The MCA vide General Circular 20/2020 dated 5th May 2020 allowed companies to hold their Annual General Meetings for the calendar year 2020 through Video Conferencing (VC) / any other Audio Visual Mode (OAVM). The circular provides procedures, to be followed (i) by companies to which e-voting is mandatory (Part-A) and (ii) by companies to which e-voting is not mandatory (Part-B) for conducting AGM through VC/OAVM,
Here we will understand the procedure to be followed by companies which are not required to provide the facility of e-voting under the Act, for conducting their AGM for the calendar year 2020.
Whether all companies are required to provide e-voting facility to members?
Rule 20 of Companies (Management and Administration ) rules, 2014 describes the criteria of companies for which providing e-voting facility to their members is mandatory. The criteria is:
- All companies whose equity shares are listed on the recognised stock exchange and
- Every company having number of members 1000 or more.
Therefore from the abovementioned thresholds, we can understand that private limited companies and public limited companies having less than 1000 members are not required to provide e-voting facility. The said Rule also exempts Nidhi companies and an institution or enterprise covered under Chapter XB or XC of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009
Companies eligible to hold AGM via VC/OAVM covered under Part-B of this Circular
The General Circular 20/2020 provides eligibility criteria for calling AGM through VC/OAVM by companies covered under Part -B of the circular.
The companies who have in its records the email address of at least half of its total number of members who;
are eligible to hold their Annual General Meeting via VC or OAVM. Therefore having email addresses of members is mandatory pre-condition.
If the company does not have email addresses of members as per the condition provided above, then such company cannot hold its AGM through VC/OAVM until the criteria is fulfilled. In such a case, the company shall take such necessary steps to contact and collect the email addresses of respective members of the company.
The company shall contact all those members whose email addresses are not registered with the company, over the telephone or via such other mode of communication for getting the email addresses registered with the company.
Where contact details of the member are not available with the company or could not be obtained, the company shall cause a public notice by way of an advertisement to be published in the newspaper immediately
- at least once in a vernacular newspaper in the principal vernacular language of the district in which the registered office of the company is situated and having a wide circulation in that district, and
- at least once in the English language in an English newspaper having a wide circulation in that district,
preferably both newspapers having electronic editions. Such Public Notice shall specify the following information:
- That the company intends to convene the Annual General Meeting through VC/OAVM in compliance with the provisions of the Act read with the General Circular 20/2020 dated 5th May 2020 and for the said purpose it is proposed to send notices to all the members of the company by email.
- The details of the email address and telephone number on which members may contact for getting their email addresses registered with the company for participation and voting at the AGM.
The purpose of public notice is to enable members to register their email addresses with the company so that they can attend and vote at the AGM. The circular requires companies to send Notice of AGM at least 3 days from the date of publication of the public notice.
System requirements for holding AGM through video conferencing
The companies conducting their AGMs through video conferencing must have
- An adequate system of recording the proceedings at the AGM, it should allow two-way teleconferencing or Webex for the ease of participation by the members.
- The participants should be allowed to pose the questions concurrently or at a given time in advance to submit questions to the email address of the company.
- The facility must allow participation of at least 500 members or members equal to the total number of members of the company (whichever is lower).
- Participation must be on a first come first serve basis. The large shareholders (i.e. shareholders holding 2% or more shares), promoters, institutional investors, directors, key managerial personnel, chairpersons of the Audit Committee, Nomination and Remuneration Committee, Stakeholders Relationship Committee, Auditors etc. may be allowed to attend the meeting without the requirement of first come first serve basis.
- The facility for joining the meeting shall be kept open at least 15 minutes before the time scheduled to start the meeting and shall not be closed till the expiry of 15 minutes after such scheduled time.
Holding of Annual General Meeting (Section 96 of the Companies Act, 2013)
As per Section 96 of the Companies Act, 2013, every company (except one person company) is required to hold Annual General Meeting in each calendar year. Such AGM shall be held within 6 months from the closure of the financial year and not more than 15 shall elapse between two AGM. In case of the first Annual General Meeting, it shall be held within 9 months from the closure of the first financial year of the company.
Therefore if a company is planning to hold its Annual General Meeting for the calendar year 2020 via video conferencing, then it has to follow the provisions specified in Section 96.
However, MCA vide General Circular 19/2020 dated 30 April 2020 has extended the due date for holding AGM by companies whose financial year ended as on 31st December 2019, from 30th June, 2020 to 30th September 2020.
