Meeting of Members for placing Ordinary or Special Resolution as SPECIAL BUSINESS (Not Ordinary Business) before them during Lockout Period due to Pandemic -COVID-19

Circular 14/2020 of MCA dated 8th April, 2020 and further relaxation vide Circular No. 17/2020 dated 13th April, 2020

Ministry of Corporate Affairs (MCA) had issued a General Circular No. 14/2020 (1st Circular) on 8th April, 2020 for passing of resolutions of members for Special Business (Not Ordinary Businesses) during this period till 30th June 2020.

Later on 13th April, 2020 MCA has issued one more General Circular No. 17/ 2020 (2nd Circular) clarifying on various difficulties faced by the Company in serving Notice for conducting EGM and gave more clarity on modalities/mechanism to follow while conducting EGM or transacting items through Postal Ballot without conducting EGM. With the 2nd Circular, MCA has extended the time for holding EGM till 30th June 2020 or till further Order whichever is earlier.

Before we discuss on the modalities provided in these two Circulars for conduct of EGM, we would like to caution our reader and request to take note that MCA is not empowered under the Companies Act, 2013 (the Act) to issue such Circulars, providing for different modalities or mechanism for conducting EGM, which are not provided in the Act. There are enough judicial decisions/ pronouncement that such circulars are non-binding in nature and it could be considered as only advisory. However, with power of regulator and power of Adjudication with the MCA as per provisions of section 454 of the Act, no company would prefer to be non-complaint and take theses Circulars as mandatory to comply. Further, considering the fact that MCA may go on changing the Circulars for clarification as firefighting solutions on every representation with myopic view, it would be advisable for the Companies to not to conduct EGM as per modalities given in these Circulars for any important and critical transaction unless it is unavoidable. In the current circumstances of Nationwide Lockout, we assume that these Circulars might be issued by MCA under power derived from the Disaster Management Act, 2005.

With this background Let’s discuss modalities provided in these two Circulars with, Why, What and How to conduct such EGM.

A. WHY World Health Organization has labelled COVID-19 a pandemic, which is spreading so quickly that any count of infections and deaths rapidly becomes out of date and until then “Social Distancing” is the best defense against COVID-19. Hence, in the current situation of “Lockout” with “Work from Home” (WFH) with understandably limited resources, question arise that how a public and private companies can continue to convene and hold general meetings of their members, whilst ensuring compliance with the Government Policy and measures to prevent the spread of COVID-19.

Several representations were made to MCA to relax the provisions of the Companies Act, 2013 (the Act) and Rules made there under (the Rules). Although the Act does not contain any specific provisions allowing conducting of General Meetings of members through Video Conferencing (VC) or Other Audio Visual Means (OAVM), except that Section 108 and 110 of the Act read with the Rules, allows to place the resolution before Members through remote e-Voting or Postal Ballot respectively. Also the list of resolutions as an illustrative list is given under Secretarial Standard No.2. Hence, MCA has issued 1st Circular and later on further representations being made before MCA with request to clarify how to send Notice of EGM to members, voting by show of hands etc., MCA had issued 2nd Circular.

B. WHAT Considering the circumstances and representations made, MCA vide its 1st Circular had provided detailed mechanism / modalities for companies to adopt certain procedures, in addition to procedures mentioned under the Act and the Rules, for conducting general meetings of its members in unavoidable circumstance for any Special Business. MCA through these Circulars allows to conduct only Extra Ordinary General Meetings (EGM) of its members through VC or OAVM and not Annual General Meetings (AGM).

In the 2nd Circular, MCA has provided further clarification with respect to issue of Notice to its Members, Change in modalities for voting by Poll and not Show of Hands, details to be mentioned in Public Notice and sending emails to members for Poll etc.

2nd Circular also clarifies that the company which is mandated or voluntarily providing remote e-voting as per section 108 of the Act, may transact any item only by Postal Ballot as per Rule 20 and Rule 22 of the Companies (Management and Administration) Rules, 2014 as per these Circulars upto 30th June , 2020 or till further order, whichever is earlier.

