Whether extension of AGM for financial year 2019-20 is valid up to 31st December, 2020 in each case and for all companies?
Due to the outbreak of COVID-19 disease all over the world, holding an Annual General Meeting (AGM) physically is risky, therefore, if the Company is holding AGM physically then the same shall be done by the Company adhering to the social distancing norms and any other rules and regulations stipulated by any local authority within the State.
As on date many companies have not been able to hold their AGMs on time due to the COVID-19 pandemic. Therefore, various representations were made before the Ministry of Corporate Affairs (MCA) to permit them to hold their AGM for the financial year ended on 31st March, 2020 beyond the statutory period provided in Section 96 of the Companies Act 2013 (‘the 2013 Act’).
MCA General Circular No. 28/ 2020 dated 17th August 2020
The MCA vide General Circular No. 28/ 2020 dated 17th August 2020 has issued Clarification on Extension of Annual General Meeting (AGM) for the financial year ended as at 31.03.2020. Under this General Circular no general extension for the due date of holding AGM for financial year 2019-20 has been given. But such companies can file an application with their Registrar of Companies (ROC) on or before September 29, 2020 in a specified form (GNL-1) for seeking extension of time in holding of AGM for the financial year ended March 31, 2020.
The Ministry had inter-alia, clarified vide General Circular No. 20/2020, dated 05.05.2020 [G.C. 20/2020] regarding holding of AGM through video conferencing (VC) or other audio-visual means (OAVM) for the calendar year 2020. In addition, the companies which are unable to hold their AGMs were advised to prefer applications for extension of AGM at a suitable point of time before the concerned ROC under Section 96 of the Companies Act, 2013.
The such view had been taken by MCA because of it has already provided digital AGM platform to all the Companies. MCA vide General Circular No. 20/2020 has clarified that Companies can hold AGM for the calendar year 2020 through video conferencing (VC) or other audio visual means (OAVM).
Though, the MCA had allowed companies to hold virtual AGMs using audio-video applications, the prevailing pandemic crisis had made it a logistical nightmare for companies to complete the audit functions and finalise the annual reports. Moreover, as per above circular dated 17th August, 2020, companies were to file an application with their ROC on or before September 29, 2020 in a specified form (GNL-1) for seeking extension of time in holding of AGM for the financial year ended March 31, 2020.
Still, there are lot of companies which have not been able to hold their AGMs on time due to the COVID-19 pandemic, therefore, it was expected that many applications be filed for seeking extension and in each case, separate order be granted by ROC.
MCA direction to ROC(s).
Now as per report, MCA has directed ROC to accord approval of three months extension to companies who have not able to hold their AGMs for the financial year ended March 31. “It has been decided that ROC should be directed to accord approval for extension of time for a period of three months beyond the due date by which companies are required to conduct their AGMs for the financial year 2019-2020 ending on March 31, 2020,” said the MCA in their statement.
ROC’s power to extend AGM
[Third proviso to sub-section (1) of Section 96 of the 2013 Act]
“Provided also that the Registrar may, for any special reason, extend the time within which any annual general meeting, other than the first annual general meeting, shall be held, by a period not exceeding three months.”
In terms of power vested under the third proviso to sub-section (1) of Section 96 of the 2013 Act, the ROC extended the time to Section 96, without requiring the for such period within the due date of holding the AGM by a period of three months from the due date by which the AGM ought to have been held in accordance with companies to file applications for seeking such extension by filing the prescribed Form No. GNL-1.
The ROC clarified that the extension granted under this Order shall also cover the pending applications filed in Form No. GNL-1 for the extension of AGM for the financial year ended on 31.03.2020, which is yet to be approved.
Further, the applications filed in Form No. GNL-1 for the extension of AGM for the financial year ended on March 31, 2020, which were rejected, where the approval for extension of AGM up to 3 months from the due date of the AGM shall be deemed to have been granted without any further action on the part of the company.
ROC’s Order for extension of time for holding AGM for the financial year ended 31st March, 2020.
On the direction of MCA, every ROC has issued an order for extension of time for holding AGM for the financial year ended 31st March, 2020. ROC Delhi & Haryana has given the order as under-
“Now, therefore, in terms of power vested with the undersigned under the third proviso to sub-section (1) of the Section 96 of the Act, I here by extend the time to hold the AGM, other than the first AGM, for the financial year ended on 31.03.2020 for companies within the jurisdiction of this office (i.e. Registrar of Companies, NCT of Delhi and Haryana) which are unable to hold their AGM for such period with the due date of holding the AGM by a period of three months from the due date by which the AGM ought to have been held in accordance with the provisions of sub-section (1) to Section 96 of the Act, without requiring the companies to file application for seeking such extension by filing the prescribed Form No. GNL-1.
Whether extension of AGM for financial year 2019-20 is valid up to 31st December, 2020 in each case?
The interesting question comes into mind whether the extension of AGM for financial year 2019-20 is valid up to 31st December, 2020 in each case and for all companies. In this regard it is submitted that-
1. Under the power vested with ROC under the third proviso to sub-section (1) of the Section 96 of the Act, ROC has power to extend the period of AGM only for three months.
2. The said relaxation (whether general or specific order) will be given to those companies which are unable to hold their AGM for such period with the due date of holding the AGM by a period of three months from the due date by which the AGM ought to have been held in accordance with the provisions of sub-section (1) to Section 96 of the 2013 Act.
In view of the above, it is submitted that general relaxation given by ROC vide their order, is application to all companies which unable to hold their AGM for such period with the due date of holding the AGM by a period of three months from the due date by which the AGM ought to have been held in accordance with the provisions of sub-section (1) to Section 96 of the 2013 Act.
