By Rupin Chopra and Vibhuti Vasisth
On April 08, 2020, the Ministry of Corporate Affairs (“MCA”), issued a Circular (“EGM Circular I”), which when read with the Ministry’s subsequent Circular dated April 13, 2020 (“EGM Circular II”), has permitted companies to hold extraordinary general meetings (“EGM”) through video conferences or other audio visual means. Even previously, various other relaxations have been introduced by the MCA as a response to COVID-19, which can be referred to here.
Furthermore, in view of the nationwide lockdown and the continued restrictions on the movement of citizens spurred by COVID-19, certain other similar relaxations have also been introduced by way of MCA’s Circular dated May 5, 2020 (“AGM Circular”) for holding the annual general meeting (“AGM”) through Video Conferences, during 2020, provided the following compliances are met:
- provisions associated with the AGMs under the Companies Act, 2013 (hereinafter the “Act”) and the articles of association (“AOA”) of the subject company through electronic mode; and
- requirements prescribed under the AGM Circular.
AGM Circular- Requirements for holding AGMs through Video Conferences
- Companies would be required to comply with the relevant setting as provided in paragraph 3, EGM Circular I, and the manner in which the notices shall be issued, as prescribed under EGM Circular II, while holding the AGMs;
- For companies which required e-voting facilities under the Act or any other company which has opted for such a facility, a public notice would have to be released which would be required to be be published in newspapers in accordance with the manner as provided under the AGM Circular. This is required to be done as an initial step and before the notices and copies of financial statements and other relevant and necessary documents are sent, as per the conditions specified under the AGM Circular. Where a company has obtained permission from the concerned authorities to conduct a physical AGM, the company may also be required to provide the facility of Video Conferences to other members of the company, so as to participate in the said meeting, who will then, together, constitute a quorum as provided under S. 103, the Companies Act, and all resolutions would have to be passed through the facility of an e-voting system;
- In case of other companies, the AGMs may be conducted via Video Conferences only if it has the records and data pertaining to the email addresses of not less than half of such companies’ total number of members, who:
- For a Nidhi Company: holds (at least) more than INR 1,000 in face value, or more than 1 percent of the total paid up share capital, whichever is lesser;
- For other companies having share capital: should not be representing less than 75 percent of such part of the paid up share capital of the company as would bestow a right to vote at the meeting; and
- For companies not having share capital: who have the right to exercise a minimum of 75 percent of the total voting power exercisable at the said meeting.
Further, the company would also be required to take any/all reasonable steps to register the email addresses of all persons who have not registered their email addresses with the company, yet.
Apart from the ordinary business, only such items of the special business that would be considered unavoidable by the Board of Directors of the company may/would be discharged.
Copies of the financial statements, the Board’s Report, the Auditor’s Report and other relevant documents required to be attached can be sent only vide email to members, trustees for debenture-holders (as the case may be) and all other concerned persons.
Other general compliances:
Companies would be required to ensure that all other compliances in respect of the general meetings such as, inspection of related documents, authorisation for voting etc., as prescribed under the statute read with the articles of association of the company, are made through the electronic mode.
Payment of dividends:
Where a company is unable to pay the dividends to any of its shareholder by electronic mode due to either un-availability of bank account details or any other reason, the same would be required to be paid by the dividend warrant or cheque, upon regularisation of postal services. Companies, which are not required to provide the facility of e-voting, would now have to make adequate provisions for allowing members to give their mandate for receiving dividends in their bank accounts. If such details are not made available, the same would have to be paid after the postal services are resumed/standardised.
Companies that are not covered:
The Ministry, vide its Circular dated April 21, 2020, had also extended the deadline for holding AGMs of companies whose financial year (“FY”), excluding the first FY, ended on December 31, 2019, to September 30, 2020. Read here our update in this regard. Companies that are not covered under the aforementioned Circular, and that are unable to conduct their meetings in accordance with, and as prescribed in the framework of the AGM Circular, have been advised to move applications under Section 96 of the Act, before the concerned Registrar of Companies, seeking an extension of time for holding the AGM.
This update is intended to provide an overview of the relevant-applicable legal framework, however, since the subject matter pertains to an evolving issue, the author strongly recommends to seek specific legal advice relevant to your business scenario before implementing any of the definitive measures mentioned herein above.