August 2020
With respect to the Annual General Meetings (“AGMs”), the Ministry of Corporate Affairs (“MCA”) came up with a general circular 18/2020 providing the companies, whose Financial Year (“FY”) ended on December 31, 2019, an extension of 3 months to convene an AGM. Subsequently, the MCA issued a General Circular 20/2020 on May 5, 2020 allowing the companies, whose FY ended on March 31, 2020, to convene their AGM through Video Conferencing (“VC”) or any Other Audio-Visual Means (“OAVM”). Now, the MCA has issued a clarification by way of General Circular 28/2020 (“Circular”) on August 17, 2020 pertaining to the AGMs to be held for FY ended on March 31, 2020, clarifying that no general extension will be granted.
What is AGM: As per section 96 of the Companies Act, 2013 (“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 directors in place of those retiring; 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.
Online AGMs: The Act does not contain any provision with respect to convening general meetings through electronic mode. By a General Circular 20/2020 on May 5, 2020, the MCA allowed companies whose FY ended on March 31, 2020, to convene AGM on or before September 30, 2020 through VC or OAVM. Further, the MCA also clarified that companies which are unable to convene AGMs physically or electronically, can apply for extension of AGM for a period of 3 months.
Recent clarification: By the Circular, the MCA has clarified that no extension will be granted to companies for convening AGMs. If any company having its FY ended on March 31, 2020 is unable to hold its AGM on or before September 30, 2020, it will have to apply for an extension of 3 months in form GNL-1 with the concerned Registrar of Companies (“ROC”) on or before September 29, 2020. Under the Act, an extension is allowed only for reasonable grounds. However, the ROCs have been advised to consider extension applications for AGMs liberally in view of the practical difficulties caused due to the pandemic.
By:
Jaya Moorjani