Further, period of AGM extended by ROC is for three months which can be up to 31st December 2020 but in not every case. As relaxation of three months period shall be count from the due date by which the AGM ought to have been held in accordance with the provisions of sub-section (1) to Section 96 of the 2013 Act. Therefore, it is also necessary to consider the provisions of sub-section (1) to Section 96 of the 2013 Act.
Pursuant to the provisions of Section 96 of the 2013 Act, every company shall hold its AGM other than the first AGM within a period of 6 months from the closure of its date of the financial year. On the other hand, in the case of the first AGM the same must be conducted by the Company within a period of 9 months from the closure of the financial year. Also, the gap between two AGMs shall not be more than 15 months.
Crux of the provisions of Section 96(1) of the 2013 Act.
1. Every company (other than OPC) shall in each year hold a general meeting namely Annual General Meeting.
2. Gap between two AGM should not be more than 15 months.
3. First AGM should be held within a period of nine months from the date of closing of the first financial year.
4. Subsequent AGM should be held within a period of six months from the date of closing of the financial year.
5. No extension is granted for companies conducting their AGM due datefor the first time for the new company.
6. Extension granted in other case can be maximum for a period of 3 months.
Conclusion: As relaxation of three months period shall be count from the due date by which the AGM ought to have been held in accordance with the provisions of sub-section (1) to Section 96 of the 2013 Act. Therefore, it will be wrong to say that the extended period of AGM is 31st December, 2020. It will depend case to case.
For Example, gap between two AGM should not be more than 15 months, therefore, if last year AGM of the company was 30th June, 2019, then due date of AGM for financial year 2019-20 is upto 30th September, 2020. Now, ROC has granted three months period extension for all companies, therefore, this company can conduct its AGM for financial year 2019-20 is upto 31st December, 2020.
But suppose last year AGM of the company was 30th April, 2019, then due date of AGM for financial year 2019-20 is upto 31st July, 2020. Now, ROC has granted three months period extension for all companies, therefore, this company can conduct its AGM for financial year 2019-20 is upto 31st October, 2020.
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Also refer: –
MCA General Circular No. 18/2020 dated 21st April 2020
MCA vide General Circular No. 18/2020 dated 21st April 2020 has extended the due date of AGM by 3 months for the Companies who are having their financial year closure date as 31st December, 2019.
Such extension was provided in view of that several representations have been received by MCA from stakeholders with regard to difficulty in holding AGM for companies whose financial year ended 31st December, 2019 due to COVID-19 related social distancing norms and consequential restrictions linked thereto.
These representations have been examined and it is noted that the Companies Act, 2013 allows a company to hold its AGM within a period of six months (nine months in case of first AGM) from the closure of the financial year and not later than a period of 15 months from the date of last AGM .
On account of the difficulties highlighted above, it clarified by MCA that
“if the companies whose financial year (other than first financial year) has ended on 31st December, 2019, hold their AGM for such financial year within a period of nine months from the closure of the financial year (i.e. by 30th September, 2020), the same shall not be viewed as a violation. The references to due date of AGM or the date by which the AGM should have been held under the Act or the rules made thereunder shall be construed accordingly.”
No doubt that MCA had given relief vide above said circular by extending the due date of AGM by 3 months for the Companies who are having their financial year closure date as 31st December, 2019. But it was not possible for the companies to hold its AGM physically due to lockdown situation and COVID disease.
Therefore, on account of need for continuous adherence to the social distancing norms and restrictions placed on movement of persons, MCA had decided to allow companies to hold their AGM by Video Conferencing (VC) or other audio-visual means (OAVM) during the calendar year 2020. Accordingly, the General Circular No: 20/2020 dated 5th May 2020 (‘AGM Circular’) has been issued by MCA. This is a welcome move of MCA as the Act does not provide any provision for holding any General Meeting including AGM through such mode.
MCA provided that the framework provided in the earlier Circulars [General Circular No. 14/2020, dated 08.04.2020 (EGM Circular – l) and General Circular No. 17/2020 dated 13.04.2020 (EGM Circular – ll)] for holding of extraordinary general meeting (EGM) would be applicable mutatis mutandis for conduct of AGMs during 2020, based on the classification of companies which are required to:
- provide the facility of e-voting or have opted for the same, and
- those companies which are not required to provide such a facility.
Owing to the difficulties in sending physical copies of the financial statements, the Circular allows the companies to send the financial statements, along with Board’s reports, Auditor’s reports and other documents required to be attached therewith, only through email. The companies are also required to provide a window to the shareholders for registering their mandate for transferring dividends electronically to them through the Electronic Clearing Service (ECS) or any other means.
The General Circular No: 20/2020 dated 5th May 2020 has been divided into two major parts i.e. Part A which is including those companies who are having the mandatory requirement to provide the e-voting facility and Part-B which covers in its ambit the companies which are not having a mandatory requirement to provide e-voting facility.
Further, the present circular i.e. 20/2020 is linked to two circulars earlier issued by MCA w.r.t holding of Extra-ordinary General Meeting via VC or OAVM on 8th April 2020 (EGM Circular-I) and 13th April 2020(EGM Circular-II) respectively, and the company has to comply with the mentioned clauses of such circular depending upon the category prescribed in the AGM Circular in which such company is falling i.e. either Part-A or B.
The AGM Circular is an appreciable move which allows the Companies to hold AGM virtually, which will eventually also low down the cost burden for the companies to hold AGM, and therefore it is advisable to all the corporates to hold AGM keeping in mind the true intention behind allowing such mode for holding AGM which is to make the members aware of the actual financial position and affairs of the Company, and Company must adhere to such AGM Circular in a constructive and ethical manner.
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