MCA Relaxation on holding of AGM amidst Covid-19

MCA Relaxation on holding of AGM amidst Covid-19

Executive Summary

• The Ministry of Corporate Affairs (MCA) has after receiving representations from stakeholders with respect to holding of AGM for companies whose financial year, (other than the first financial year) ended on December 31st, 2019 provided relaxation to such companies allowing them to hold their AGM within a period of nine months from the closing of the financial year i.e. by September 30th, 2020.
• Holding such AGM as per the relaxation issued by the government will not be viewed as a violation of the law under the Companies Act 2013.
• Companies have been allowed to conduct their AGM through video conferencing (‘VC’) or other audio visual means (‘OAVM’) during the calendar year 2020, subject to fulfillment of certain requirements.

Introduction

A company’s AGM is one of the highlights of the financial calendar. This year, in view of the social distancing norms and other restrictions thereof, MCA provided an extension of 3 months for holding annual general meeting (‘AGM’) for the companies having the calendar year as the financial year.

In view of continuing restrictions on the movement of persons at several places in the country, MCA has further decided to allow companies to conduct their AGM through video conferencing (‘VC’) or other audio visual means (‘OAVM’) during the calendar year 2020, subject to fulfillment of certain requirements. The conditions have been prescribed based on companies which are required to and which are not required to provide the facility of e-‘voting under the Act.

Applicability of AGM Circular:

The AGM Circular applies to all the AGMs to be called by companies within the calendar year 2020. Generally speaking, all the companies will call their AGM for the financial year 2019-2020 in the calendar year 2020 only. Therefore, one may conclude that this AGM Circular can be availed by all the companies without any exception.

Conduct of AGM pertaining to ‘E-Voting Facility’:

Companies which are necessarily & required to provide an option of E-voting facility are:

• All Listed Companies;

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

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

• Nidhi Companies

• Companies listed on the SME trading platform.

• Companies listed on Institutional Trading platforms

Such companies shall take all reasonable steps to register the e-mail ID of all persons who have not registered their e-mail addresses with the company.

Procedure for Holding AGM through Video Conferencing (VC) and Other Audio-Visual Means (OVAM):

A) Companies with E Voting Facility-

This includes companies with 1,000 or more members. The company shall send notice to concerned person of an annual general meeting by email and by way of public notice.

The annual general meeting shall be convened through video conferencing or other audiovisual modes. The company shall also provide two-way communication facility to at least first 1,000 members requesting and for webinars like conferencing facility. In most cases, two-way communications will not be required except where one really has a good question to ask.

Before the actual date of the meeting, the facility of remote e-voting shall be provided.

Only those members, who are present in the meeting through VC or OAVM facility and have not cast their vote on resolutions through remote e-voting and are otherwise not barred from doing so, shall be allowed to vote through e-voting system or by a show of hands in the meeting.

The chairman present at the meeting shall ensure that the facility of the e-voting system is available for the purpose of voting during the meeting held through VC or OAVM.

B) Companies without E Voting Facility

This includes companies having less than 1,000 members who are not opting for e-voting facility.

The company shall send notice of an annual general meeting to concerned person’s email address and by way of public notice.

The annual general meeting shall be convened through video conferencing or other audiovisual modes. The company shall also provide two-way communication facility to at least first 500 members requesting and for other webinars like conferencing facility.

After discussion, the company shall send electronic voting facility by way of an email and the vote should be exercised in the manner prescribed.

Motivation to conduct AGM through VC/ OAVM:

After the enforcement of the AGM Circular, the companies are motivated to convene the AGM through VC/OAVM mode. The reasons for such a motivation are many; some of them are as follows:

• 1. Less time consuming process;
• 2. Operating convenience;
• 3. Cost effectiveness;
• 4. Environment friendly; and
• 5. Sooner getting the advantage of last audited accounts.

Intention of Companies to Convene their AGM Early:

• Cost Saving.
• To avail exemptions or benefits under Companies Act, 2013 and various other laws.
• Early AGM would mean early declaration of dividend and therefore a step towards shareholder service.
• The restrictions on gathering may still continue after lifting of the lock-down.

Enabling meeting through video-conferencing or means other than physical presence would help the companies to hold AGMs and make critical decisions in due time. However, for effective participation, companies need to ensure that they are well equipped to conduct the AGM through VC or OAVM facility. Also companies should ensure that the proceedings of the meeting are duly recorded, and adequate measures have been taken to safeguard the recorded transcript of the meeting.

Conclusion:

By providing for the AGM through video conferencing, the Ministry of Corporate Affairs has played its part well. It is now for the companies to effectively utilize the new modes available for conducting AGM. They should ensure compliances with the prescribed requirements, while ensuring that all efforts are made to allow effective participation by all shareholders, especially during these testing times when they may wish to engage directly with the management and the Board to discuss the performance and outlook the companies where they are shareholders.

Regards,

Legal Team

Proind Business Solutions Private Limited
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