CS Vinita Nair

Compliances to be ensured while determining Record/Cut-off Dates at ensuing AGM

Record date: Meaning & Requirement:

With the advent of demat trading, the whole concept of transfers have changed as transfers continue to happen seamlessly and momentarily. As a result, the list of shareholders keeps on changing continuously.

Record date is the date fixed for taking record of shareholders or debenture holders of the Company. An investor must be a shareholder/ debenture holder on this particular date in order to be eligible to participate in a particular corporate action.

Under Regulation 42 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (Listing Regulations), the listed entity is required to intimate the record date for the following purposes:

(a) declaration of dividend;

(b) issue of right or bonus shares;

(c) issue of shares for conversion of debentures or any other convertible security;

(d) shares arising out of rights attached to debentures or any other convertible security

(e) corporate actions like mergers, de-mergers, splits and bonus shares, where stock derivatives are available on the stock of listed entity or where listed entity’s stocks form part of an index on which derivatives are available;

Relevance of Book closure:

For securities held in physical form, the listed entity is required to announce dates of closure of transfer books in place of record date and accordingly comply with the requirements of intimating stock exchanges. Additionally, Reg. 42 (5) requires the listed entity to ensure that the gap between two dates of book closure is of atleast thirty days. The earlier requirement under Clause 16 of Listing Agreement of closing the transfer books at least once a year at the time of AGM, if not closed at anytime during the year, has not been incorporated under Listing Regulations.

Book closure is required for completing all pending transfers received by the company on or before the book closure date. During the book closure period, the Company does not take any further transfers. The book closure period typically coincides with the AGM date. The last date of the book closure period used to be the date of AGM mostly. The company used to update all transfer records and had the list of shareholders ready by the AGM. Transfers during the book closure period were disregarded. Thus, the company could declare and pay dividend to the shareholders as on the record date. Record date is typically the date prior to the book closure period. For example, if the book closure period is from 24th June to 30th June, the 23rd June will be the record date. The Company then determines the entitlement of the members whose name appear in the register of members as on 23rd June after giving effect to all valid share transfers lodged with the Company before closing hours of  23rd June, to the final dividend.

Dates to be determined for the purpose of AGM:

a) Cut-off date for dispatch of notices, annual reports, e-voting instructions

Companies Act, 2013 mandates providing 21 days clear days notice to the shareholders for the purpose of AGM, unless convened at a shorter notice. Further, every company other than a company referred to in Chapter XB or Chapter XC of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009 having its equity shares listed on a recognised stock exchange or a company having not less than one thousand members, are required to provide to its members facility to exercise their right to vote on resolutions proposed to be considered at general meetings by electronic means. Listed entity is required to determine the cut off to cull out the list of members to whom the notices and e-voting instructions are to be sent. This date is not required to be intimated to the stock exchanges. The agencies offering e-voting platform shall refer the list of shareholders as on this cut-off date, upload the same and generate user id and password for such shareholders.

b) Record date, in case dividend is declared at the AGM

 In case of AGM, the Board at the meeting held to approve the notice of AGM recommends the final dividend and decides the record date and the book closure period. Compliances to be ensured under Listing Regulations for the same are detailed as under:

ParticularsRegulation No.Compliance to be ensured
Intimation of the Board meeting at which declaration/recommendation of dividend is proposed to be consideredReg. 29 (1) (e)Atleast 2 working days notice in advance (excluding the date of intimation and the date of meeting)
Intimation of outcome of Board meeting held to consider recommendation/ declaration of dividends and the date on which dividend shall be paid/dispatched;Reg. 30 read with Para A (4) (a) of Part A of Schedule IIIWithin 30 minutes of the closure of the Meeting.
Intimation of record date specifying the purpose of record dateReg. 42 (2)Atleast 7 working days notice in advance (excluding the date of intimation and the record date) to be given to the stock exchanges specifying the purpose of the record date.
Time between recommending/ declaring dividend and the Record dateReg. 42 (3)The listed entity shall recommend or declare dividend atleast 5 working days (excluding the date of intimation and the record date) before the record date fixed for the purpose.

Formerly, Clause 19 (c) of Listing Agreement mandated intimating at least five days before commencement of the closure of its transfer books or the record date fixed for the purpose.

Gap between 2 record datesReg. 42 (4)Atleast 30 days

c) Book closure dates in case of physical shares, for the purpose of dividend.

In case of physical shares, the transfer books will be required to be closed. Compliances to be ensured under Listing Regulations and Act, 2013 are as under:

ParticularsRegulation/ Section/ Rule No.Compliance to be ensured
Intimation of book closure specifying the purpose of the sameReg. 42 (2) read with 42 (5)Atleast 7 working days notice in advance (excluding the date of intimation and the record date) to be given to the stock exchanges specifying the purpose of the book closure.
Time between recommending/ declaring dividend and the book closureReg. 42 (3) read with 42 (5)The listed entity shall recommend or declare dividend atleast 5 working days (excluding the date of intimation and the book closure period) before the book closure fixed for the purpose..
Gap between 2 dates of closure of transfer booksProviso to Reg. 42 (5)Atleast 30 days
Publication in newspaperSection 91 read with Rule 10 of Companies (Management and Administration) Rules, 2014Advertisement at least once in a vernacular newspaper in the principal vernacular language of the district and having a wide circulation in the place where the registered office of the company is situated, and at least once in English language in an English newspaper circulating in that district and having wide circulation in the place where the registered office of the company is situated and publish the notice on the website as may be notified by the Central Government and on the website, if any, of the Company.

The provisions contained above shall not be applicable to a private company provided that the notice has been served on all members of the private company not less than seven days prior to closure of the register of members.

d) Cut-off date for determining the eligibility to vote by electronic means or in the general meeting

ParticularsRegulation/ Section/ Rule No.Compliance to be ensured
Cut-off date for determining the eligibility to vote by electronic means or in the general meetingSection 108 read with Rule 20 of Companies (Management and Administration) Rules, 2014A date not earlier than seven days before the date of general meeting for determining the eligibility to vote by electronic means or in the general meeting, to be determined.

Other compliances w.r.t. e-voting as provided under Rule 20 also needs to be ensured. This date is disclosed in the instructions given in the AGM notice and need not be separately disclosed to the stock exchanges.

Same record dates for all purposes?

Based on the above discussion, it would be a prudent step to have same record date fixed by the Company for the purpose of dividend and cut-off date for the purpose of e-voting. The dividend, if declared by the members, can be made payable on or after the date of AGM.

(Author is associated with ‘Vinod Kothari & Company’ and can be reached at vinita@vinodkothari.com)

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