C. HOW In the 1st Circular MCA had provided procedures in two Parts (A) and (B).

⇒ Part (A) has provided for detailed procedure for conducting EGM by the company which is mandated under Section 108 of the Act to provide remote e-Voting facilities (Companies whose equity shares are listed on a recognized stock exchange and every company having not less than 1000 shareholders) or company which has voluntarily opted for remote e-Voting facilities; and

⇒ Part (B) has provided for detailed procedure for conducting EGM by the company which is not required to provide the facility of remote e-Voting

There are not much difference between Part A and Part B except that (a) VC or OAVM facility must have a capacity to allow 1000 members for Part A and 500 members or members equal to the total number of members , whichever is lower, to participate on a first-come-first served basis and (b) providing designated email address to all members at the time of sending the Notice of meeting so that the members can convey their vote, when a poll is required to be taken during the meeting for appointment of Chairman or on any resolution, at such designated email address.

Before conducting EGM the Companies are required to check the provisions of its Articles of Association (AoA), the Shareholders Agreement (SHA) or Joint Venture Agreement (JV) if any, to check the provisions to be complied with respect to

(i) the relevant approval thresholds;

(ii) minimum Notice period ;

(iii) approval of any Nominee Director for shorter period of Notice;

(iv) mandatory presence of any Director or Nominee Director of any Investor or for any Material Transactions as defined in the AoA or SHA or JV; and

(v) means by which the approvals can be given etc.

We will analyses various Corporate Actions / Secretarial Actions which are required for conducting such EGM for Unavoidable Circumstance through VC or OAVM as per these Circulars and whether it’s worth doing it or not considering challenges that may arise to be kept in the mind.

Corporate /Secretarial Action points

1. Check the Articles of Association / SHA or JV for convening of EGM

2. Notice period and time of the Meeting

3. Venue for the meeting

4. Appointment of scrutinizer

5. Notice of the meeting, if notice is not sent before the Circular

6. Fresh Notice with shorter Notice consent, if the Notice is already sent before the Circular is issued

7. Postal Ballot/ Poll Paper

8. Documents as part of Notice or inspection of documents electronically

9. Arrangement of e-voting

10. Publication of Notice by the company which is providing remote e-voting facility

11. Publication of Notice by the company which is not providing remote e-voting facility

12. Uploading the Notice on website of the company , if any

13. For listed company, send the intimation and the Notice to Stock Exchanges

14. Despatch of Notice, mode of despatch and to whom

15. VC or OAVM arrangement

16. Quorum for the meeting

17. Proxy for the member ( allowed or not allowed )

18. Authorized Representative of President of India or Governor of a State or a Company or a Body Corporate

19. Chairman of the meting

20. Participation in the meeting

21. Recording of the meeting

22. Uploading the results of the meeting on website and to Stock Exchanges

23. Filing of resolution with MCA in 60 days

The Company need to ensure and provide all relevant information to its members to retain their trust throughout this crisis and if the convening of EGM is unavoidable to obtain the approval, the Company may conduct EGM with full disclosure and ensuring proper participation opportunity being given to the members.

In these Circulars remote e-voting and e-voting terms are used hence for our reader we clarify as follow:

(1) Remote e-voting to be understood as voting through electronic as per Rule 20 of the Companies (Management and Administration ) Rules, 2014 and also for the Postal Ballot, the voting will be through remote e-voting only.

(2) e-voting system to be understood as sending vote by email during the meeting as per these Circulars.

1. Check the Articles of Association (AoA)/ SHA or JV for convening of EGM

The companies must check all the provisions of its AoA , SHA, JV, the Act & Rules before deciding to conduct EGM as per these Circulars.

2. Notice period and time of the Meeting

EGM of a company can be called by giving not less than clear 21 days Notice, unless with shorter notice. While deciding the time for EGM through VC or OAVM, the company should keep in mind the convenience of different persons positioned in different time zones in the globe. For that reason, the company must know and check the list of its shareholders with their addresses and ensure availability of its Directors, Independent Directors, Nominee Directors and Auditors.

