Convening of Annual General Meeting during COVID- 19 Crisis
BACKGROUND
In view of the COVID-19 outbreak, the Ministry
of Corporate Affairs (‘MCA’) had come up with the circular dated April 08, 2020, providing
certain relaxations from the provisions of Companies Act, 2013 and rules made
thereunder including conducting the extra-ordinary general meeting for
transecting the business of urgent nature through video conferencing (‘VC’) and
other audio visual means (‘OAVM’) till June 30, 2020. Further, in order to
provide more clarity on the modalities to be followed by the companies for
conducting EGM viz. manner of issuance of notice, voting by show of hands and
postal ballot etc., another circular dated April 13, 2020 (Collectively
referred to as ‘EGM Circulars’) was brought in force. In continuation to the
aforesaid circulars and 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 vide its circular dated April 21, 2020.
Now, considering the
representations of various stakeholders, MCA has issued a circular dated May
05, 2020, (‘AGM Circular’) in line with the relaxations provided under the EGM
Circulars to hold AGMs through VC/ OAVM.
While the AGM Circular will draw its reference from
the EGM Circulars in terms of the modalities, however, there are various issues
worth discussing to understand the scope, impact and applicability for
companies to call AGM during the COVID-19 crisis. This write-up focuses on some
of the issues and also provides the comparison between both the EGM Circulars
and AGM Circular.
APPLICABILITY
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. Having said that, it is also pertinent to
mention that a specific condition has been laid down for companies which are
not mandated to provide e-voting facility, to call their AGMs under this AGM
Circular.
WHY TO CONVENE THE MEETING THROUGH VC/OAVM
The reasons for convening the meeting through VC/OAVM are
as follows:
1.
Less
time consuming;
2.
Convenient
in Operation;
3.
Cost
effective;
4. Environment friendly; (Social Distancing)
AGM CIRCULAR TO COVER BOTH ‘ORDINARY BUSINESS’ AND
‘SPECIAL BUSINESS’
Para A(II) and B(IV) of the AGM Circular provides the
type of business which will be transacted in the AGM through VC/OAVM. The text
of the same is provided below:
“In such meetings, other than ordinary business, only those items of special business, which are considered to be unavoidable by the Board, may be transacted.”
While on the first reading of the para it seems that
the AGM Circular will allow to convene the AGM by VC/OAVM only for the
unavoidable special business. However, that should not be the intent of the
lawmakers as an AGM without the ordinary business will have to be adjourned
till such time the ‘Ordinary Business’ items are decided and concluded.
Therefore, aforesaid para should be construed and interpreted in a manner to
include the unavoidable special business along with the ordinary business
items. Accordingly, in the light of aforesaid circular, the company may proceed
with to pass the ordinary as well as unavoidable special business in their AGM.
Further, for items requiring right of representation
like removal of auditors or directors, etc. cannot be conducted through VC/OAVM
as mentioned under EGM Circular.
The circular provides for both-
For
companies which are required to provide the e-voting facility
For companies which are not required to provide the e-voting facility
KEYNOTE-
Only the Unavoidable Business in addition Ordinary
business shall be transacted at the AGM.
The circular provides for both-
For
companies which are required to provide the e-voting facility
For companies which are not required to provide the e-voting facility
Companies which are required to provide the e-voting facility
Content of the public notice under rule 20 of the Companies
(Management and Administration) Rules, 2014
The
following contents shall form part of the public notice for e-voting:
i.
a statement that the AGM shall be convened through VC or OAVM;
ii. date
and time of the AGM;
iii. availability
of notice on the website of the company and stock exchange, if required;
iv. the
manner in which the following can cast their votes:
a. Physical
shareholders; and
b. who
have not registered their email addresses with the company;
v. the
manner in which the persons can get their email addresses registered;
vi.
any other detail considered necessary by the company
Minimum standards of VC/OVAM facility
Time frame for VC/OVAM facility
The VC/OVAM facility shall be
kept open at least 15 minutes before the scheduled time of the AGM and shall
not be closed till the expiry of 15 minutes after the conclusion of the
scheduled time for AGM.
Attendance through VC/OVAM
Attendance of members through VC/OAVM
shall be counted for quorum under section 103 of the Act.
Voting by the members present in the Meeting
The members who are present in
the AGM through VC/OAVM facility and have not casted their vote through remote
e-voting shall be allowed to vote through e-voting system.
