In a welcome move, and to soften the blow of the COVID-19 pandemic on companies, on 05 May 2020, the Ministry of Corporate Affairs (MCA), issued a circular authorising companies to conduct their Annual General Meetings (AGMs) through videoconferencing or other audio-visual means.
This comes on the heels of prior MCA relaxations such as:
- Circulars dated 08 April 2020 and 13 April 2020 (the EGM Circulars), through which, companies were permitted to hold extraordinary general meetings (EGMs) through videoconferencing or other audio-visual means. The EGM Circulars prescribed detailed procedures for the conduct of such EGMs. (see our previous posts here and here.)
- Circular dated 21 April 2020, which extended the last date for the conduct of AGM by companies whose financial year ended on 31 December 2019, to 30 September 2020.
Under the Companies Act, 2013, (Act) companies are mandated to hold their AGMs within 6 months from the closure of the financial year (9 months in case of first AGM), and no later than 15 months from the date of preceding AGM. In light of the challenges faced by companies due to the continuing restrictions on the movement of persons, both domestically and internationally, the MCA has now permitted all companies (on fulfillment of prescribed conditions) to conduct their AGM through videoconferencing or other audio-visual means, during the calendar year 2020.
The following are the requirements to be met by companies for conducting such meetings:
A.Companies which are required to provide for the facility of e-voting under the Act (i.e., all listed companies and companies having not less than 1,000 members
1.The framework for holding such meetings and the procedure regarding the issue of notice, as provided under the EGM circulars, shall apply
2.Other than ordinary businesses, only those special businesses which the Board considers to be unavoidable may be transacted at such a meeting.
3.In lieu of physical copies of the financial statements, including board’s report and auditor’s report, electronic/soft copies may be sent via email to the members, debenture-holders and all other persons entitled to receive it under the Act.
4.Before sending the notices and copies of financial statements, a public notice by way of advertisement must be published, at least once, in a vernacular newspaper and at least once, in an English newspaper, in each case being a newspaper having wide circulation in the district in which the registered office of the company is situated, specifying the following:
- Statement that the AGM will be convened through videoconferencing or other audio-visual means;
- The date and time of such AGM;
- Availability of the notice on the website of the company (and, if the company is listed, on the stock exchange);
- Manner of e-voting for members who hold physical shares or who have not registered their emails with the company;
- Procedure for members to give mandates to receive dividends directly in their bank accounts through electronic clearing system etc.; and
- Any other detail which the company thinks necessary.
- If the company is unable to pay dividends to its shareholders by electronic mode, due to non-availability of details of bank account, the company shall dispatch the dividend cheque by post as soon as postal services are normalised.
- In case the company has received permission from appropriate authorities for holding the AGM at its registered office, then, after due compliance with the advisories issued by the authorities, and in addition to the physical presence of some members, the company may also provide its members with the option of attending the AGM through video conferencing or other audio-visual means. Members attending the AGM through such facilities shall also be considered for the purpose of quorum for the purpose of the Act, on par with members in physical attendance.
B. Companies which are not required to provide the facility of e-voting under the Act:
1.AGM may be conducted through video conferencing or other audio-visual means only by such companies which in its records, has the email addresses of at least half of its total members, who also:
a.In case of Nidhi companies: hold shares of more than INR 1000 in face value or more than 1% of the total paid-up share capital, whichever is less;
b.In case of other companies having share capital: represent not less than 75% of such part of the paid-up share capital of the company as gives a right to vote at the meeting;
c.In case of companies not having share capital: have the right to exercise not less than 75% of the total voting power exercisable at the meeting.
2.The company shall take all necessary steps to procure and register the email addresses of all persons who have not registered their email addresses with the company.
3.The framework for holding such meetings and the procedure regarding issue of notice, as provided under the EGM circulars, shall apply
4.Other than ordinary businesses, only those special businesses which the Board considers to be unavoidable may be transacted at such a meeting.
5.In lieu of physical copies of the financial statements, including board’s report and auditor’s report, electronic/soft copies may be sent via email to the members, debenture-holders and all other persons entitled to receive it under the Act.
6.The company shall make adequate provisions for allowing members to mandate receipt of dividends directly in their bank accounts through the Electronic Clearing Service (ECS) or any other means. For shareholders whose bank account details are not available, the company shall, immediately upon the normalization of postal services, dispatch the dividend warrant/cheque to such shareholder(s) by post.
Companies are required to ensure that all other related compliances mandated under the Act and/or under its articles of association are made through electronic mode.
The MCA has also clarified that, if any company is not covered by the 21 April 2020 circular, or is unable to hold its AGM under the framework of this 05 May 2020 circular, they may apply to the Registrar of Companies for extension of time to hold their AGM.
Please refer to MCA Circular No. 20/2020.
[i] Section 108 of the Companies Act, 2013, read with Rule 20 of the Companies (Management and Administration) Rules, 2014