3. Venue for the meeting

Every notice of a meeting is require to specify the place, date, day and the hour of the meeting and shall contain a statement of the business to be transacted at such meeting.

EGM through VC or OAVM may be held as per this circular, however the Circular is silent about which place to be considered as venue of the meeting as the same is by VC or OAVM. Hence we can understand and assume that as per the Board Meeting the venue of the meeting conducted through video conferencing or other audio visual means, the scheduled venue of the meeting as set forth in the Notice convening the meeting shall be deemed to be the place of the meeting and all recordings of the proceedings at the meeting shall be deemed to be made at such place.

4. Appointment of scrutinizer

The Board may decide to appoint one or more scrutiniser to scrutinise the remote e-voting or e-voting process as per these Circulars. In case of voting through Postal Ballot , the Board is require to appoint the Scrutinizer . The scrutinizer to scrutinize the vote in a fair and transparent manner and provide Report to the Chairman.

The Scrutiniser may be Chartered Accountant in practice, Cost Accountant in practice or Company Secretary in practice or an Advocate, or any other person who is not in employment of the company and is a person of repute who, in the opinion of the Board can scrutinise the remote e-voting, postal ballot or poll by e-voting process during the meeting as per these Circulars in a fair and transparent manner. The Scrutiniser should give his consent for his appointment as such in advance and he should be available for the purpose of ascertaining the requisite majority at the time of EGM.

5. Notice of the meeting, if notice is not sent before the Circular

The Notice of EGM should be as per the Act and the Rules. The company which is providing e-voting facility mandatorily as per Section 108 of the Act or voluntarily, need to comply with Rule 20 of the Companies (Management and Administration ) Rules, 2014 and in addition, it must disclose the following as per these circulars

(a) Detailed manner of conducting the meeting as per circular

(b) Use of process by the members

(c) How to access the meeting

(d) How to participate in the meeting

(e) Helpline number through Registrar & Share Transfer Agents or technology provider or otherwise for the members who need assistance with using the technology before or during the meeting

(f) The designated e-mail ID to which member to convey his vote, when poll is demanded

6. Notice is already sent before the Circular is issued

In the Notice for EGM has been served prior to 08th April, 2020, being the date of 1st Circular, than the company which has share capital can, with the consent of majority of members in number who are entitled to vote and representing atleast 95% of paid up share capital or the company with no share capital can, with the consent of members who are entitled to vote and representing atleast 95% of voting power, issue a fresh Notice with shorter duration with detailed disclosure as mentioned in the above point as per 1st Circular.

7. Postal Ballot/ Poll Paper

The company which requires to transact any business only through Postal Ballot and not conducting EGM even through VC or OAVM as per these Circulars, must send Postal Ballot along with the Notice. The Notice of EGM to be sent only by email to members and others who are entitled, and with respect to publication of Notice as per point 10 below and other procedure, such company shall also follow modalities as per these Circulars. However, under the current circumstances of Pandemic COVID-19 there is no possibility of receipt of Postal Ballot by the company, hence the voting shall be only through remote e-voting only and the outcome of voting shall be communicated by the company chairman.

The other company which is not mandated or opted for remote e-voting ,may send poll paper by email to members along with the Notice, which the member can use for e-voting system by email during the meeting as per these Circulars.

8. Documents as part of Notice or inspection of documents electronically

Inspection of documents as mentioned in the Notice may be provided as an attachment or through the electronic means or give Uniform Resource Locator (URL) which should be readable and the person who is receiving should be able to obtain and retain copies and the company shall give the complete Uniform Resource Locator or address of the website and full details of how to access the document or information.

9. Arrangement of e-voting for companies which are mandated under section 108 of the Act or which voluntarily choose to provide e-voting

Before the actual date of the meeting, company to provide the facility of remote e-voting in accordance with the Act and Rule 20 of the Companies (Management and Administration) Rules, 2014.

