Annual General Meeting (AGM) through Electronic means amid Covid 19 Pandemic
Brief Background
The Covid 19 pandemic and its harmful impact has resulted in various authorities bringing unprecedented changes to the existing Laws and regulation to cope with the pandemic and it’s after effects. Duly considering the Social distancing norms the Ministry of Corporate Affairs (MCA) and Securities and Exchange Board of India (SEBI) have come up with relaxations pertaining to the convening of Annual General Meeting (AGM) dispatch of physical Annual Reports and other allied compliances. Further The Institute of Company Secretaries of India (ICSI) has issued a guidance on certain aspects Secretarial Standards pertaining to AGM.
Relaxations and Changes as provided in MCA and SEBI circulars
1. Prior to AGM
- Holding of AGM through Video Conferencing (VC) or Other Audio and Visual means (OAVM)
The AGM can be held solely through Video Conferencing (VC) or Other Audio and Visual means (OAVM) i.e. holding physical AGM is not mandatory it can be held digitally through Electronic means on or before 31st December 2020. VC or OAVM facility must have a capacity to allow at least 1000 members to participate web platform on a first come‐first‐served basis. However Shareholders holding 2% or more shareholding, promoters, institutional investors, Directors, Key Managerial Personnel, Chairpersons of Audit, NRC, SRC Committee, and Auditors of the Company have to be mandatorily provided VC or OAVM facility on a two way Communication without and shall be excluded from 1000 members.
- Notice of AGM
The Notice of AGM shall contain the following apart from the existing contents:
- Manner in which the framework provided in MCA and SEBI circular shall be made available to the shareholders
- Clear instructions on how to access and participate in the meeting
- Helpline number of technology provider and the RTA
- The notice to state that the AGM is held through VC or OAVM.
- Circulation of notice of AGM and Annual Report
As per the MCA and SEBI circular the Company can send only electronic copies of notice of AGM and Annual Report on registered email addresses of the Shareholders available with the company/RTA or the depositories. Hence physical circulation of notice of AGM and Annual Report is dispensed with, electronic circulation through E-mail shall suffice.
- Business to be take up at AGM
The MCA circular mentions that Ordinary business and only unavoidable special business transactions shall be transacted at such AGM. The wordings of the circular are “In such meetings, other than ordinary business, only those items of special business, which are considered to be unavoidable by the Board, may be transacted”. However there is no clarity in the circular as to which items are considered to be unavoidable by the Board, hence this is open for various interpretations. I am of the opinion that such transactions are those transactions which are necessary to be approved by the shareholders on or before 31st December, 2020 and cannot be deferred.
- Public notice and Advertisement
The MCA circular states that in addition to publishing advertisement after dispatch, the companies will also have to provide a public notice in a vernacular newspaper in the principal vernacular language of the district in which the registered office of the company is situated and having a
wide circulation in that district, and at least once in English language in an English newspaper having a wide circulation in that district, preferably both newspapers having electronic editions, Prior to sending notice of AGM and Annual Reports providing the following details;
1. a statement that the AGM through VC or OAVM;
2. date and time of the AGM;
3. availability of notice on the website of the company and stock exchange;
4. the manner in which physical shareholder and those who have not registered email Id can cast vote:
5. the manner of registering the email ids;
6. the manner in which mandate can be given for receiving divided directly in bank account through the Electronic clearing system or any other means;
7. any other detail considered necessary by the company.
Hence now a Company who has to provide Remote E-voting facility has to publish two advertisement one prior to dispatch and one post-dispatch.
Additionally the above mentioned points except point no. 6 has to be also mentioned in the advertisement to be done post-Dispatch along with Complete details and procedure for inspection of documents and other mandatory registers.
- Remote E‐voting
Remote E‐voting to be provided before the meeting as per the existing provisions of the Companies Act, 2013 and SEBI (LODR) Regulations, 2015.
- Proxy
There cannot be any Proxy for AGM conducted through VC or OVAM. However Authorized representatives appointed through valid Board Resolutions can vote and participate in the meeting.
2. During the course of AGM
- Two‐way VC or OAVM facility and Webcast
One‐way live webcast shall be provided to all Stakeholders in addition to the two‐way VC or OAVM facility for the AGM for companies having more than Thousand Members.
The facility for joining the meeting shall be kept open at least 15 minutes before the time scheduled to start the meeting and shall not be closed till the expiry of 15 minutes after the start of AGM.
