Forget Password
View News
ANNUAL-GENERAL-MEETINGS-AGM-IN-INDIA-A-COMPREHENSIVE-GUIDE
ANNUAL GENERAL MEETINGS (AGM) IN INDIA: A COMPREHENSIVE GUIDE
INTRODUCTION
Annual General Meetings (AGMs) are crucial gatherings that facilitate interaction between a company's management and its shareholders. In India, AGMs are governed by the Companies Act, 2013, which lays down specific rules and procedures that companies must adhere to when conducting their AGMs. In this comprehensive guide, we will delve into the key aspects of AGMs, including their purpose, requirements, procedures, and special considerations.
PURPOSE OF AGMS:
AGMs serve as a platform for shareholders to discuss various matters related to the company, including the annual financial results, appointment of auditors, declaration of dividends, and the election of directors. The primary objectives of an AGM include:
1. Financial Disclosures: Companies present their audited financial statements, director's reports, and auditor's reports to shareholders for approval and discussion.
2. Dividend Declaration: Shareholders have the opportunity to approve the payment of dividends.
3. Appointment of Directors: New directors are appointed to replace retiring ones, and shareholders may discuss the composition of the board.
4. Auditor's Appointment: Shareholders approve the appointment of auditors and decide on their remuneration.
5. Special Business: Matters that require a special resolution, such as changes to the company's articles of association, are also discussed.
COMPANIES REQUIRED TO HOLD AGMS:
While most companies in India are required to hold AGMs, there are exceptions. One-person companies (OPCs) are exempt from this requirement. However, all other companies must hold an AGM within six months from the end of the financial year. The first AGM for a newly incorporated company can be held within nine months from the end of the first financial year. It's important to note that the gap between two AGMs should not exceed 15 months.
PROCEDURE FOR HOLDING AGMS:
AGMs require meticulous planning and adherence to legal procedures. Here's a step-by-step guide:
1. Notice: A company must give a clear 21 days' notice to its members for calling the AGM. The notice must specify the date, time, place, and agenda of the meeting. It can be sent via speed post, registered post, or electronic mode to members' addresses on record.
2. Agenda: The agenda includes the consideration and adoption of audited financial statements, director's report, auditor's report, dividend declaration, appointment of directors and auditors, and any other special business.
3. Electronic Communication: Notices can be sent electronically to members' registered email addresses. The notice must also be posted on the company's website or a government-approved website.
4. Shorter Notice: An AGM can be called with a notice period shorter than 21 days if at least 95% of the members entitled to vote agree to the shorter notice, either in writing or through electronic mode.
5. Meeting Date and Time: AGMs should be conducted during business hours between 9 a.m. and 6 p.m. on any day that is not a national holiday.
6. Meeting Location: The meeting can be held within the city, town, or village where the registered office is located. A government company may have flexibility in choosing the location.
QUORUM FOR AGMS:
The quorum for AGMs depends on the type of company:
- Private company: Two members present at the meeting.
- Public company:
- Five members if the number of members is within one thousand.
- Fifteen members if the number of members is between one thousand and five thousand.
- Thirty members if the number of members is more than five thousand.
If the quorum is not met within 30 minutes from the scheduled time, the meeting is adjourned to the same day the following week at the same place.
MEMBERS' RIGHTS IN AGMS:
Shareholders have several rights during AGMs, including the ability to attend, vote, and appoint proxies to vote on their behalf. Proxies must be appointed in writing and signed by the member or an authorized signatory for corporate shareholders.
MINUTES OF AGMS:
Companies are required to prepare minutes of AGMs, which document the proceedings, resolutions passed, and other events during the meeting. These minutes should be signed and entered into the minute book within thirty days from the AGM. Members can request to inspect the minutes book upon payment of a prescribed fee.
EXTENSION OF TIME FOR HOLDING AGMS:
In certain exceptional circumstances, a company may seek an extension for holding its AGM. The Registrar of Companies (RoC) can grant an extension of up to three months upon application by the company. Valid reasons for seeking an extension include mergers and acquisitions, delays in finalizing financials, and non-availability of shareholders or directors due to various factors.
CONSEQUENCES AND PENALTIES FOR DEFAULT:
Failure to hold an AGM within the stipulated time or as per an extension granted by the RoC can lead to penalties. The Tribunal may order an AGM, and failure to comply with its directions can result in fines for the company and its officers. Continuing defaults can lead to daily penalties.
SPECIAL PROCEDURE FOR 2020:
In light of the COVID-19 pandemic, companies were allowed to hold AGMs via Video Conferencing (VC) or Other Audio-Visual Means (OAVM) in 2020 and 2021. This special provision aimed to ensure business continuity and shareholder engagement during challenging times.
|
FREQUENTLY ASKED QUESTIONS (FAQS) ABOUT ANNUAL GENERAL MEETINGS (AGMS) IN INDIA
- A company other than a One-Person Company (OPC) must conduct at least one AGM in a financial year. The first AGM of a newly incorporated company should be held within nine months from the closing of the first financial year. Therefore, a company does not need to hold an AGM in the year of its incorporation.