10. Publication of Notice by companies providing remote e-voting

The company which is providing remote e-voting facilities mandatorily as per section 108 of the Act or voluntarily, cause a Public Notice by way of an advertisement as per Rule 20 (4) (v) of the Companies (Management and Administration ) Rules, 2014 and in such Public Notice following matters shall also to be stated , namely:

(a) a statement that the EGM is proposed to be conducted through VC or OAVM in compliance with applicable provisions of the Act / Rules and these Circulars ;

(b) the date and time of the EGM to be conducted through VC or OAVM;

(c) availability of Notice of the meeting on the website of the company and the stock exchange for listed company;

(d) the manner in which the members who are holding shares in physical form or who have not registered their email addresses with the company can cast their vote through remote e-voting or through the e-voting system by email during the meeting;

(e) the manner in which the members who have not registered their email addresses with the company can get the same registered with the company;

(f) any other detail considered necessary by the company

11. Publication of Notice by companies not providing remote e-voting facility

The company which is not providing remote e-voting must ensure that all members are aware that EGM is proposed to be conducted in compliance with these Circulars, it shall do the following:

(a) Contact all its members whose email address are not registered with the company, over telephone or any other mode of communication for registration of their email address before sending the Notice for EGM to all its members ; or

(b) where the contact details of any of the members are not available with the company or could not be obtained even after making efforts as above , it shall cause a Public Notice by way of an advertisement to be published, immediately at least once 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 and specifying in the advertisement, the following information

(i) that the company intends to convene EGM through VC or OAVM in compliance with applicable provisions of the Act / Rules and these Circulars and for that purpose the company proposes to send Notices to all its members by e-mail after, at least, 3 days from the date of publication of the public notice;

(ii) the details of the e-mail address along with the telephone numbers on which the members may contact for getting their e-mail addresses registered for participation and voting in the EGM

12. Uploading the Notice on website of the company , if any

Notice of meeting require to be displayed on the website of the company

13. For listed company , send the Notice to Stock Exchanges

Listed company to send the required intimation and the Notice to Stock Exchange

14. Dispatch of Notice, mode of dispatch and to whom

The Notice may be sent only by email of Members registered with the Company or Depository Participants or Depository. The Notice shall also be placed on the website, if any, of the company and of the agency forthwith after it is sent to the members

Notice which may be sent through e-mail can be sent as a text or as an attachment to e-mail or as a notification providing electronic link or Uniform Resource Locator for accessing such Notice.For the companies which is not required to give e-voting facilities, the Notice need to be sent to all Members, Shareholders, Promoters, Institutional Investors, Body Corporates -through Authorized Representatives, Key Managerial Personnel (KMP), Directors, Auditor of the Company.

15. VC or OAVM arrangement

Company to ensure the following:

(a) Arrangement for two-way communication through teleconferencing or webex

(b) Capability of system of hosting upto 1000 members ( for companies providing remote e-voting) or 500 members or members equal to the total number of members of the Company, whichever is lower ( for company which is not required to provide remote e-voting)

(c) Allow participants to attend on first come first serve basis principle

(d) Shareholders holding 2% or more shareholding, Promoters, Institutional Investors, Directors, Key Managerial Personnel, Auditors must be allowed to attend the meeting without restriction of first- come- first- served basis principle

(e) The facility of joining the meeting is allowed at-least 15 minutes before the time scheduled to start the meeting and allowed to continue till the expiry of 15 minutes after such scheduled time.

16. Quorum for the meeting

The Members who attend through VC or OAVM are counted for the purpose of reckoning quorum under Section 103 of the Act.At least one Independent Director (where the company is required to appoint) and the Statutory Auditor / Secretarial Auditor or their authorized representative who are also qualified to be the Statutory Auditor / Secretarial Auditor , as the case may, shall attend such meeting through VC or OAVM.

