Financial year and First Annual General Meeting (AGM) of newly incorporated Company.
Under the Companies Act, 1956 (‘Old Act’), it was open to the Companies to determine any period as their financial year (for example- 1st April to 31st March or 01st January to 31st December). However, the Companies Act 2013 (‘New Act’) did not give this leverage as New Act has introduced the concept of uniform Financial Year. As per the New Act, every company is obliged to have the financial year starting from 1st April to 31st March.
Financial Year in case of newly incorporated company under New Act.
The financial year of any company or body corporate has been defined under Section 2(41) of the New Act, as under-
“Financial year”, in relation to any company or body corporate, means the period ending on the 31st day of March every year, and where it has been incorporated on or after the 1st day of January of a year, the period ending on the 31st day of March of the following year, in respect whereof financial statement of the company or body corporate is made up.”
In view of the above, the first financial year of any newly incorporated company or body corporate shall be-
i) if the company is incorporated before the 1st day of January of a year- financial year shall be started from the date of incorporation and ending on 31st day of March every year.
ii) if the company is incorporated on or after the 1st day of January of a year- financial year shall be started from the date of incorporation and ending on the 31st day of March of the following year.
First Annual General Meeting.
As per Section 96 of New Act, every company other than One person company shall in each year hold its general meeting within not more than 15 months from the date of annual general meeting of a company and that of next.
Please Note that in case of first annual general meeting, it shall be held within a period of nine months from the date of closing of the first financial year of the company and in any other case, within a period of six months from the date of closing of Financial Year.
Please further note that if a company holds its first annual general meeting as aforesaid, it shall not be necessary for the company to hold annual general meeting in the year of incorporation.
Also note that Registrar may for any special reason, extend the time within which any annual general meeting, other than first annual general meeting, shall be held by a period not exceeding three months.
This means, for a company incorporated on 1st day of January 2020, the first financial year shall be closed on 31st day of March 2021 and Annual General Meeting should be convened on or before 31st day of December 2021.
However, for a company incorporated on 31st day of December 2019, the first financial year shall be closed on 31st day of March 2020 and Annual General Meeting should be convened on or before 31st day of December 2020.
Please Note: No extension is granted for companies conducting their AGM due date for the first time for the new company. Extension granted in other case can be maximum for a period of 3 months.
Remark: It may be a planning part for the promoters when the company to be incorporated whether before 1st day of January of a year or thereafter, as the effect of the same be on compliance part after incorporation.
Disclaimer: Nothing contained in this document is to be construed as a legal opinion or view of either of the authors whatsoever and the content is to be used strictly for educative purposes only.