Annual General Meeting of the Company & Related Temporary relaxations during the Global Pandemic

On 05.05.2020, the Ministry of Corporate Affairs(MCA) has given a clarification vide circular n0.18/20 giving relaxation for holding through Video Conferencing or other Audio Visual Means(OAVM). The article below provides a detailed description of AGM & the relaxation provided.

An annual general meeting (AGM) is a meeting of the general membership of the organization. Such organizations include memberships associations & companies with shareholders to discuss important matters primarily four ordinary matters which include-

i.    Approval of Financial Statements

ii.    Appointment & fixing of the remuneration of statutory Auditor

iii.    Appointment of director

iv.    Declaration of dividend

Section 96 of the Companies Act 2013 contains provisions regarding compulsory holding of Annual General meeting every year. It states” Every Company other than a One Person Company is required to hold an AGM every year once by serving a notice of meeting prior to at least 21 days from the date of meeting at the latest updated address of members of the company”.

Other Provisions include the following-

1.    The Annual General Meeting of every company should be held within six months from the closing of the financial year except in case of a newly incorporated company whose First AGM should be held within 9 months from the closure of the first financial year.

2.    There should not be a gap of more than 15 months between two AGM of the company.

3.    Normally, an AGM should be held legally till 30th September every year, but where the company is unable to hold a meeting within this time, the Registrar may allow a maximum extension of 3 months i.e. 30th December.

4.    Sub-section (2) of section 96 provides that an AGM should be held on a day which should not be a national holiday, in between 9 a.m. to 6 p.m., at the registered office of the company or at a place where the majority of shareholders agree the meeting to be conducted.

5.     An unlisted public company can conduct such meetings in any part of India if they receive unanimous approval from the members in either writing or electronically.

6. For the facility of E-voting, two categories have been made in this regard under section 108 read with rule 20 (Management& Administration) Rules 2014-

A. Companies that are within the ambit of section 108 & necessarily required to provide an option of E-voting. Such companies Include-

i. All Listed Companies;

ii. Every company having members either equal to or more than 1000;

B. Companies which have been kept out of the ambit of E-voting which are-

i.    Nidhi Companies

ii.    Companies listed on the SME trading platform.

iii.    Companies listed on Institutional Trading platforms

Temporary Relaxation in the provisions of holding AGM vide circulation no.18/20 dated 5.05.2020

1)    Taking care of the situation where it is difficult for people to go out of their house and attend the Annual General Meeting (AGM) in person, the Ministry of Corporate Affairs has on 5.05.2020 vide notification 18/20 has provided temporary relaxation in holding Annual General meeting and has given clarification on following-

    Such companies whose financial year ended on 31.12.19 have been allowed to hold AGM till 30.09.2020.

    In view of the current situation where the movement of any person is restricted in several parts of the country, the companies have been allowed to hold the Annual General Meeting through video conferencing or other audiovisual meaning(OAVM) for the year 2020 subject to following conditions-

A.    Companies which are necessarily allowed to provide the option of E-voting to its members or where any company has opted for the facility :

a.    Normal provisions for the mode & manner of issuing notices for EGM shall be applicable in the same manner for holding AGM through electronic mode.

b.    In such Annual General Meeting (AGM) other than ordinary business, only such items of business can be transacted which is unavoidable to be required to be discussed necessarily.

c.    As it is difficult to dispatch physical copies of important reports like financial statements, the Board’s report, the Auditor’s report, etc. which are attached to the notice of the meeting, shall be sent by email to persons who are entitled to receive notice of the meeting.

d.    Before sending such notice of the meeting, a public advertisement by way of the notice at least once in a vernacular newspaper in the principal vernacular language & once in English which is in wide circulation of the district where the registered office of the company is situated should be passed which shall specify the following details-

•    A statement declaring that the AGM will be convened through Video Conferencing (VC) or Other Audio-Visual Means (OAVM).

•    Date & time of the AGM through VC or OAVM.

•    Declaration of the fact that a copy of the notice of the AGM is also available on the official website of the company & where the company is a listed entity, on the website of the stock exchange.

e.    A declaration that the members who hold shares in physical form may also cast their votes through e-voting by providing their email account to the company.

f.    The manner by which the members of the company will be able to update their necessary details shall also be mentioned in the notice.

g.    Where any company has received permission to hold the AGM of the company in its registered office or any other place by the relevant authorities, it shall mandatorily provide the option of E-voting through VC or OAVM & such members shall also be counted for the purposes of valid quorum under section 103 of the Act.

B. Companies which are not necessarily required to provide the facility of E-voting-

1. In such circumstances, only such companies shall be allowed to hold their AGM with the facility of VC/OAVM who have at least 50% of the total member's updated e-mail address details in their records and such members –

a. Where a company is a Nidhi company and members holding the least of either-

    Shares having a face value of rupees one thousand or more or;

    1% of the total paid-up share capital of the company.

b. Where a company is a company limited by share capital, the members who represent not less than 75% of the total paid-up share capital of the company.

c. Where a company is a company not limited by share capital of the company, such members who have a right to exercise not less than 75% of the total voting power of the company exercisable at the meeting.

d. Other provisions regarding sending of notices, the publication of advertisement of notice& updating details of a member shall be the same as provided in (A) above.

However, care should be taken that:

    No Companies referred to in A & B above shall avoid any other compliance related to holding of the meeting which includes giving necessary disclosures, an inspection of the related documents by members, etc. & other provisions given in the Act or in the Articles of Association of the company.

    The Companies which cannot make adequate facilities for conducting AGM (companies not covered by a circular no.18/2020 dated 21.04.2020) manner provided above shall apply in the manner provided under section 96 of Companies Act 2013 seeking an extension for date of holding AGM to the Registrar concerned within appropriate time-limit.

Conclusion:

Therefore it can be adequately said that “Necessity is the real-cause behind innovation”. Though it has deeply weakened the global economy it has led to some revolutionary changes primarily in business mannerisms with the use of technology even with once in a year events like Annual General meetings ultimately giving us a lesson that “ People may come & go, but the life goes on”!

Author:

eStartIndia Team