17. Proxy for the member

Proxies cannot be appointed for participation in the EGM conducted as per this Circular

18. Authorised Representative of President of India or Governor of a State or a Company or a Body Corporate

Authorised Representative in pursuance of Section 112 and Section 113 of the Act are deemed to be member of the company and are entitled to exercise same rights and powers as the member could exercise and hence appointment of Authorised Representative is meeting allowed for the purpose of voting through remote e-voting or for participation and voting in the held through VC or OAVM. The company to encourage the Institutional Investors who are members of the company, to attend and vote in the meeting through VC or OAVM.

19. Chairman of the meeting

a. For company where remote e-voting is provided

Chairman present at the meeting shall ensure that the facility of e-voting system is available for the purpose of voting during the meeting held through VC or OAVM.

b. For company where remote e-voting is not provided

Unless the Articles of Association of the company require any specific person to be appointed as a Chairman for the meeting, the Chairman for the meeting shall be appointed as follow :

> If there are less than 50 members present, the Chairman shall be appointed in accordance with Section 104 of the Act, that is by show of hands ; and

> if there are more than 50 members present, then the Chairman shall be appointed by a poll Such voting by Poll will take place during the meeting and the members may convey their assent or dissent only at such stage on items considered in the meeting by sending emails to the designated email address circulated by the company, through their email address(es) which are registered with the company . Voting by email for Poll is not allowed to be sent by email in advance to the company before the meeting is actually held through VC or OAVM facility.

20. Participation in the meeting—the most important part

(a) The participants shall also be allowed to pose questions concurrently or given time to submit questions in advance on the e-mail address of the company.

(b) The Chairman of the meeting shall satisfy himself and cause to record the same before considering the business in the meeting that all efforts feasible under the circumstances have indeed been made by the company to enable the members to participate and vote on the items being considered in the meeting

(c) For companies which are mandated to provide e-voting facility as per Section 108 or companies which voluntarily provides e–voting facility

(i) Member who is present in the meeting through VC or OAVM and who has not cast his vote on resolution through remote e-voting and is otherwise not barred from the voting shall be allowed to vote through e-voting system

(ii) Chairman to ensure that the facility of e-voting system is available for the purpose of conducting a poll during the meeting held through VC or OAVM.

(d) For Companies which are not required to provide e-voting facility

(i) The company to provide a designated email address to all members at the time of sending the Notice of meeting so that the members can convey their vote, when a poll is required to be taken during the meeting on any resolution, at such designated email address. The confidentiality of the password and other privacy issues associated with the designated email address shall be strictly maintained by the company at all times. Due safeguards with respect to authenticity of email address(es) and other details of the members shall also be taken by the company

(ii) During the meeting through VC or OAVM facility, where a poll on any item is required, in such case the members shall cast their vote on the resolutions only at such stage on items considered in the meeting by sending email to the designated email address circulated by the company through their email address(es) which are registered with the company. Such voting is not allowed to be sent by email in advance to the company before the meeting is actually held through VC or OAVM facility

(iii) The Chairman may decide to conduct a vote by show of hands if the members present in the meeting are less than fifty (50). If the demand for poll is made by any member in accordance with Section 109 of the Act then the procedure mentioned above in point (ii) shall be followed.

(iv) The meeting may be adjourned for the purpose of counting votes and be called later to declare the result.

21. Recording of the meeting

The entire proceedings of the meeting to be recorded and such recorded transcript shall
be maintained in the safe custody by the company. The public company to upload the
recorded transcript on the website of the company, if any.

22. Uploading the results of the meeting on website and to Stock Exchanges

The company which is providing e-voting facility, must declare the result along with the report of the Scrutineer and displayed on the website of the company, if any, and on the website of the agency immediately after the result is declared by the Chairman.

23. Filing of Resolutions with the Registrar of Companies, MCA in 60 days

Resolutions to be filed with the Registrar of Companies within 60 days of meeting, clearly indicating therein that the mechanism provided in these Circulars along with other provisions of the Act and Rules were duly complied with during such meeting.

