Quorum :
Quorum means the minimum number of members who must be present in order to constitute a meeting and transact business thereat. Thus, quorum represents the number of members on whose presence the meeting of a company can commence its deliberations.
Section 103 of the Companies Act, 2013 provides the law with respect to the quorum for the meetings. Section provides that where the articles of the company do not provide for a larger number, there the quorum shall depend on number of members as on date of a meeting.
(a) in case of a public company,—
| Quorum for the meeting | Number of members as on date of a meeting |
| 5 members personally present | not more than one thousand |
| 15 members personally present | more than one thousand but up to five thousand |
| 30 members personally present | exceeds five thousand |
(b) in the case of a private company, two members personally present, shall be the quorum for a meeting of the company.
Consequences of no quorum- If the quorum is not present within half-an-hour from the time appointed for holding a meeting of the company—
(a) the meeting shall stand adjourned to the same day in the next week at the same time and place, or
(b) to such other date and such other time and place as the Board may determine; or
(c) the meeting, if called by requisitionists (under section 100), shall stand cancelled:
Notice of an adjourned meeting- Where the meeting stands adjourned to the same day in the next week at the same time and place, or to such other date and such other time and place as the Board may determine, there the company shall give at least 3 days notice to the members either individually or by publishing an advertisement in the newspapers.
No quorum in an adjourned meeting- If at the adjourned meeting also, a quorum is not present within half-an-hour from the time appointed for holding meeting, the members present shall be the quorum.
The words, personally present exclude proxies. However, the representative of a body corporate appointed under Section 113 or the representative of the President or a Governor of a State under Section 112 is a member ‘personally present’ for purpose of counting a quorum [Re. Kelantan Coconut Estate Ltd. ,1920 W.N. 274]. In case two or more corporate bodies who are members of a company are represented by single individual, each of the bodies corporate will be treated as personally present by the individual representing it. If, for instance, he represents three corporate bodies, his presence will be counted as three members being present in person for purposes of quorum. It has been held in a Scottish case that one individual may count as more than one member if he attends the meeting in more than one capacity, e.g. as a member holding shares in his own right and as a member entitled to vote in person in respect of a trust holding (Neil McLeod & Sons Ltd., Petitioners, 1976 SC 16).
Joint holders and quorum: In the case of joint holders it would seem prima facie that any one of them may be counted in a quorum. In an Australian case [Re. Trans-Continental HotelLtd. (1947) SASR 49], It has been held that two joint holders are each members and are to be counted towards a quorum as two members personally present.
It should be noted that Act specifically provides that for certain purposes where two or more persons hold any shares jointly, they shall be counted only as one member, e.g. under Section 2(68)(ii) for the purposes of counting the number of members in a private company, and under Section 244 for the purposes of right to apply for relief in cases of oppression or mismanagement. If the articles do not provide anything to the contrary, it appears that two or more joint holders when personally present can be counted as so many members for the purpose of forming a quorum.
When quorum is immaterial: If all the members are present, it is immaterial that the quorum required is more than the total number of members [Re. Express Engineering Works Ltd.(1920) Ch 466: Re Oxted Motor Co. Ltd. (1921) 3 KB 32]. If, for example, the articles of a private company provide that four members personally present shall be a quorum, and the number of members is reduced to three then the question of quorum will not arise when all the three members attend a meeting.
The meeting cannot proceed with business in the absence of quorum. Unless the articles of the company provide otherwise, if within half-an-hour from the time appointed for holding the meeting of the company, quorum is not present then the meeting shall be dissolved, if it has been called upon by the requisition to the same day in the next week, at the same time and place, or to such other day and such other time and place as the Board may determine. If at such an adjourned meeting a quorum is not present within half-an-hour from the time appointed for the meeting, the members present shall constitute the quorum (Section 103). A single member present shall not constitute quorum at an adjourned meeting.
Effect of failure of a quorum: If no quorum is present, then there is no meeting and the proceedings are invalid [Re Romford Canal Co. (1883) 24 Ch D 85]. However, acts done creating rights in favour of third parties at a meeting without a quorum being present would not affect the rights of such third parties, provided they had no notice of the irregularity e.g. debentures issued at a meeting of directors where there was an insufficient quorum-Re. Romford Canal.
Examples:
(i) A general meeting of a public company was adjourned by the chairman for want of quorum. Fresh notice was not served for the adjourned meeting. Do you feel that notice is required for the adjourned meeting? Referring to the provisions of the Companies Act, 2013 state the minimum number of members required to be present in the adjourned meeting.
Answer
As per section 103 of the companies Act, 2013, if within half an hour from the time appointed for holding a meeting for the company quorum is not present, the meeting, shall stand adjourned to the same day in the next week, at the same time and place. Fresh notice of not less than 3 days shall be given by the company to the members individually or by publishing in the newspapers. Besides, no quorum is necessary in the adjourned meeting. Thus, the adjourned meeting in question is valid.
