need approval before the next AGM.
In this guide, we will understand what an Extra-Ordinary General Meeting is, why companies call it, and how it works in India under the Companies Act, 2013.
What is an Extra-Ordinary General Meeting (EGM)?
Let me explain this in a simple way. Every company normally holds one Annual General Meeting every year. But sometimes important business decisions cannot wait that long.
For example, a company may need shareholder approval to:
- Remove or appoint a director
- Approve a major investment
- Change the company’s articles of association
- Approve mergers or restructuring
When such matters arise suddenly, the company calls a separate shareholders’ meeting.
This meeting is called an Extra-Ordinary General Meeting (EGM).
In simple terms, an EGM is any shareholders’ meeting that is held apart from the annual general meeting to discuss special business matters.
Unlike an AGM, where routine matters like approving financial statements are discussed, all items discussed in an EGM are considered special business.
Why Companies Hold an EGM
In real business situations, companies often face decisions that cannot be postponed.
Let me give you a simple example.
Suppose a company discovers an opportunity to acquire another smaller business. The deal must be approved quickly to avoid losing the opportunity. If the next AGM is eight months away, waiting that long may cause the deal to collapse.
So the board calls an Extra-Ordinary General Meeting, gathers shareholders, explains the proposal, and asks them to vote. From practical experience, many corporate decisions such as director removal, takeover bids, shareholder disputes, or urgent policy changes are often handled through EGMs.
Who Can Call an Extra-Ordinary General Meeting?
Under the Companies Act, 2013, an EGM can be called in different ways depending on the situation. Let’s understand them one by one.
1. EGM Called by the Board of Directors
Most EGMs are called directly by the Board of Directors. Whenever the board believes that shareholders need to approve something important, they can schedule an EGM.
For example, if a company plans to issue additional shares worth ₹50 crore, the board may decide that shareholder approval is necessary. In such a case, they will call an EGM and send notices to shareholders.
Normally, these meetings are held somewhere in India.
However, if the company is a wholly owned subsidiary of a foreign company, the meeting may also be held outside India.
2. EGM Requested by Shareholders
Sometimes shareholders themselves want a meeting. This usually happens when shareholders are unhappy with management decisions or want to bring an important matter for discussion. However, a single small shareholder cannot demand a meeting.
The law requires that the request must come from shareholders who collectively hold at least one-tenth of the company’s voting power.
In simple words, if a company has ₹10 crore voting share capital, shareholders requesting the meeting must together hold shares representing ₹1 crore voting power. These shareholders must clearly write:
- The issue they want to discuss
- The resolution they want to propose
The request must be submitted to the registered office of the company.
Time Limit for the Board to Act
Once the company receives a valid request from shareholders, the board cannot ignore it. The board must begin the process of calling the meeting within 21 days of receiving the request. The meeting itself must then be held within 45 days from the date the request was submitted.
This rule exists to ensure that shareholder rights are respected. In real-life corporate situations, this rule has played a role in several shareholder disputes. For instance, courts in India have clarified that if shareholders have properly requested an EGM, courts generally will not stop the meeting from taking place.
3. When Shareholders Call the Meeting Themselves
Now imagine the board simply refuses to act. This sometimes happens during corporate conflicts. If the board fails to call the meeting within the required time, the shareholders who requested the meeting can organize the meeting themselves.
However, there are a few conditions. The meeting must be held within three months from the date the request was originally submitted. The shareholders must send proper notice to other members, mentioning:
- Place of the meeting
- Date
- Time
- Business to be discussed
Such meetings are usually held in the same city or town where the company’s registered office is located. Also, the meeting cannot be held on a national holiday.
Who Pays the Expenses?
You might wonder — who pays for the cost of organizing this meeting? When shareholders are forced to call the meeting themselves because the board failed to do so, the company reimburses the reasonable expenses they incurred.
Later, the company may recover this cost from directors who failed to perform their duty. This rule ensures that shareholders are not financially burdened for enforcing their rights.
What Happens if Quorum is Not Present?
In company meetings, quorum means the minimum number of members required for the meeting to legally proceed. If the required number of shareholders are not present within 30 minutes of the meeting start time, the meeting cannot continue. In such cases, the meeting is usually adjourned, meaning it is postponed to another date.
What is an Adjourned Meeting?
Let’s understand this with a simple situation. Suppose an EGM is scheduled at 11:00 AM, but not enough shareholders attend. After waiting for 30 minutes, the meeting cannot continue. It is then postponed to a later date.
This postponed meeting is called an adjourned meeting.
Usually, the adjourned meeting takes place one week later at the same time and place, unless the board decides otherwise. The company must inform shareholders about the new meeting through:
- Individual notices, or
- Newspaper advertisements
Quorum in an Adjourned Meeting
Sometimes even the adjourned meeting does not attract many shareholders. In such cases, if at least two members are present, the meeting may proceed. This rule ensures that company decisions are not blocked indefinitely because of low attendance.
Tribunal Ordered Meetings
There are rare situations where it becomes difficult or impossible for a company to organize a meeting. For example:
- Serious shareholder disputes
- Management conflicts
- Operational issues preventing proper notice
In such cases, the National Company Law Tribunal (NCLT) can step in. The Tribunal may order that a meeting be conducted in a specific way and may even declare that a single member present can be treated as a valid meeting. This ensures that the company’s decision-making process continues even during unusual circumstances.
Important Point About Adjourned Meetings
One point often confuses beginners. If a resolution is passed during an adjourned meeting, the decision is considered passed on the date of the adjourned meeting, not on the date of the original meeting. Also, only the unfinished business from the original meeting can be discussed during the adjourned meeting. New matters cannot normally be introduced.
Example
Let’s take a small example. Suppose a public company has 700 members and its articles require 7 members physically present for a valid meeting. During the meeting:
- One person represents the Governor of a state
- One person represents two companies
- Four people attend as proxies
Now here is the interesting part.
Proxies do not count as members personally present. So the quorum calculation becomes:
- Governor representative → counts as 1 member
- Representative of two companies → counts as 2 members
- Proxies → not counted
Total members personally present = 3
Since the required quorum was 7, the meeting cannot proceed.
Conclusion
Extra-Ordinary General Meetings play an important role in company governance in India. They allow companies to take important decisions without waiting for the annual meeting. EGMs ensure that shareholders remain involved in major decisions affecting the company.
For beginners learning corporate law or finance, the key idea is simple: An EGM is a special meeting of shareholders held whenever an urgent or important business needs approval.
Understanding how these meetings are called, who can request them, and how decisions are passed helps you see how companies function in practice. If you continue learning about company law, this concept will connect closely with topics like shareholder rights, board responsibilities, and corporate decision-making.