- Voting during course of AGM.
Members attending the meeting will also be provided with E‐voting facility during the meeting.
- Appointment of Chairman
In terms of the clauses of the AOA of the Company or as per Section 104 or through poll by E-voting facility during the AGM.
- Inspection of registers and other documents
The inspection of registers and other documents shall be provided by electronic mode the complete details and procedure of which shall be given in the Notice of AGM for viewing the documents.
- Attendance of Independent Directors and Auditors
At least 1 Independent Director and the auditor or his authorized representative should be present.
- Quorum
As per existing provisions of the Act.
3. Post AGM
- Recording of Proceedings of AGM
Transcript of the AGM through VC or OAVM facility to be recorded, and to be also uploaded on the website (if any) of the company as soon as practically possible.
- Minutes
Minutes shall be recorded and signed digitally by the Chairman and the same can be recorded and signed physically once normal conditions resume.
- Filing of resolutions
All resolutions passed (ordinary or special) in accordance with provisions of the MCA circular shall be filed with the Registrar of Companies within 60 days of the AGM, clearly indicating therein that the procedure provided was in compliance with the MCA circulars along with other provisions of the Act.
- Results of AGM
The results shall be intimated to the stock exchanges within 48hrs, however for all companies Results need not be put up at the Notice Board of the Company at the registered office instead can be displayed on website (if any) of the Company and the same shall be treated as sufficient compliance.
- Payment of Dividend by warrants
In case the details of bank account are not available for payment of dividend through electronic mode, dividend warrants shall be dispatched after resumption of normal postal services.
4. Practical aspects and challenges
- How is Quorum to be ascertained
The existing provisions provide that quorum of the meeting has to be present throughout the AGM, it may be possible that due to some technical connectivity aspects the number may fall below the required quorum during the course of AGM, then will such AGM be considered to be as validly convened.
- Holding of physical meetings
The MCA circular states that if the company which has received appropriate permissions from the relevant authorities it can conduct Physical AGM, subject to following rules and advisories issued by the government.
- Question raised by the Shareholders and answers provided by the Board
Companies have to carve out a mechanism during AGM to make it interactive and the shareholders queries and concerns could be addressed.
- Voting during the AGM
The remote E-voting would close one day prior to AGM, challenge is to establish such a mechanism where live E-voting has to be provided to shareholders during course of AGM, who have not voted before or in case of demand of a poll.
- Can Companies opt for AGM only through VC or OAVM even if normal conditions resume before 31.12.2020
Yes, The MCA circular clearly States that AGM in the calendar year 2020 can be held through electronic means, hence any AGM in the calendar year 2020 can be held through VC OR OVAM.
5. Conclusion:
The authorities have taken various measures to digitize the overall functioning from time to time. The prevailing pandemic has made it all the more important in taking steps towards establishing a digital platform by electronic means for two way Communication amongst various stakeholders. The most important one on one communication with the Shareholders is considered to be a AGM of the Company it also serves purpose as investor meet where the shareholders directly get to interact with the Directors and the top management of the company which instills confidence amongst the shareholders. The concept of holding AGM electronically is new and is here to stay, but this being the very first year of introduction I see a great challenge for its proper implementation and covering and overcoming the practical difficulties and challenges especially for large listed Companies.
Links:
https://taxguru.in/company-law/companies-allowed-hold-agm-till-30-09-2020-fy-ending-31-12-2019.html
https://taxguru.in/company-law/mca-clarifies-holding-digital-agm-through-vc-oavm.html
https://taxguru.in/sebi/additional-relaxation-compliance-sebi-lodr-regulations.html
https://taxguru.in/company-law/icsi-clarifies-applicability-secretarial-standards-meetings.html
(Author – CS Vipesh Ghadi, is a Associate Company Secretary with HS Associates and can be contacted at vipeshghadi@gmail.com)
Disclaimer: The entire contents of this Document have been prepared on the basis of relevant provisions, circulars and information available at that given point of time of preparation of this article. Though utmost efforts are made to provide authentic information, for better understanding and confirmation it is suggested to cross check with the provisions of the appropriate Acts, rules, circulars, notifications and Regulations as applicable as on the date of viewing this article. The observation and comments made by the author are his personal views and the author does not take any responsibility of the same and any portion of this article cannot be reproduced or quoted before any authority without prior written approval of the author.
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