Annual General Meeting (AGM)

Meetings indeed play a vital role in the corporate governance structure of the Companies Act, 2013 to render transparency, accountability, and decision making within the organisation. These formal meetings serve to gather directors, shareholders, or members who will discuss and deliberate on matters of great importance affecting operations, policies, and future development direction. The Act divides meetings into three as per its provisions: board meetings, annual general meetings (AGMs), and extraordinary general meetings (EGMs), each catering to its own set of rules and procedures.

Board meetings are attended by the directors of the company and, on the whole, deal with management and strategic decisions, while AGMs, in contrast, are yearly meetings of shareholders convened to review the financial statements of the company, appoint auditors, and carry out other statutory business. EGMs, on the other hand, are calling meetings such that the issues discussed are matters that are urgent or particular and could not be postponed till the next annual general meeting.

The Companies Act 2013 stipulates notification timelines, quorum requirements, and truism in documentation and minute recording to ensure compliance and protection of stakeholder interests in these meetings for sound corporate governance, stakeholder engagement, and transparency, legality, and ethics of the company. All meetings required under the Act are not purely procedural formalities, as instead, they are the lifeblood of corporate operation and accountability.

What is AGM?

An Annual General Meeting is required to be held by all such companies as per the provisions of the Companies Act, 2013, according to specific definitions, mostly public companies. The purpose of an AGM is to have a complete report of the overall performance and activities it has undertaken in a given financial year. It is a meeting of all the shareholders of the company and includes different items like approval and adoption of accounts, declaration of dividends, appointment or reappointment of directors, and appointment or ratification of auditors.

Which Companies Are Required to Hold AGMs?

The Companies Act, 2013, mandates that all types of companies, save for One Person Companies, be required to hold Annual General Meetings. This requirement applies particularly to companies with a share capital, reasonably to public companies, whereas private companies have similar provisions unless exempted.

According to Section 96 of the Companies Act of 2013, the first annual general meeting must be convened within the period of nine months from the end of the first financial year. If, within this period, the first AGM is held, no other AGM shall be held for that year. For other years, an AGM should be convened within six months after the end of the fiscal year to ensure that a gap between two AGMs never exceeds fifteen months.

One Person Companies are not required to hold AGMs. However, listed companies and other designated public entities must adhere to AGM requirements to facilitate shareholder engagement and continue with legal compliance.

Is There an Extension Provision to Hold AGM?

Yes, the Registrar of Companies can extend the time allowed for conducting the AGM when circumstances warrant it. The law explicitly states that no time may be extended in its application to the first AGM, as there is a provision for nine months in the law. In case of all other AGMs, time extension up to a maximum three month period can be granted by the RoC only under reasonable and sufficient causes.

Reasons for seeking an extension:

In general, extensions are not granted on an automatic basis but must be substantiated for a grant by the Registrar of Companies (RoC). The following are some reasons that are frequently related to any extension –

1. Natural calamities like floods and earthquakes or pandemic situations may obstruct doing business.
2. Specific internal company challenges like restructuring, merging, and technical reasons regarding the closure of accounts.
3. Audit delays due to personnel changes or sickness or absence of proper data.
4. Financial and operational troubles faced, especially by early-stage or recently converted entities.
5. Regulatory or legal troubles, that is, delays in approvals or litigation that will delay the completion of financial statements.

Firms will have to file an application on Form GNL-1 with the RoC, stating the reason for the delay and attaching supportive documents. The RoC can grant extensions, and penalties may be levied for failure to hold AGM in the absence of authorisation by the RoC.

AGM Notice

The Companies Act 2013 specifies procedures for informing the shareholders of an Annual General Meeting (AGM) to facilitate effective communication and transparency. Such procedures are set out mainly under Section 101 of the Act and in the related provisions of the Companies (Management and Administration) Rules, 2014.

1. Minimum Notice Period:

• At least 21 days’ notice should be given prior to the AGM date.
• “Clear days” is the period between the posting of the notice and the meeting date.
• When notice is posted or sent by courier, an additional 2 days should be added for delivery.

2. Method of Sending Notice: Notice can be sent in writing, via email, personally, or by post/courier.

3. Who receives the Notice: The notice shall be sent to every member/shareholder of the company, directors, auditors, and other persons as may be appropriate (for example, legal representatives of members who are dead).

4. Contents of the Notice:

• The date, time, and venue (or virtual meeting format) must be mentioned in the AGM notice.
• A meeting agenda.
• Information on ordinary and special business items.
• A Section 102 explanatory statement for any special business.
• E-voting instructions, if any.
• An in-person meeting proxy form and attendance slip.

5. Without a proper AGM notice, the meeting shall be said to be invalid and the resolutions passed, if any, shall also stand void, with no legal effect on the events or operations of the company.

AGM Agenda

The business list which has been prepared for the Annual General Meeting (AGM) would serve as a reading and approval list for those things that shareholders are required to go and approve in the meeting. Sections 102, 129, 134, 139, 152, and 96 of the Companies Act 2013 prescribe the business that has to be mandatorily performed at an AGM.

AGM can be held physically, virtually (by means of video conferencing), or in a hybrid mode as permitted by the MCA notifications and circulars, especially after guidelines as a result of the COVID-19 pandemic.

AGM can be called on a shorter notice only if 95% of entitled members consent to it for the meeting (in the case of a private company).

