May 2020
The Companies Act, 2013 (“the Act”) does not contain any provision with respect to convening general meetings through electronic mode. Earlier, by general circular 14/2020 and 17/2020, the Ministry of Corporate Affairs (“MCA”) allowed EGMs through video conferencing (“VC”) or any other audio-visual means (“OAVM”) with a view to support corporate India on account of the pandemic. Subsequently, it came up with another general circular 18/2020 providing the companies, whose Financial Year (“FY”) ends on December 31 every year, an extension of 3 months to convene Annual General Meetings (“AGMs”). Now, the MCA has issued a General Circular 20/2020 on May 5, 2020 (“Circular”) allowing all companies to convene AGMs through VC or OAVM.
Applicability: As per section 96 of the Act, every company is required to hold its first AGM within 9 months from the end of its first FY and subsequent AGMs within 6 months from the end of every FY. AGM is convened to transact “ordinary” as well as “special” business. Ordinary business refers to (i) approval and adoption of financial statements, auditors’ and directors’ report; (ii) declaration of dividend; (iii) appointment of non-retiring directors; and (iv) appointment or ratification or fixing of remuneration of auditors. Any business which is not “ordinary” and requires shareholder approval is deemed as “special” business.
The Circular allows companies to discuss all ordinary business and also unavoidable special business through VC or OAVM. Further, to convene a virtual AGM, companies having share capital must have e-mail ids of at least 50% of its total members holding 75% of the paid-up capital with voting rights. Furthermore, the MCA also clarified that companies which are not covered under general circular 18/2020 and those which are unable to convene AGMs electronically as per the Circular, can apply for extension of AGM for a period of 3 months.
Certain key procedural points:
- Annual report i.e. AGM Notice, financial statements including notes, auditor’s report, board’s report and any other relevant documents are allowed to be circulated through e-mail. If e-mail addresses of the shareholders are not registered with the company, it will have to contact such shareholders through telephone or any other mode to get their e-mail address for sending the AGM notice. If contact details are also not available, the company will have to issue a public notice by way of newspaper advertisement in an English and a local newspaper of the district informing about the upcoming AGM and providing the company’s contact details;
- Before dispatching of annual report, a public notice by way of newspaper advertisement in an English and a local newspaper of the district is mandatory for companies which are required to provide e-voting facility as per section 108 read with rule 20 of the Companies (Management and Administration) Rules, 2014, or any other company which has voluntarily opted for e-voting
- If any company obtains permission from relevant authorities to conduct physical AGM with some members present physically and some through VC or OAVM, all members collectively be counted for quorum;
- There is no requirement for appointment of proxies since physical attendance of members has been dispensed with;
- Members must be given a facility to raise questions during the meeting and a helpline number for any assistance with using the technology before or during the meeting;
- At least one independent director (if required to be appointed) and the auditor have to attend the meeting through VC or OAVM;
- Facility for joining the meeting shall be kept open at least 15 minutes before and after the scheduled time of meeting;
- Facility of VC or OAVM is required to have a capacity to allow at least 1000 members to participate on a first-come-first-served basis (except shareholders holding 2% or more shareholding, promoters, institutional investors, directors, key managerial personnel, auditors and chairpersons of the audit committee, nomination and remuneration committee and stakeholders relationship committee) for the companies which provide e-voting facility under the Act. All other companies, including private companies, have to provide for at least 500 members or members equal to total number of members of the company, whichever is lower;
- With respect to voting during the meeting, the circular has the following requirements:
| For companies which are compulsorily required to provide e-voting as per the Act or any which has voluntarily opted for e-voting | By e-voting only |
| For companies (including private companies) which are not compulsorily required to provide e-voting as per the Act | (a) Company having less than 50 members present at the AGM – By show of hands unless poll is demanded; and (b) Other companies – By poll. In case of poll, the members shall cast their vote on the resolutions only by sending e-mails through their registered e-mail addresses with the company. The designated e-mail address has to be circulated by the company in advance. |
- Companies must deposit dividends directly in members’ bank accounts through electronic means. However, it will have to dispatch the dividend warrant/cheque to members, whose bank accounts are not available, by post once the postal service normalizes;
- AGMs held through VC or OAVM have to be recorded and their transcripts have to be maintained. In case of a public company, the recorded transcript has to be made available on the company’s website, if any;
- All resolutions passed in such meetings should also indicate the mechanism adopted for voting and in the event any resolution is required to be filed with the Registrar of Companies, it has to be done within 60 days of the meeting.
By:
Jaya Moorjani