Day, date, time and place of holding Annual General Meeting
Section 96 (2) of the Companies Act, 2013 provides that every Annual General Meeting shall be called during business hours, i.e. between 09.00 AM and 06.00 PM on any day that is not a National Holiday and shall be held at the registered office of the company or at such other place within city, town or village in which registered office of the company is situated.
Section 96 also provides that the annual general meeting of an unlisted company may be held at any place in India if consent is given in writing or by electronic mode by all the members in advance.
If the Annual General Meeting is proposed to be held through video conferencing then practically there will be no venue/place of meeting as all the participants will be joining the meeting through VC/OAVM from different places.
Therefore one can determine that place/venue of the meeting in case the AGM is held through video conferencing, shall be deemed to be the place where all the recordings of the proceedings of the Meeting take place. Such a place can be the registered office of the company.
Issue of Notice of Annual General Meeting
In view of current circumstances due to COVID-19, and considering the difficulties in sending notice of AGM through registered post/courier, the Notice shall be sent only through email addresses registered with the company/depository or depository participant. As per the provisions of Section 101 of the Companies Act, 2013, a general meeting may be called by giving not less than 21 days clear notice either in writing or electronic mode.
A general meeting may be called at shorter notice by obtaining consent from at least 95% of the members entitled to vote at the meeting either in writing or via electronic mode.
The requirements regarding the issue of notice of meeting to members include:
- The notice shall clearly specify the day, date and the hour of the meeting.
- The notice of the Annual General Meeting must be sent at least 21 days before the date of the meeting unless Articles of Association provide for a different period.
- The notice shall be sent only through email address registered with the company/depository or depository participant.
- A copy of Notice should be available on the website of the company if any.
- The notice shall specify the framework, helpline number, contact person details etc.
- The notice shall contain a statement of the businesses to be transacted at the meeting (Section 102). In the case of private limited companies, Section 102 shall apply unless otherwise specified in the Articles of the company.
- The notice along with a statement of the businesses to be transacted at the meeting, if applicable shall be sent to every member of the company, every director of the company, auditor or auditors of the company, legal representatives etc.
- Notice of the meeting shall be printed on the letterhead of the company and can be sent as email text or as an attachment to the email.
- The companies shall provide a designated email address where the members can send their vote, when a poll is demanded during the meeting and such designated email address shall be mentioned in the notice.
- The notice shall clearly specify the framework of this circular and should provide instructions on how to access and participate at the meeting.
Dispatching of financial statements including Auditors Report, Directors Report and other documents required to be attached herewith
The financial statements along with consolidated statements, Auditors Report, Directors Report and such other documents required to be sent to every member, shall be sent only by email.
Matters to be transacted at the Annual General Meeting held through video conferencing
The Circular specifically says, other than ordinary businesses, only those special businesses that are unavoidable by the Board can be transacted. The Ordinary Businesses to be transacted at the Annual General Meeting include:
- the consideration of financial statements, consolidated financial statements, if any, and the reports of the Board of Directors and Auditors;
- the declaration of any dividend;
- the appointment of Directors in the in the place of those retiring; and
- the appointment or ratification thereof and fixing of the remuneration of the Auditors.
Therefore apart from ordinary businesses, if there are any special businesses which are unavoidable, can be transacted at the meeting.
Quorum at the meeting
Section 103 of the Companies Act, 2013 provides that unless Articles specifies for larger number of members,
- In case of public limited company
5 members present personally - if the number of members as on the date of meeting in not more than 100
15 members present personally - if the company has number of members as on the date of meeting more than 100 but up to 5000
30 members present personally - if the number of members exceeds 5000.
- In case of private limited company 2 members personally present shall be the quorum for a meeting.
The total number of members attending/participating through video conferencing shall be counted for the purpose of quorum.
At Least one independent director (where the company is required to appoint), Auditor or his representative who is qualified to be an Auditor shall attend the meeting through VC/OAVM.
Where the company has institutional investors as members, they must be encouraged to attend the meeting through VC/OAVM.
Appointment of Chairman of the meeting
The Circular provides that, unless Articles requires any specific person to be appointed as Chairman of the meeting, the Chairman shall be appointed in the following manner:
- If members present or attending the meeting through VC/OAVM are less than 50
In this case, the Chairman shall be appointed as per the provisions of Section 104. Below are the provisions contained in Section 104 for appointment of Chairman:
104(1) - Unless the articles of the company otherwise provide, the members personally present at the meeting shall elect one of themselves to be the Chairman thereof on a show of hands.