1. Statutory business at the AGM

According to the Act, these matters shall be regarded as ordinary business to be transacted at all AGMs:

1. Approval of the financial statements, i.e., Balance Sheet, Profit and Loss Account, Cash Flow Statement, Board’s Report, and Auditor’s Report (Sections 129 and 134).
2. Declaration of dividends, if any.
3. Appointment of directors and/or reappointment of directors who are likely to retire by rotation (section 152).
4. Appointment/reappointment of statutory auditors and their remuneration (section 139).

2. Special Business at the Annual General Meeting (AGM)

Any business that is not an ordinary business is considered a special business. This includes:

1. Amendments to the Memorandum of Association or Articles,
2. The issue of bonus shares,
3. Approval of related party transactions,
4. An increase in authorized share capital, and
5. Any other special resolutions required by the Act.

Under Section 102, an Explanatory Statement should be included with every notice of special business, explaining the nature, reason, and any interests (if any) of directors or senior executives.

3. Approval of Directors’ and Auditor’s Reports

The directors have to submit the Board’s Report (according to Section 134), consisting of a synopsis of the company’s performance, plans for the future, and position with respect to compliance. The auditor’s report on the accounts will also be submitted and discussed.

4. Other Optional Items

Optional items on the agenda may include the ratification of remuneration for cost auditors, discussion and questions from shareholders, and Corporate Social Responsibility (CSR) updates, if applicable.

Minutes of AGM

Minutes of the Annual General Meeting shall mean the formal, written record of proceedings and resolutions adopted at the meeting itself. Section 118 of the Companies Act, 2013 and the Companies (Management and Administration) Rules, 2014 lay down certain specified rules regarding the preparation of the minutes of meetings. Keeping accurate minutes for any AGM is thus not only a legal requirement but also a best practice; it promotes transparency, accountability, and compliance with corporate governance as enshrined under the Companies Act, 2013.

1. Preparation of the Minutes:

• Draft minutes for all general meetings, including the AGM. Provide a fair and true account of the proceedings.
• State the date, time, venue, etc.
• Include the names of members or participants who attended.
• Decisions should be recorded, indicating the method of vote in each case, for example, show of hands, poll, e-voting.
• If there was any discussion, it has to be recorded with a summary of the discussions.
• Specify the name of the chairman.

2. Timeframe for Recording: Minutes must be entered into the minutes book within 30 days after the AGM.

3. Signing of Minutes: The minutes have to be signed and dated by the meeting chairperson or the chairperson of the next meeting.

4. Maintenance of the Minute Book:

• Records should be stored safely, whether in paper or electronic format.
• Pages should be numbered consecutively.
• Rearranging, pasting, tampering, or overwriting is prohibited.

5. Access to or Inspection of Minutes:

• General meeting minutes are available for inspection during office hours.
• Copies may be requested by members, which will be issued within 7 working days upon payment of reasonable fees.

Report on AGM and Form MGT-15

The public companies are required to submit an annual report after holding their AGM by the Companies Act 2013. The entire process of AGM and its documentation, i.e., AGM Report and Form MGT-15 serve important purposes as far as compliance with procedures regarding conduct holding of AGMs is concerned. Such a mode of compliance is necessary for influencing good corporate governance and raising the transparency of shareholders.

According to Section 121(1) of the Act, every listed company has to create a report after every AGM. The report shall confirm the company’s holding and conducting of the AGM as provided in the Act and its provisions.

The report on AGM must include the following:

1. That the meeting was validly convened and held
2. Date, time, and place of the meeting
3. The number of members attended
4. Compliance with the notice period and quorum rules
5. Highlights of the proceedings and resolutions taken
6. Any adjournments or variations made at the meeting.

Form MGT-15 is used for the filing of an AGM report with the Registrar of Companies by all listed companies.

Key notes of Form MGT-15:

1. Title as Report on Annual General Meeting.
2. The purpose of it is to provide assurance regarding the compliance of the AGM rules for listed companies.
3. Authority comes from Rule 31 of the Companies (Management and Administration) Rules, 2014.
4. The report will be filed within 30 days after the AGM.
5. It should bear the signature of a director or company secretary, attested by a Practising Company Secretary (PCS).

Consequences Of Non-Compliance

Violations of AGM regulations under the Companies Act 2013 generally spell trouble for the concerned companies and their employees from a legal and financial standpoint. Section 99 empowers the NCLT to order company AGMs and impose penalties up to ₹1 lakh for failure to hold the meeting within a stipulated period. In addition, the company and its officers shall incur further penalties of ₹5,000 for every day of continued violation.

The failure to file statutory forms like MGT-7, AOC-4, or MGT-15 may bring penalties starting with ₹10,000 and going beyond ₹2 lakh depending on the nature and length of the violation. Other immediate implications of noncompliance may include the disqualification of directors, an adverse impact on the credit rating of the company, and legal hurdles in the acquisition of future permits from regulatory authorities or financing. For this reason, compliance with the AGM requirements is important for business governance and legal standing.

Conclusion

The Annual General Meeting (AGM) required under the Companies Act 2013 is a powerful vehicle to ensure transparency, accountability, and good corporate governance. Shareholders in the AGM can observe the financial performance of the company, make some key decisions, and bring the management on the floor to answer questions about its performance. The Act ensures a comprehensive model of the processes, timelines, and reporting needed regarding the AGMs, particularly in public and listed companies. Timely and correct conduct of AGMs is not only protection of the company under legal covers, but also builds investor trust and confidence and credibility for the organisation. Holding the AGM in time and in an appropriate manner is vital for compliance under the law as well as in encouraging shareholder involvement, testifying the company’s commitment to transparency, governance, and accountability.

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