The Board of Directors of a public joint stock company is the legal and authorized body vested with the legal power and authority to call the shareholders of the company for an ordinary or extra-ordinary general assembly.
However, at the same time the Commercial Companies Law gives this important legal authority, as alternative priority, to other government institutions. The Ministry of Trade and Commerce is one of the government institutions pledged with such legal authority. The Ministry of Trade and Commerce comes in and exercises this legal power in certain circumstances enumerated and explained in the commercial companies law .
The Board of Directors of a company may delay the process or opt not to call the shareholders to convene the ordinary general assembly. This may happen for any reason and ultimately the bond relationship between the shareholders “the owners of the company” and the company will be severed.
If such an instance occurs, the Ministry of Trade and Commerce shall exercise its vested legal powers and statutory authority and shall directly call the shareholders of the company for the required meeting. This legal statutory authority, to call the shareholders of the company for the meeting, shall be exercised by the Ministry, in consultation with other Ministry and other Competent Authority – if any– supervising or controlling the affairs of the concerned company.
The Ministry of Trade and Commerce is the licensing authority for all companies to operate as commercial companies in the country. Due to this , it has been vested with an overall power over all licensed companies to make sure that they are performing their corporate duties according to the terms of the law and without violating any of the provisions stipulated therein.
As part and parcel of this overwhelming authority the Commercial Companies Law gives the Ministry the preemptive right to call the shareholders of the company for the meeting in case the Board of Directors, for any reason, fails and or refrains from doing this within the period and terms specified in the law.
I think , this legal power , given by the law to the Ministry serves dual purposes by asking the Board of Directors to keep the relationship with the shareholders intact all through, and at the same time, to give overall credit to the Ministry to keep such relationship alive and vivid.
Apart from above, the Ministry of Trade and Commerce is given an additional authority, to over-step the management of the company ( Board of Directors ) and to call the shareholders for the meeting in case it ascertains that there are violations of the law, the articles of association of the company and or mal-practices by the management of the company.
When and why to call the shareholders, is based on the above reasons as mentioned in the law. We believe, the exercise of this authority shall be left for the discretion of the Ministry which shall always exercise such legal discretion with due care and diligence. The Ministry, as we have seen, normally advices the management of the company in case there is breach of law or disobedience to official instructions or regulations Recourse to shareholders has been exercised in extremely few cases in this country.
On the other hand, we have noticed that, the American authorities used to call the shareholders, or majority of the shareholders, particularly in relation to combating anti-trust or anti-monopolistic practice by some companies.
A third reason for the Ministry to call the shareholders of the company for the meeting, is the non-availability of the required quorum for the meeting of the Board of Directors. This could happen due to resignation , incompetence or death of a member of the Board of Directors. The Board of Directors of the company, without the necessary quorum, lacks the legal authority to exercise and perform its duties. This situation would handicap the company and jeopardize the interests of the shareholders of the company.
To inject impetus to the Board of Directors, the law gives the Ministry the legal power to call the shareholders to elect new members to the Board of Directors to fill the vacant post (posts) or to elect a complete new Board of Directors. This is rather a procedural matter , but ultimately it is very essential and important for the future of the company .
A fourth and final instance wherein the Ministry of Trade and Commerce could step-in and call the shareholders of the company for the required meeting , is when the Board of Directors neglects a request by some shareholders to convene an ordinary general meeting. The shareholders of the company could request a meeting at any time, provided that, such shareholders own or hold at least certain per cent of the equity shareholding in the capital.
I think , the requirement of having a minimum per cent of the equity shareholding is very crucial and should be strictly observed, otherwise, the door could be open for endless meetings for fruitless results. This however, should not be understood that the voice or views of the shareholders shall not be heard. We should look at this as a matter of principle and the meeting shall take place, only, when a minimum equity shareholding is available. The shareholders interested to set an ordinary general meeting in place could lobby this and market their views for the purpose of attaining the required minimum percentage.
Above are the instances wherein the Ministry could call the shareholders for an ordinary general assembly. The Ministry shall exercise this role with the aim of strengthening the performance of all companies for the betterment of the commercial and corporate activity in the country.
In all cases, when the Ministry of Trade and Commerce calls for an ordinary general assembly, a representative(s) of the Ministry in addition to other competent authorities , if any, shall attend the meeting as observers without voting rights. This is required to give the Ministry and or the other competent authority, the opportunity to present their views and recommendations to the shareholders of the company…