Ministry of Corporate Affairs has surprised all by issuing a circular No 28/2020 Dated 17th August 2010 clarifying about the extension of holding Annual General Meerut for the companies completing their financial year as at 31st March 2020. The said circular has suggested an old provision for application in GNL-1 for extension of Annual General Meeting. The extension of Annual Accounts is part and parcel of it. It surprised all as recently Ministry of Corporate Affairs extended the holding of Annual General Meeting for nine months for the companies till 30th September 2020. The majority of the companies close their Financial Year as at 31st March; hence no relief to such companies.
Holding of Annual General Meeting (AGM)
Annual General Meeting means a meeting which is held once in every year by every Company registered under the Companies Act, 2013 except One Person Company (OPC). As per section 96 of the Companies Act 2013, every Company shall hold Annual General Meeting (AGM) once in a year. If a company is registered from 1st January to 31st March of any financial year, then the 1st Annual General Meeting (AGM) of the Company shall be held within nine months from the date of closure of financial year of the following year. However, the existing Company shall be held within six months from the date of closure of the financial year. It may be noted that not more than fifteen months shall elapse between the date of one annual general meeting of a company and that of the next.
Extension to AGM of Companies having their F.Y. ending 31st December
The companies having their financial year ending on 31st December 2019 were required to hold their Annual General Meeting within six months, i.e. 30th June 2020. However, due to Covid-19, the companies were facing difficulty to hold the meeting in a stipulated time. Hence the Ministry of Corporate Affairs has issued a general circular No. 18/2020 dated 21st April 2020 has given a blanket extension to hold the meeting till 30th September 2020. The said statutory period of Six Months has been extended to nine months. The content of the circular is as follows.
On account of difficulties highlighted, it is hereby clarified 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 the 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 Extension of AGM to Companies having their F.Y. ending 31st March
The companies having their financial year ending on 31st March 2020 were required to hold their Annual General Meeting within six months, i.e. 30th September 2020. However, due to Covid-19, the companies were facing difficulty to hold the meeting in a stipulated time. Hence the Ministry of Corporate Affairs has issued a general circular No. 28/2020 dated 17th August 2020 has not given any extension to hold the annual general meeting. The said statutory period of Six Months has not been extended as expected from many quarters on the line of extension of the annual general meeting for such companies having closure their financial year 31st December 2019. Rather, have given weightage to their circular regarding holding of AGM through video conferencing (V.C.) or other audiovisual means (OAVM) for the calendar year 2020. The content of the circular is as follows.
The matter has been examined in this Ministry, and it is stated that this 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 (V.C.) or other audiovisual means (OAVM) for the calendar year 2020. Also, 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 Registrar of Companies under section 96 of the Act.
In view of the above, it is once again reiterated that the companies which are unable to hold their AGM for the financial year ended on 31.03.2020, despite availing the relaxations provided in the G.C. 20/2020 ought to file their application in Form GNL-1 for seeking an extension of time in holding of AGM for the financial year ended on 31st March 2020 with the concerned Registrar of Companies on or before 29th September 2020.
Procedure to seek an extension of 2020 AGM
Any company who desires to extend the date of its AGM may follow below Procedure for Extension of Annual General Meeting (AGM).
1. Board Meeting -The Company shall call a board meeting for approving the proposal of extension of the annual general meeting.
2. Approval of Board Meeting- Once the board of directors agree mutually for extension of the Annual General Meeting, and then it must approve the same.
3. Making application to the Registrar in Form GNL-1 – After the board approves the proposal, the next step is to make an application to Registrar in form GNL-1 till 29th September 2020.
4. Due to Covid-19, the Registrar of companies is hereby advised to consider all such applications (Filed in GNL-1) liberally in view of hardship faced by stakeholders and to grant an extension for the period as applied for (Up to Three Months). Earlier there were specific reasons in which the application for date of AGM can be extended like the Company is planning to go into liquidation. All employees along with Accounts department have left the Company, Not able to held AGM due to Natural Calamity, Confiscation of Books of accounts by the Income-tax department, Serious and Fraud Investigation cell, or any other government official, Sudden resignation of the Statutory Auditor from the A company without providing the audited balance sheet, Falling of director below the numbers prescribed by the Act, however, Non-Availability of Annual Accounts Deficiency in the Quorum of the Annual General Meeting is not valid reasons where application. Further, there could not be any extension If the chairman of the meeting in which accounts are to be approved is not available or Non-availability of accounts due to non-compliance of Audit by the Auditor.
5. A true copy of Board resolution and an ample reason for Covid-19 to be attached and mentioned with GNL-1. In case of application is made for the extension of AGM or Annual Accounts, mention the financial year-end date in respect of which the application is being filed. Ensure that you enter the correct date as the extension by the concerned office shall be based on this date
6. The Registrar of Companies shall issue Certificate of Extension of Annual General Meeting upon submission of all required documents. However, there is a provision in the act which give power to Registrar of Companies to extend the time for holding of the AGM maximum by 3 months
Consequences of failing to hold AGM in time
If a a company fails to hold the AGM within the due date then, such a company is liable for penalties u/s 99 of the Companies Act, 2013 i.e. (complying with any directions of the Tribunal, the company and every officer of the company who is in default shall be punishable with a fine which may extend to one lakh rupees and in the case of continuing default, with a further fine which may extend to five thousand rupees for every day during which such default continues).
As per section 97 of the Act, NCLT is having a power of calling the AGM, if any default is made in holding the AGM of a company, any member of the Company may make an application to the tribunal to call or direct the calling of, an AGM of the Company and give such ancillary or consequential directions as the tribunal think expedient. Such directions may include a the direction that one member of the Company present in person or by proxy shall be deemed to constitute a meeting.
As per section 99 of the Act, a provision of punishment for not holding AGM in mention, if any default is made in complying or holding AGM of the Company, the Company and every officer of the Company who is in default shall be punishable with fine which may extend to ` 1 lakh and in case of continuing default, with a further fine which may extend to ` 5,000 for each day during which such default continues.
However, If the AGM has stayed the orders of CLB/tribunal, there is no default in holding AGM. [Ador-Samia Ltd. vs Indocan Engineering Systems Ltd.] Further If at the time of holding the AGM there is only one shareholder (the other having died), no offence is committed when the AGM is not held. [State of Kerala vs West Coast Planners Agencies Pvt. Ltd.(1958) 28 Com. Cas. 13]
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