D. Few note for attention

1. Company cannot pass resolution by conducting EGM as per these Circulars for any business in respect of which directors or auditors have a right to be heard at any meeting as provided in Section 110 of the Act and Rules.

2. Resolution proposed to be considered through voting by electronic means shall not be withdrawn.

3. Normally the facility for remote e-voting to remain open for not less than 3 (three) days and shall close at 5.00 p.m. on the date preceding the date of the EGM, however for the EGM to be conducted as per these Circulars by the company who are mandated or opted for providing remote e-voting facility, such facility to remain open till all the resolutions are considered and voted upon in the meeting and those members who have note exercised their right to vote through remote e-voting can vote during the meeting.

4. During the period when facility for remote e-voting is provided, the members of the company, holding shares either in physical form or in dematerialised form, as on the cut-off date, may opt for remote e-voting, provided that once the vote on a resolution is cast by the member, he shall not be allowed to change it subsequently or cast the vote again. Provided further that a member may participate in the EGM conducted as per these Circulars even after exercising his right to vote through remote e-voting but shall not be allowed to vote again in the meeting held through VC or OAVM.

5. The EGM conducted through VC or OAVM may be adjourned by the Chairman, for declaring the result of voting after remote e-voting or e-voting is over for each resolutions. The reason being that either a Scrutinizer is appointed (which is optional ) or where members participating are many and it may take time to receive emails for e-voting and take those on record.

6. All resolutions, Ordinary or Special, passed in EGM conducted as per these Circulars are required to be filed with Registrar of Companies. These may be to ensure by the regulator about the urgency and unavoidable circumstances for conducting such EGM.

7. In 2nd Circular, only by altering clause IX in Para 3 Part A, the voting by show of hand was deleted but the same is not altered in clause VII and VIII of Para 3 Part A. Hence, the same must be ignored and understood that voting for companies which are mandated or opted for remote e-voting would not allow voting by show of hands in the EGM conducted through VC or OAVM.

We must welcome the approach of MCA in trying to help the corporate to conduct EGM of its members in such circumstances, which is unprecedented by anybody and no one can assess the spell further.

However, our general opinion remains that unless its Unavoidable, the company must avoid to conduct EGM as per these Circulars. Many members may not be in position to even provide their Email in spite of their efforts, due to constrain prevailing under the current circumstances and secondly proxies are also not allowed, therefore there remain a challenge of any kind of dispute for such resolutions passed in EGM through VC or OAVM as per these Circulars.

Disclaimer*This brief article is not intended for solicitation or advertising This is of a general nature for knowledge sharing only. This should not be construed as our legal opinion. The views expressed are my personal based on the reading of these Circulars issued by MCA.

Author Bio

Qualification: CS
Company: Amita Desai & Co
Location: Mumbai, Maharashtra, IN
Member Since: 04 May 2017 | Total Posts: 27
Amita Desai is a Fellow Company Secretary and Insolvency professional in practice since 1995 Her expertise lies in following .She can be reached at amita@amitadesai.com 1. Business and Legal Advisory on Corporate Law 2. Foreign Exchange Management Act 3. Drafting and Appearance before Tribunal View Full Profile

My Published Posts

2 Comments

  1. sneha says:

    if you can share formats of cobening EGM via VC, like Notice, & Note which goes along with Notice of EGM , it would be of great help.

    1. Amita Desai says:

      Please read pt 3 in Para D- Few note for attention to be read as follow:

      3. The facility for remote e-voting to remain open for not less than 3 (three) days and shall close at 5.00 p.m. on the date preceding the date of the EGM. For the EGM to be conducted as per these Circulars by the company who are mandated or opted for providing remote e-voting facility, remote –e voting facility will be closed as per Rule for e-voting. Further , e-Voting by email will be open during the course of EGM till all the resolutions are considered and voted upon in the meeting and those members who have not exercised their right to vote through remote e-voting can vote during the meeting by way of e-voting (voting by sending Emails to designated email ID provided by the company in Notice). Such email cannot be sent in advance to the company

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