The Circular is based on the growing demand by the industry bodies and other stake holders to recognize participation by the shareholders in the AGM / EGM [General Meeting] through electronic mode. The Circular relies on the provisions of the Information Technology Act 2000 [the IT Act] which is enacted inter alia to provide for legal recognition of electronic records. The Circular provides legal validity of compliances under the Act and is expected to ease procedure and facilitate wider participation by the shareholders in the General Meeting.
Salient features of the compliance requirements
The Circular defines “electronic mode” to mean video conferencing facility i.e. audio-visual electronic communication facility (VCF) employed which enables all persons participating in that meeting to communicate concurrently with each other without intermediary and to participate effectively in the meeting.
The Circular clarifies that shareholders of a company may participate in a General Meeting under the provisions of the Act through electronic mode.
Where participation in a General Meeting is allowed through VCF, for the purpose of constitution of quorum, 5 members in case of a public company and 2 members in case of a private company and the Chairman of the general Meeting shall be physically present at the place of the meeting. In other words, participation by members through VCF will not be counted towards quorum.
For holding General Meeting through electronic mode, a company shall comply with the following in addition to compliance required under the Act:
1. Notice of the General Meetings should inform shareholders regarding availability of participation through VCF and details for accessing VCF.
2. Chairman of the General Meeting and Secretary shall assume the following responsibilities i.e.:
a. Safeguarding the integrity of the meeting via video conferencing;
b. Ensuring proper video conference equipment / facilities;
c. Preparing minutes of the meeting;
d. Ensuring that only concerned shareholder or proxy to a shareholder is attending the meeting through VCF;
e. If a statement of a participant in the meeting via VCF is interrupted or garbled, the Chairman or Secretary shall request for a repeat or reiteration, and if need be, the Chairman or Secretary shall repeat what he heard the participant was saying for confirmation or correction.
3. In order to provide larger participation and for cost reduction, listed companies may provide VCF for such meetings in at least 5 places in India. Such places should be top 5 states / union territories based on maximum number of members or at least 1,000 members, whichever is more, residing as per the address registered with the depositories.
4. In order to have secured electronic platform for capturing accurate electronic voting process, the agencies duly approved by MCA viz. National Securities Depository Limited, Central Depository Services (India) Limited should be appointed, subject to such agencies completing necessary certification.
Conclusion – Legal recognition to participation by shareholders at the General Meeting through VCF will allow shareholders who may be at different locations to participate in important deliberations. The Circular provides safeguards to be taken and procedures to be followed by the company for conducting General Meeting through VCF.