A company is required to hold annual general meeting (AGM) as per the provisions of sec 96 of the act. A onetime three months extension period is allowed, expiry of which makes the company and its officers defaulters and may attract unwanted penalties and prosecution.
Default in holding of AGM and remedies to overcome (sec 97):
The authority to convene the annual general meeting of the company is with the Board of Directors. But what If, the Board fails to hold AGM in any year.
Remedy: (Sec, 97) When the Board of directors defaults in holding of AGM, the member of the company has the authority to approach the Tribunal. The Tribunal on such application may call or direct the calling of the meeting or give such ancillary or consequential directions in relation to holding of AGM.
Every company which comes under sec 96 can avail this remedy to avoid defaulting.
Who can apply to the Tribunal– This right is exclusively available to the members of the company.
Process to make an application:
a. Form: NCLT-1
b. List of documents required:
– Affidavit verifying the petition,
– Bank draft evidencing payment of application fee,
– Any other relevant document.
When is the right time to initiate such an application?
Once the last date to issue notice of the AGM has expired (that’s when the board fails to call & hold the AGM within the stipulated time as per sec 96).
Actions taken by the Tribunal– Once the tribunal is of the opinion that the management of the company is unwilling to call AGM or it was impracticable on their part to call such meeting, then it may pass directions such as:
If, at the time when the annual general meeting is due to be held, there is only one member [due to the death of other member(s)], no offence is committed if the AGM is not held because of the shortfall of total number of members.
Failure to comply with sec 96 & 97:
Sec 99- The Company and every officer of the company who is in default shall be punishable with fine which may extend to one Lac INR and in the case of a continuing default, with a further fine which may extend to five thousand INR for every day during which the default continues. (1 Lac + 5000/day)
Compounding of offences
Default in holding of AGM is not a cognizable offence and it can be compounded u/s 441 of the act.
Such default made by the company or its officers can be compounded either before or after the institution of any prosecution, by-
a) The Tribunal (where maximum amount of fine imposed exceeds 5 Lac INR); or
b) The RD or any officer authorized by the central govt. (where maximum amount of fine imposed does not exceed 5 Lac INR).
On payment or credit of such a sum as specified by the authority (a) or (b) above to the Central Govt. keeping in view that such sum shall not, in any case, exceed the maximum amount of fine imposed for the offence which is being compounded.
One must take note of the following:
Procedure for compounding:
AGM is considered as an obligatory act which needs to be performed by the company & its officers as per the Companies act, 2013.
This is being done to sheer transparency among company’s members & stakeholders.
Defaulting AGM is considered as an offence & may attract stringent penalties.