Introduction
Following Article 72 of the Amendment Bill of the Trade Law approved in 1347, the General Assembly is essentially a meeting of a company’s shareholders. The rules for attendance and decision-making quorums are outlined in the company’s articles of association. Companies hold various types of general assemblies, including founding, ordinary, and extraordinary.
Types of General Assemblies
- Founding
The founding assembly is an essential part of establishing a joint-stock company and is mandatory. However, for a private limited company, it is possible to forgo holding a founding general assembly by sending the signed minutes of the decisions taken by all shareholders to the company registration office, as stated in Article 20 of the amendment bill. Nonetheless, it is still preferable to hold the founding assembly as it involves appointing the first managers and inspectors and establishing important protocols for the company.
It should be noted that this assembly is only formed when the company is established and dissolved after making the necessary decisions.
- Duties
According to Article 74 of the amendment bill, the Founding General Assembly has the following responsibilities:
1) Reviewing and approving the founders’ report, verifying the subscription of all company shares, and making necessary payments.
2) Approving the draft of the company’s articles of association and making any necessary amendments.
3) Selecting the first board members and inspectors for the company.
4) Designating the first official gazette where any subsequent invitations and notices to shareholders will be published until the first regular general assembly is held.
- Formation
In order to form the founding general assembly, a minimum number of shareholders representing at least 50% of the company’s capital must be present. If the majority does not attend the first invitation, the founders have the option to convene new meetings up to two times. However, they must announce the invitation and agenda of the previous meeting, along with its outcome, in the official gazette selected for publication at least 20 days before the new meeting. The presence of any number of shareholders who own at least one-third of the company’s capital is required for the last two assemblies.
The quorum for decision-making in this assembly is always two-thirds of the majority of those present in the meeting. If this quorum is not met, the founders will announce the non-establishment of the company.
- Management
The founding general assembly will be managed by a board of directors comprising a chairman, two inspectors, and a secretary. It is important to note that the chairman and two inspectors of this meeting must be selected from among the shareholders. However, this is not a requirement for the selection of the secretary.
- Ordinary
Following Article 89 of the Commercial Law Amendment Bill, the ordinary general assembly must be held once a year at the specified time in the company’s articles of association. This assembly is more important than the two others. If the board of directors does not call the meeting within the specified time in the company’s articles of association, the inspector must do so. Alternatively, shareholders owning at least one-fifth of the company’s capital can call and organize the ordinary general assembly.
- Duties
1) Review and decide on all current company affairs, except for matters within the jurisdiction of the founding or extraordinary general assemblies.
2) Handle the balance sheet, profit and loss account of the previous fiscal year, statement of assets, claims, and debts of the company, and the company’s performance period and annual report, following the review of the managers’ and inspectors’ reports.
3) Selecting board members and inspectors.
4) Approve the balance sheet and determine the profit distribution among shareholders.
5) Selecting the official gazette
- Formation
At least half of the shareholders with voting rights must attend to form the annual general assembly. If this quorum is not met in the first meeting, the next meeting will proceed with all shareholders having voting rights, and its decisions will be legally binding. However, the second meeting invitation should mention that the first meeting was not established.
As per Article 88 of the amendment bill, the quorum required for decision-making at the regular general assembly is always half plus one of the votes of those present, except in electing managers and inspectors, where a simple majority will suffice.
- Extra Ordinary
An extraordinary general assembly is a meeting of shareholders convened in emergency situations when an extraordinary issue is raised. The formation of this assembly is not subject to a fixed date or time.
- Duties
1) Changing the company’s articles of association
2) Changing the capital of the company
3) Early liquidation of the company
- Formation
To conduct the extraordinary general assembly, it is necessary for more than half of the shareholders with voting rights to be present. If the required quorum is not met during the first invitation, the meeting can proceed if at least one-third of the shareholders with voting rights are present during the second invitation. However, the outcome of the first invitation’s failure to convene should be mentioned in the second invitation.
Also, this assembly’s decisions will always be valid if they are supported by a majority of two-thirds of the votes cast by those present in the meeting.
Additional Notes
- According to Article 94 of the Amendment Bill, decisions to change a company’s nationality cannot be made during general meetings, and no majority can increase the shareholders’ obligations.
- Article 106 of the bill above stipulates that if decisions made by the general assembly relate to specific matters, a copy of the assembly minutes must be forwarded to the company registration office. The specific matters are as follows:
1) Selection of board members and inspectors
2) Approval of the balance sheet
3) Decrease or increase of capital
4) Changes to the articles of association
5) Liquidation of the company and its method
Based on the points mentioned, general assemblies play a crucial role in companies, particularly joint stock companies. If you plan to register a company or need advice on corporate law matters such as registration, making changes, establishing articles of association, conducting general assemblies, liquidation, and related issues, feel free to contact us. Karimi Law Firm has a mix of seasoned lawyers and eager young legal experts providing specific legal services for commercial companies.