CA Intermediate · Corporate and Other Laws · Management & Administration
Nirmal Pharma Ltd passed an ordinary resolution at an EGM held on 10 June to appoint a managing director. Members holding 60% voted in favour, 25% against and the rest did not vote. Later it is discovered that the notice of the EGM omitted the explanatory statement for this special business, which was material. What is the legal position?
The resolution is not validly passed. Notice of a general meeting with special business must carry an explanatory statement of material facts, and omitting it makes the notice defective. A majority vote or later intimation to the Registrar cannot cure that defect.
- AThe resolution is valid because a majority voted in favour
- BThe resolution is valid if the Registrar is informed within 30 days
- CThe resolution is valid but the company is liable to a penalty only
- DThe resolution is not validly passed because the notice lacked the mandatory explanatory statementCorrect
Explanation
For special business the notice must annex an explanatory statement stating material facts. Omitting it renders the notice defective and the resolution is not validly passed, regardless of the vote margin. Informing the Registrar cannot cure the defect.
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