104(2) - If a poll is demanded on the election of the Chairman, it shall be taken forthwith in accordance with the provisions of the Act and the Chairman elected on a show of hands shall continue to be the Chairman of the meeting until some other person is elected as Chairman as a result of the poll, and such other person shall be the Chairman for the rest of the meeting.
- In all other cases, the chairman shall be appointed by a poll.
The appointment of the Chairman depends upon the number of members attending the meeting through VC/OAVM. Considering the issues involved and correctness in show of hands at meetings held through VC/OAVM, the MCA has clarified that the e-voting facility shall be made available to members to vote on the matters during the meeting.
It is further provided that the members can also send email to the designated email address of the company, providing their assent or dissent in respect of any matter if a poll is demanded during the meeting.
Appointment of Proxies and Authorised Representatives
The provisions of Section 105 of the Companies Act, 2013 provides that, any member entitled to attend and vote at the meeting shall be entitled to appoint another person as a proxy to attend and vote at the meeting on his behalf. As meetings held through VC/OAVM do not require physical presence of the member, therefore appointment of proxy has no significance and hence, appointment of proxy by members is not available for AGM held through VC/OAVM.
However, the circular allows representatives appointed in pursuance of Section 112 and 113 for participation and voting at the meeting held through VC/OAVM. They are also allowed to cast their vote via remote e-voting.
The resolution and representation letters can be digitally signed by signing authority of the respective corporations or body corporates, to grant authority to any person, to represent and vote at the meeting on behalf of such corporation or body corporate.
The companies holding AGM through VC/OAVM, are not required to send proxy forms along with the notice of meeting, as proxies are not allowed to appoint at such meetings.
Voting at the Meeting
Where less than 50 members are present/attending the meeting through VC/OAVM, the Chairman may decide to conduct voting by show of hands, unless a poll is demanded.
If demand for a poll is made, then members are required to convey their assent or dissent only by sending emails to the designated email address of the company. The members cannot vote in advance on any matter until put up at the meeting. The poll can take place only during the meeting. Such designated email id of the company shall be provided in the notice of meeting.
Voting by show of hands means: one member one vote, irrespective of his shareholding
Voting by poll means: one share is equal to one vote.
Filing of Resolution passed at the meeting
The resolutions passed at the meeting held under this mechanism shall be filed with the Registrar of Companies within 60 days of the meeting. The resolution shall specify that it is passed in compliance with the rules and other provisions under the Act, and the mechanism provided for conducting the meeting via VC/OAVM.
Compliance of Other provisions
Other compliance such as inspection of members registers and other documents, disclosures if any shall be kept open and shall be made available to any person attending the meeting. The MCA has provided that the companies are required to comply with all the provisions associated with the general meetings and as provided in the Articles of Association of the company through electronic mode.
Preparation of minutes and signing of minutes
The provisions related to preparation and signing of the minutes are unchanged. The minutes shall be prepared, serially numbered and signed within 30 days of the completion of the AGM. Considering the current scenario, the Chairperson may sign the minutes digitally.
Extension of Annual General Meeting
The companies that are unable to conduct their Annual General Meeting through VC/OAVM, shall file an application with the Registrar of Companies for extension of AGM at suitable point.
Section 96 of the provides that except for the first annual general meeting, the Registrar may for any special reason, extend the time within which the company is required to hold the annual general meeting, for a period not more than 3 months.
Payment of Dividends
The companies are now allowed to pay dividends through Electronic Clearing Service (ECS) or any other electronic means. For any members, whose bank account details are not available, the company shall send a dividend warrant or cheque, through registered post/speed post, upon normalisation of postal services.
- Fulfillment of both the criterias i.e. having email addresses of at least half of the total number of members, holding such percentage of shares (as provided in eligibility criteria) is mandatory for holding AGM through VC/OAVM.
- The company shall be duty bound to provide the procedure on how to register their email address with the company to access and participate at the meeting.
- The companies shall provide login id and password / URL to all members, to participate at the meeting.
- Practically speaking, if a company has two members and they are in the same house or in case of family owned businesses where members stay in house, then in such case, there is no requirement of holding AGM through video conferencing. As unlisted companies can now hold their annual general meeting anywhere in India if prior consent from all the members of the company in writing or via electronic mode is obtained in this regard.
Allowing companies to hold their annual general meetings through video conferencing can be a welcome step. It is best suited for closely held companies, private companies, wholly owned subsidiaries etc. Electronic voting for listed companies is mandatory but promoting e-voting for this segment will definitely add accuracy and ease in the voting system.
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