Introduction

The Ministry of Corporate Affairs (‘MCA’) vide its general circular no. 14/2020 dated April 8, 2020 has clarified that in case of holding of Extra-ordinary General Meetings (‘EGMs’) is considered as un-avoidable by any company, then the company can hold EGM for transacting the urgent business through Video Conference (‘VC’) or other audio visual means (‘OAVM’) and pass ordinary or special resolution, as the case may be.

Presently, the Companies Act, 2013(“Act”) does not contain any specific provisions regarding conducting the members’ meeting through VC or OAVM. In other words, the members of the companies are required to be physically present at such meeting.

Section 108 of the Act requires listed companies (having equity listed on recognized stock exchange) and companies having 1,000 or more members to mandatorily provide e-voting facility to its members. On the other hand, section 110 of the Act allows companies to pass resolutions (except items relating to ordinary business and any business in respect of which directors or auditors have a right to be heard at any meeting) through postal ballot which also includes electronic ballot and electronic voting.

Considering the current scenario of pandemic caused by COVID-19, MCA issued circular for providing relaxation to the companies by allowing them to hold EGMs through VC or OAVM, complemented with e-voting facility or simplified voting through registered e-mails. In continuation of the above referred general circular no. 14/2020, MCA issued another circular i.e. general circular no. 17/2020 dated April 13, 2020 to provide greater clarification on the various issues faced by the stakeholders which were not addressed in earlier circular.

Procedure for convening EGM via VC or OAVM

While prescribing the procedure in the above referred circulars, the MCA divided the companies into two categories:-

I. Companies which are required to provide e-voting facility to members under the Act or any other company which has opted for such facility;

II. Companies which are not required to provide e-voting facility to members.

I. Procedure for the companies which are required to provide e-voting facility to members under the Act or any other company which has opted for such facility

Note: – Listed companies(having equity listed on recognized stock exchange) and the companies having 1,000 or more members are mandatorily required to provide e-voting facility to its members. In case, any company other than aforementioned companies opt for such facility, then it will have to follow the procedure as applicable in case of e-voting.

Additional matters to be stated in public notice > Rule 20(4)(v) of the Companies (Management and Administration) Rules, 2014 requires a company to give advertisement in respect to general meeting at least 21 days before such meeting.It also provides the matters which are to be stated in the aforesaid advertisement. Apart from such matters, the circular requires the company to state the following matters  as well in the advertisement–

a. Statement that EGM has been conducted through VC or OAVM is in compliance with applicable provisions of Act read with general circular no. 14/2020 dated 08/04/2020 and general circular no. 17/2020 dated 13/04/2020;

b. Date and time of EGM through VC or OAVM;

c. Availability of notice of  EGM on website of the Company and Stock Exchange;

d. The manner in which members who are holding shares in physical form or who have not registered their e-mail id with the company can cast their vote through e-voting or remote voting system during meeting;

e. The manner in which members who have not registered their e-mail addresses with company can get the same registered;

f. Any other detail considered necessary by the Company.

Voting by members > Companies can conduct EGM through VC or OAVM and e-voting.

> Before the actual date of the meeting, the facility of remote e-voting shall be provided in accordance with the Act.

> During the meeting voting is to be conducted through e-voting system.

[Note: – Only those members who are present in meeting through VC or OAVM and have not casted their vote through remote e-voting are allowed to vote at meeting. The Company cannot do away with holding of meeting even in case facility of remote e-voting has been provided before the meeting.]

Appointment of Chairman > Except where Articles of Association of the Company provides for any specific person to be appointed as Chairman, the Chairman shall be appointed in following manner-

  • In case less than 50 members present at the meeting – Chairman to be appointed as per Section 104 of the Act;
  • Where 50 or more number of members are present at the meeting – Chairperson shall be appointed by poll conducted through e-voting system.

II. Procedure for the Companies which are not required to provide e-voting facility to members  –

Intimation about meeting to members who have not registered e-mail id with company > In order to make all members aware about the general meeting being held through VC or OAVM, the company shall take the following steps-

a) Contact all such members whose e-mail addresses are not registered with the company over telephone or any other mode of communication for registering their e-mail addresses before sending notice.

b) Where contact details of any member is not available or could not be obtained, public notice by way of advertisement shall be published in following newspapers having wide circulation in district where registered office of the company is situated and such newspapers shall preferably have electronic editions –

i) Vernacular newspaper in vernacular language circulating in district where registered office of the Company is located; and

ii) English newspaper in English language.

In such public notice, the company shall mention the following information-

a) The company intends to convene a general meeting via VC or OAVM and proposes to send notices to all members by e-mail after, at least, 3 days from date of publication of notice.

b) Details of e-mail address along with telephone number on which members may contact for getting their e-mail addresses registered for participation and voting in the general meeting.

Voting by members > Simplified mechanism for voting through registered e-mails has been put in place.

> Depending on the number of members present in the meeting, the voting shall be conducted in the following manner-

  • In case less than 50 members are present at the meeting – Chairman may decide to conduct vote by show of hands unless the poll is demanded.
  • Where 50 or more number of members are present at the meeting – voting shall be conducted by poll.

> Company is required to provide a designated e-mail address to all the members at the time of sending notice so that members can convey their vote, when poll is required to be taken during meeting on any resolution, at such designated e-mail address.