Section 103 of the Companies Act, 2013 stipulates that unless the articles of associations provide for a larger number, two members personally presented shall constitute quorum in the case of a private company. Hence, the private company may provide a larger number for quorum. The general principle is that if no quorum is present the meeting and proceedings are void. However, there can be situations when quorum becomes immaterial. If all the members are present, it is immaterial that the quorum required is more than the total number of members. [Re. Express Engineering Works Ltd. (1920) CH466].
(ii) Whether the following persons can be counted for the purposes of quorum in a general meeting of a public company (a) a person representing three member companies; (b) both the joint owners of shares or present at the meeting; (c) a single member present at the meeting.
Answer
(a) Unless the articles of a company provide for a larger number, five, fifteen or thirty members personally present depending upon the number of members as on date of meeting is, less than one thousand, ranging from 1000 to 5,000 or exceeding 5,000 respectively in the case of a public company shall be the quorum for a meeting of the company (section 103). Personally present excludes proxies. But a representative of a body corporate appointed under Section 113 is a member personally ‘present’ for purposes of counting of quorum. If one individual represents three member companies, his presence will be counted as three members being present in person for purpose of quorum [Mac-Leod (Neil) & Sons Ltd.].
(b) For the purpose of quorum, joint shareholders will be collectively regarded as one shareholder. However in an Australian Case (Re. Trans-Continental Hotel Ltd.), it has been held that two joint holders are each members and are to be counted towards a quorum as two members personally present.
The Companies Act specifically provides for certain purposes e.g. under Section 2(68)(ii) and under section 244 where two or more persons hold shares jointly they shall be counted only as one member. If the articles do not provide anything to the contrary, it appears that two or more joint holders when personally present can be counted as so many members for the purpose of forming quorum.
(c) The word ‘meeting’ literally means a coming of together of two or more persons and generally more than one person will be necessary to constitute a meeting [Mac-leod (Neil) & Sons Ltd.]. But there may be cases where the constitution of a company may be such as, for instance, where one person holds all the equity shares of a class or all the preference shares so that there can be no meeting of more than one voting shareholder or one member of a particular class of shares. In such cases, it must be presumed that the Act contemplates positions where a meeting of two or more persons will not be possible in the strict sense and the word ‘meeting’ must be taken to have been used in the sense of a function which can be performed by one person also as effectively as by two or more (East v. Bennet Bros. Ltd.). Apart from these special circumstances, there is an express provision in the Companies Act where a single member will constitute a meeting. Section 167 empowers the CLB to call annual general meeting of a company. Section 186 empowers CLB to order a meeting of the company, other than an annual general meeting. In both these cases, the CLB may issue directions in relation to the calling, holding and conducting of the meeting. The directions may include a direction that one member of the company present in person or by proxy shall be deemed to constitute a meeting.
[Note: Corresponding sections of sections 167 and 186 of the Companies Act, 1956 is sections 97 and 98 of the Companies Act, 2013, which is not yet notified. Till then the sections of the Companies Act, 1956 shall be referred]
(iii) The Articles of Associations of X Ltd. require the personal presence of six members to constitute quorum of General Meeting. The following persons were present at the time of commencement of an Extraordinary General Meeting to consider the appointment of Managing Director:
(i) Mr. G. the representative of Governor of Gujarat
(ii) Mr. A and Mr. B, shareholders of Preference Shares.
(iii) Mr. L. representing M Ltd., N Ltd. and X Ltd.
(iv) Mr. P, Mr. Q, Mr. R and Mr. S who were proxies of Shareholders.
Can be said that quorum was present? Discuss.
Quorum means the minimum number of members that must be personally present in order to constitute a meeting and transact business threat. Thus, quorum represents the number of members on whose presence the meeting of a company can commence its deliberations. According to Section 103, of the Companies Act, 2013, unless the Articles provide for larger number, 5, 15, 30 members, personally present depending upon the number of members as on date of meeting, less than 1000, from 1000 to 5000 or exceeding 5000 respectively in the case of a public company and two in the case of any other company form the quorum for a general meeting. In this case, the Articles provide for six.
The word ‘personally present’ exclude proxies. However, the representative of a body corporate appointed under Section 113 or the representative of the President or a Governor of State under Section 112 is a member ‘personally present’ for purpose of counting a quorum. In case two or more corporate bodies who are members of a company are represented by a single individual, each of the bodies corporate will be treated as personally present by the individual representing it. If, for instance, he represents three corporate bodies, his presence will be counted as three members being present in person for purposes of quorum.
The quorum of members, personally present means the presence of the members who are called to vote in the meeting. Preference shareholders can vote only in relation to the matters affecting the rights of preference shares. In the extra ordinary general meeting in question, only the appointment of the managing director has to be considered. It is not a matter affecting the right of preference shares and the preference shareholders are not entitled to vote and hence, they cannot be considered as “members personally present” for the purpose of quorum.
Thus, the number of persons being personally present would be as follows:
| Present personally | Number |
| Mr. G | 1 |
| Mr. A and Mr. B | Nil |
| Mr. L | 3 |
| Proxies | Nil |
| Total | 4 |
It can therefore be said that quorum was not present.