Election of chairman
Unless the articles require any specific person to be
appointed as a Chairman for the Meeting, the Chairman for the Meeting shall be
appointed in the following manner:
i. Where there are less than 50 members present
at the Meeting, the Chairman shall be appointed in accordance with section 104;
ii. In all other cases, the Chairman shall be
appointed by a poll conducted through the e-voting system during the Meeting.
E-voting facility during the Meeting
The Chairman shall ensure that the facility of
e-voting system is available for voting during the Meeting held through VC/OAVM.
Voting by the authorized representatives
The
representatives of the members may be appointed for the purpose of voting
through remote e-voting or for participation and voting in the Meeting held
through VC/OAVM.
Role of
Scrutinizer
The company
should be required appoint a scrutinizer in accordance with the applicable
provisions of the CA, 2013 red with allied rules for enabling transparent
voting free from any conflict of interest.
Attendance
of independent director and the auditor
At least one
independent director (if is required to appointed), and the auditor or his
authorized representative, shall attend such Meeting through VC/ OAVM.
Notice
issued prior to the AGM Circulars
For
companies which have already sent their notices for calling AGM, should be
required to send out fresh notices containing the fact that meeting will
conducted through VC/OAVM in terms of the AGM Circular.
In our view,
the length of AGM notices can remain 21 days unless the same is called at a
shorter notice.
Filing of resolutions
All resolutions, passed in accordance with this
mechanism shall be filed with the ROC within 60 days of the Meeting, clearly
indicating therein that the mechanism provided herein along with other
provisions of the Act and rules were duly complied with during such Meeting.
Companies which are not required to provide the e-voting facility
Intimation to the members with respect to the Meeting
Where the contact details of any of the members are
not available with the company, it shall issue of public notice in vernacular
language and vernacular newspaper in which the registered office is situated,
& in English language and English newspaper having wide circulation in that
district and electronic editions.
The following content shall form part of the public
notice:
i. A statement that the AGM shall be
convened through VC or OAVM; and the company proposes to send the notice by
email at least 3 days from the date of publication of the public notice;
ii. The details of the email address along
with the phone number on which the members may contact for getting their e-mail
addresses registered for participation and voting in the Meeting.
Maintenance of recorded transcript
The recorded transcript shall be maintained by the
company. In case of public company, the recorded transcript shall also be made
available on the website of the company.
Minimum standards of VC/OVAM
facility
Ensure that the Meeting through VC/OAVM facility
allows two way teleconferencing for the ease of participation of the members.
The VC/OVAM facility must have a capacity to allow at least 500 members or
members equal to total number of members, whichever is lower to participate on
first come first serve basis.
Timeframe for VC/OVAM facility
The VC/OVAM facility shall be kept open at least 15 minutes before the scheduled time of the AGM and shall not be closed till the expiry of 15 minutes after the conclusion of the AGM.
Designated e-mail address for voting
The company shall provide a
designated e-mail address to all members at the time of sending the notice of
Meeting so that the members can convey their vote, when a poll is required to
be taken during the Meeting on any resolution, at such designated email address.
Voting through registered e-mail only
During the Meeting held through
VC/OVAM facility, where a poll on any item is required, the members shall cast
their vote on the resolutions only by sending their email addresses which are
registered with the company. The said emails shall only be sent to the
designated email address circulated by the company in advance.
Attendance of independent director and the auditor
At least one independent director
(if is required to appointed), and the auditor or his authorized
representative, shall attend such Meeting through VC/ OAVM.
Role of Scrutinizer
The company may appoint a
scrutinizer even though on a voluntary basis for enabling transparent voting
free from any conflict of interest.
Declaration of voting results
In case the counting of votes
requires time, the said meeting may be adjourned and called later to declare
the result.
Notice issued prior to the AGM Circulars
Same for these kinds of Companies.
Filing of resolutions
Same for these kinds of Companies.
Application for extension of AGM for certain companies
The companies which do not have
calendar year as their financial year and are unable to conduct their AGM in
accordance with the framework provided in AGM Circular may apply for the
application for extension of AGM before the concerned Registrar of Companies
under section 96 the Act.
RELATED LINKS
http://mca.gov.in/Ministry/pdf/Circular14_08042020.pdf
Regards
CS Shubham Kapoor
Contact- 9711244345
Email- kapoor.shubhamm@gmail.com
Very detailed and helpful Mr. Kapoor..great
ReplyDeleteDetailed and informative article...keep it up!
ReplyDeleteWell structured and informative. keep doing it, i'm looking forward to your upcoming articles.
ReplyDelete