> In case where poll is demanded during the meeting, the members can cast vote on resolutions by sending e-mails through their registered e-mail addresses to the designated e-mail address.

[Note: -MCA clarified that poll will take place during the meeting and the members may convey their assent or dissent only at such stage on items being considered in the meeting by sending e-mails at designated e-mail address.]

> The confidentiality of the password and other privacy issues associated with the designated e-mail address shall be strictly maintained by the company at all times.

Appointment of Chairman > Except where Articles of Association of the Company provides for any specific person to be appointed as Chairman, the Chairman shall be appointed in following manner-

  • In case less than 50 members present at the meeting – Chairman to be appointed as per Section 104 of the Act;
  • Where 50 or more number of members are present at the meeting – Chairperson shall be appointed by poll through e-mail.
Adjournment of meeting > In case the counting of votes requires time, the said meeting may be adjourned and called later to declare the result.

III. Common procedure for companies covered under category I and II above

In addition to above, the following common procedure is required to be followed by both the companies i.e.- i) companies covered under category I which are required to provide e-voting facility to members in accordance with Act as well as ii) the companies covered under category II which are not required to provide the e-voting facility-

Notice of General Meeting >  Notices to members may be given only through e-mails registered with the Company or depository participant/ depository.

>  Notice of the meeting shall disclose the manner in which framework of the meeting as provided in the circulars will be available to the members, instruction on how to access and participate in the meeting, helpline number (through registrar and transfer agent, technology provider or otherwise) for the shareholders who may require any assistance for using the technology.

> A copy of notice shall also be displayed prominently on website of the company and intimation be made to stock exchanges in case of listed companies.

> In case notice has been served prior to date of circular (i.e. April 8, 2020), the mechanism as provided in circular may be adopted for the meeting, by sending a fresh notice of shorter duration with due disclosures in consonance with the circular subject to receipt of shorter consent in accordance with Section 101(1) of the Act.

Safe custody of transcript of EGM and posting on website > Recorded transcript of EGM to be kept in safe custody of the company. In case of the public company, it shall also be made available on website (if any) of the company.

[Note: – The time period for preserving the recorded transcript is not provided. As a good corporate practice, the same may be preserved as long as possible.]

Considering time zone of different locations of different persons > Convenience of different persons positioned in different time zones shall be kept in mind before scheduling the meeting.

[Note: -In case the company is having foreign shareholders for instance joint venture companies, then while scheduling the meetingthe company shall consider the time zones of different shareholders who are present in different countries.]

Conduct of meeting > Meeting shall allow two way teleconferencing or WebEx for convenience of participation of members.

> The participants be allowed to pose questions concurrently or given time to submit questions in advance on the e-mail address of the company.

> The facility of VC or OAVM shall have capacity to allow following number of members to participate on first-come-first-served basis-

  • At least 1000 members in case of companies covered under category I above;
  • 500 members or total number of actual members of the company (whichever is lower) in case of companies covered under category II.

However, such restriction of first-come-first-served basis may not be made applicable to –

i) Large shareholders (holding 2% or more shareholding),

ii) Promoters,

iii) Institutional investors,

iv) Directors,

v) Key Managerial Personnel,

vi) Chairpersons of Audit committee, Nomination and Remuneration committee and Stakeholders Relationship Committee,

vii) Auditors etc.

>  Facility for joining meeting shall open at least 15 minutes before meeting and shall continue till 15 minutes after the scheduled time of meeting.

Members participating via VC or OAVM to be counted inquorum >  Members attending EGM via VC or OAVM shall be counted for the purpose of quorum.
Proxy >  Facility for appointment of proxy will not be available for such meetings. However, representatives of members can be appointed in pursuant to Section 112 or 113 (representative of body corporate members) of the Act.
Mandatory attendees > At least 1 independent director and auditor or his authorized representative, who is qualified to be auditor shall attend the EGM.

> Institutional Investors (where they are the members of company) shall be encouraged to attend and vote at the meeting.

Filing of resolutions with Registrar of Companies > The Company shall also file all the resolutions which have been passed using the mechanism as laid under the circular with the Registrar of Companies within 60 days of the meeting while indicating that the mechanism as laid under the circular and other provisions of the Act and rules have been duly complied with.

Applicability of Secretarial Standards

The Institute of Company Secretaries of India (“ICSI”)has clarified that any relaxation provided by the MCA from the compliance of the provisions of Board and General Meetings will automatically and consequentially apply to Secretarial Standards, as the case may be. Accordingly, the relaxed provisions of the Act will prevail to the extent possible. TheICSI has also issued a detailed guidance on the same.

Conclusion

 The MCA is fully cognizant of the difficulties faced by companies on account of ongoing lockdown and social distancing due to COVID 19. MCA has been working very pro-actively and issuing bringing various relaxations for addressing the issues being faced by the stakeholders. The relief for allowing companies to conduct EGM through VC or OAVM is another welcome step by MCA. Amid the current pandemic situation, this relief is available only till June 30, 2020. With social distancing to become new normal in the years to come, the MCA going forward should consider extending the benefit to hold EGMs through VC or OAVM under the normal circumstances as wellby incorporating relevant provisions under the Act. This will also enable ease of doing business.

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Qualification: CS
Company: Kapil Sapra & Associates
Location: Delhi, New Delhi, IN
Member Since: 24 Apr 2020 | Total Posts: 2

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