Holding Of AGM Through VC by A Private Limited Company

Given the difficulties faced by the stakeholders on account of the threat posed by COVID-19, the Ministry of Corporate Affairs (“MCA”) have issued a circular (No.20/2020) on 5th May 2020 for allowing the conduct of Annual General meeting through video conferencing (“VC”)or other audio visual means (OAVM).

The Companies Act, 2013 (Act) does not provide provisions of holding Annual General meeting through VC. Hence, if any company cannot hold the meeting physically due to COVID-19, then the Company can hold the meeting through VC/OAVM mode by following the procedure prescribed in the circular.

There are two separate procedures for those companies which are required to provide a facility of e-voting under Section 108 of the Act and for those companies which are not required to provide e-voting facilities.

In this article, I am highlighting provisions for those companies which are not required to provide e-voting facilities. All private companies are not required to provide such facilities.

Provisions: General Circular No.20/2020 dated 5th May 2020

Applicability: AGM to be held during the calendar year 2020

THE HIGHLIGHT OF THE PROVISIONS ARE AS FOLLOWS:

Conditions

• If Company has in its record, the email address of at least half of its total number of members who represent not less than 75% of the paid-up share capital of the Company as gives a right to vote at the meeting
• Company shall take all necessary steps to register the email address of all shareholders
• In meetings, Ordinary business shall be considered and special business which are considered to be unavoidable by the Board may be transacted
• The Companies shall make adequate provisions for allowing the members to give their mandate for receiving dividend directly in their bank accounts through the Electronic Clearing Services or any other means.

Recording and Time zone

• The proceedings of the meeting should be recorded and to be maintained in safe custody
• Time of the meeting should be convenient for all shareholders of the meeting

Limitation

• The facility of the meeting should have the capacity to allow at least 500 members or members equal to the total number of members whichever is lower (Thus. It is maximum 200 for private companies) to participate on a first come first serve basis.
• First come first serve basis does not apply to the shareholders holding more than 2%, promoters, institutional investors, directors, KMP, Auditor
• Appointment of proxy by members shall not be allowed

Chairman appointment if Articles of the Company not prescribed any person to be appointed as Chairman

• If there are less than 50 members present, the Chairman shall be appointed by the members present through a show of hands or polls as per Section 104 of the Act unless Articles prescribes otherwise
• In all other cases, the Chairman shall be appointed by a poll

Mandatory attendance apart from quorum:

• Atleast one Independent Director (if applicable to the company)
• Auditor of the company or his authorized representative, who is qualified to be an auditor

Notice of the meeting

• To provide a designated e-mail address in the notice so that the members can convey their vote when a poll is required to be taken during the meeting on any resolution
• Notice shall make disclosures about how the framework provided in this circular shall be available for use and contain clear instructions on how to access and participate in the meeting.
• The notice should also contain a helpline number (technical provider or otherwise) for those shareholders who need assistance with using technology before or during the meeting

Voting:

• Where less than 50 members are present in the meeting, the Chairman may decide to conduct a vote by show of hands, unless a demand for a poll is made by any member
• In case of a poll is demanded, the members shall cast their vote on the resolution only by sending emails through their e-mail address which are registered with the company to the designated email address circulated in the notice

Reporting requirement

All resolutions passed in accordance with this mechanism shall be filed with Registrar of Companies (“ROC”) within 60 days of the meeting indicating therein that mechanism provided herein along with other provisions of the Act and rules were duly complied with.

Miscellaneous:

• Companies shall ensure that all other compliances associated with the provisions relating to general meetings viz making of disclosures, inspection related documents by members, etc as provided in the Act and the AOA of the company are made through electronic mode.
• Shareholders attended through this mode will be considered as quorum for the meeting
• The Companies whose financial year ends on 31 March and are unable to conduct their AGM in accordance with the framework provided in the Circular are advised to prefer an application for extension of AGM before the concerned RoC under Section 96 of the Act

Practical challenge/Author’s observation

• The circular has not prescribed the form in which resolutions to be reported with the RoC. Whether it is to be filed in e-Form MGT-14 or GNL-1 or GNL-2. Filing in Form MGT-14 might be the best option as this form was used for filing many resolutions. However, there is no specific instruction on this aspect
• Circular is restricting the proxy appointment. In the case of shareholders who are in a remote places and cannot have access to electronic mode, then their rights are restricted to attend the meeting.
• The circular is salient on the voting method in case of more than 50 members.  Authors believe in such a case, meeting to be conducted through a poll.

Conclusion:

In the backdrop of the current circumstances of COVID-19 pandemic prevailing in the country, the MCA has given the relaxation for the company to hold the Annual general meeting electronically.

This relaxation is a significant measure as the Act does not provide any specific provisions for allowing members to meet through VC or OAVM. This measure would give way for promoting the digital India concept and would enable corporates to take certain urgent decisions in the face of extreme disruption caused by the pandemic.

This temporary measure will open the door for virtual general meetings in times to come.

Disclaimer: The views and opinions expressed in this article are those of the authors and it is not biding on any person or on any regulatory authorities. My article is based on the Act/rules at the time of publication and the same should not be construed as legal opinion on the application of the provisions.