2. Which section of the Companies Act contains provisions relating to AGM? - Provisions regarding AGMs are covered in Section 96 of the Companies Act, 2013.
3. Do AGM rules apply to a General Meeting? - AGM rules are applicable to all types of general meetings, including Annual General Meetings, Extraordinary General Meetings, meetings of members, meetings of creditors or debenture holders. The rules regarding procedures, quorum, members' rights, and minutes of an AGM apply to all general meetings of a company.
4. Can we hold an AGM on Sunday? - Yes, AGMs can be held on any day, including Sundays, except for national holidays. However, AGMs should take place during business hours, between 9 a.m. and 6 p.m. on Sundays.
5. Can an AGM be held outside India? - Generally, AGMs should be held at the registered office or within the same district as the registered office. However, companies can seek approval from the Central Government to hold AGMs outside India, provided certain conditions are met.
6. Can an AGM be held on a public holiday? - Yes, AGMs can be held on public holidays. The Companies Act, 2013, only restricts AGMs from being held on national holidays.
7. If an adjourned AGM falls on a National holiday, can the AGM be held on that day? - Yes, an adjourned AGM can be held on a national holiday as the original scheduled date of the meeting was not on a national holiday.
8. Can AGMs be conducted through video conferencing? - Yes, AGMs can be conducted via Video Conferencing (VC) or Other Audio-Visual Means (OAVM). Special provisions have been made, especially during the COVID-19 pandemic, to allow for AGMs to be held virtually. However, certain conditions and procedures must be followed.
9. What is the procedure for conducting an AGM via VC or OAVM? - The company must provide adequate notice to members, specify the date and time of the AGM through VC or OAVM, and make necessary arrangements for e-voting. Ordinary business and unavoidable special business may be transacted through this mode.
10. How should financial statements be shared with members during AGMs? - Due to difficulties in sending physical copies, financial statements, including the Board's report and Auditor's report, can be sent via email to members, trustees, and eligible persons.
11. What happens if a company defaults in holding an AGM? - The Tribunal may order the company to hold an AGM if it defaults in doing so. Failure to comply with the Tribunal's directions can result in fines for the company and its officers. Continuing defaults may lead to daily penalties.
12. Can an AGM be extended beyond the usual timeframe? - In exceptional circumstances, the Registrar of Companies (RoC) may grant an extension of up to three months for holding an AGM. Reasons for seeking an extension may include mergers, audit delays, and non-availability of directors or shareholders.
13. How should members request to inspect the minutes of an AGM? - Members can request to inspect the minutes book of an AGM by contacting the company and paying the prescribed fee. If the company fails to provide the minutes within seven days, penalties may apply.
14. Is there a specific format for the notice of an AGM? - While there is no specific format, the notice should include essential information such as the date, time, place, and agenda. It should also conform to legal requirements.
15. Can an AGM be held entirely virtually, with no physical presence? - While AGMs can be conducted through VC or OAVM, companies may also have some members physically present while providing facilities for others to participate virtually. The rules allow flexibility in this regard. Remember that AGMs are not just legal obligations; they are opportunities for companies to engage with their shareholders, demonstrate transparency, and make important decisions. Complying with the Companies Act and any special provisions is crucial for a successful AGM. |
|
Compliance Requirements for Annual General Meetings (AGMs) in India (2023):
Compliance Requirements During and After AGM (2023):
|
CONCLUSION:
Annual General Meetings are a vital aspect of corporate governance in India. Companies must meticulously plan and execute their AGMs to fulfill legal requirements and engage with shareholders effectively. Staying compliant with the Companies Act, 2013, and any special provisions or extensions is essential for smooth AGM proceedings and avoiding penalties. AGMs are not just a legal requirement; they are an opportunity for companies to demonstrate transparency, accountability, and responsible management to their shareholders.
“Unlock the Potential of Legal Expertise with LegallMantra.net - Your Trusted Legal Consultancy Partner”
Article Compiled by:-
Mayank Garg
(LegalMantra.net Team)
+91 9582627751
Disclaimer: Every effort has been made to avoid errors or omissions in this material in spite of this, errors may creep in. Any mistake, error or discrepancy noted may be brought to our notice which shall be taken care of in the next edition In no event the author shall be liable for any direct indirect, special or incidental damage resulting from or arising out of or in connection with the use of this information Many sources have been considered including Newspapers, Journals, Bare Acts, Case Materials , Charted Secretary, Research Papers etc.