Shorter circulation of Financial Statements

Indian Ministry of Corporate Affairs on 21st July 2015 came out with another clarification in form of General Circular 11 of 2015.

Proviso to sub – section (1) of Section 101 state, “a general meeting may be called after giving a shorter notice if consent is given in writing or by electronic mode by not less than ninety-five percent of the members entitled to vote at such meeting”.

Sub – section (1) of Section 136 dealing with right of member to copies of audited financial statement state, “Without prejudice to the provisions of section 101, a copy of the financial statements, including consolidated financial statements, if any, auditor’s report and every other document required by law to be annexed or attached to the financial statements, which are to be laid before a company in its general meeting, shall be sent to every member of the company, to every trustee for the debenture-holder of any debentures issued by the company, and to all persons other than such member or trustee, being the person so entitled, not less than twenty-one days before the date of the meeting.”

There is no provision in Sub – section (1) of Section 136 similar to Proviso to sub – section (1) of Section 101. In absence to this even if the member may consent to get notice of General Meeting (not only Annual General Meeting) for a sorter notice, they may not compromise their right to get audited financial statement not less than twenty – one day before the date of the meeting.

Sub – section (1) of Section 136 starts with words “Without prejudice to the provisions of section 101”, which means “without affecting any right given in Section 101”. It is not clear, which particular right this clause in Sub – section 136(1) want to protect in Section 101. Hence, this clarification is issued by Ministry.

Paragraph 1.2 of the Circular state, “the matter has been examined and it is clarified that a company holding a general meeting after giving a shorter notice as provided under section 101 of the Act may also circulate financial statements (to be laid/considered in the same general meeting) at such shorter notice.

Here, very important terms used in this circular are “(to be laid/considered in the same general meeting)”. This implies that circular of financial statements is possible for one general meeting for which consent is being sought, not for any subsequent general meeting. This suggests that consent for shorter notice should not be one time exercise but should take every time when company want to send financial statements.

This circular interprets expressed provision of the Act in some other way beyond its authority. Matter dealt herein should be placed in the Companies Act itself.

Please note: I welcome your comments and feedback. This blog post is not a professional advice. Readers may share this post on social media by using buttons given here.

One response to “Shorter circulation of Financial Statements

  1. Pingback: Index of Companies Law Posts | AishMGhrana

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