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CA Intermediate · Corporate and Other Laws · Management & Administration

Sundaram Textiles Ltd, an unlisted public company, received a valid requisition from members holding 12% of the paid-up voting share capital to convene an extraordinary general meeting (EGM). The Board did nothing within the statutory period after the requisition was deposited. What is the legal position?

The requisitionists may convene the extraordinary general meeting themselves at the company's expense. Holders of at least 10% of paid-up voting capital can requisition an EGM, and if the Board fails to act within the prescribed period, the members acquire the right to call it directly without Tribunal permission.

  1. AThe requisitionists themselves may call the meeting at the company's expense, as the Board failed to actCorrect
  2. BThe requisition lapses, because only the Board may call an EGM
  3. CThe requisitionists must first obtain an order of the Tribunal before they can call the meeting
  4. DThe requisitionists may call the meeting only if they hold at least one-third of the paid-up capital

Explanation

Members holding at least 10% of paid-up voting capital can requisition an EGM. If the Board does not proceed to call the meeting within the prescribed time, the requisitionists may call it themselves, and the company bears the reasonable expenses, which are recoverable from fees or remuneration of defaulting directors. Here 12% exceeds 10%, so no Tribunal order is required. The one-third option wrongly raises the threshold.

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