According to Companies Act, 2013- section 96, companies need to hold their Annual General Meeting (AGM) within a period of six months from the date of closing of the financial year (FY). The company who are going to hold their first AGM will be held within a period of nine months from the date of closing of the financial year (FY) of that company.
The MCA (Ministry of Corporate Affairs) vide it’s General Circular No 14/2020 issued earlier, on April 08, 2020, allowed the Companies to hold their Extra-Ordinary General Meetings also known as EGM through Video Conferencing i.e. VC or Other Audio-Visual Means aka OAVM). Further, for providing more clarity on the modalities to be followed by the companies for conducting EGM like manner of issuance of notice, voting by show of hands and postal ballot etc., another circular released on April 13, 2020 , also known as ‘EGM Circulars’ was brought in force. In continuation to the earlier mentioned circulars and in view of the social distancing norms and other restrictions thereof, MCA provided an three months extensions for holding annual general meeting (AGM) for the companies having the calendar year as the financial year(FY) vide its circular dated April 21, 2020.
On May 05, 2020, MCA has announced another Circular which is General Circular No 20/2020 allowing the Companies for holding Annual General Meeting (AGM) via Video Conferencing (VC) /Other Audio-Visual Means (OAVM) in the calendar year 2020 subject to the fulfilment of some requirements.
As per the current pandemic COVID-19 outbreak, the Ministry of Corporate Affairs (MCA) had come to provide few relaxations from the provisions of Companies Act, 2013 and rules made thereunder including conducting the extra-ordinary general meeting (EGM) for passing the resolutions of urgent nature through video conferencing and OAVM till June 30, 2020.
Procedural Aspect
For filing the extension application, Companies are required to file Form GNL-1 stating the reason due to which the AGM cannot be held within the due date along with a resolution of the Board of directors (BOD)authorizing to file this extension application. The Registrar then examines the application and grants the certificate for extension if he/she is satisfied with the grounds on which the application is made.
Penalties and Consequences
If a company is unable to hold the AGM within the due date or the extended date, then you need to go through with penalties. If the AGM is held after the due date without taking approval of ROC, then the company and every officer of the Company who is in default will be punishable with fine of upto Rs. 1 Lac and in case of continuity a further fine may be charged which can extend to Rs. 5000 for everyday form which such default continues. Also, the Company will have to go to NCLT or RD for compounding of offence.
Motivation to Conduct AGM Through VC/ OAVM
After the circular released for AGM, the companies will be motivated to convene the AGM through VC/OAVM mode. The reasons for such a motivation are many, some of them are as follows:
- Less time-consuming procedure.
- Convenient Operating
- Cost effective.
- Environment friendly.
- Earlier getting the advantage of last audited accounts.
While there are many reasons to conduct the AGM through VC/OAVM mode, the only difficulty seems to be is the completion & audit of the annual accounts. Once the audit is done, the company can proceed for convening the AGM via this mode.