Following the onset of Covid 19 and the consequent nationwide Lockdown, which still continues in certain parts albeit with relaxations- the most crucial thought in the mind of professionals was how to hold physical meetings and manage the compliance deadlines.
Sensing the practical difficulties being faced by the companies and individuals, the Government proactively, came out with various circulars granting relaxations in terms of extension of due dates of various tax and other filings, extension of time limit for payment of taxes, granting moratorium for loans, making available Covid 19 Loan to eligible companies, extension of collateral free loans to specified companies/individuals and several such other measures. This article aims to discuss in detail one such important relaxation dealing with convening of General Meetings through VC/OAVM.
Prior to Covid 19, holding physical Board meetings and Shareholders’ meetings, were the norm. A situation which restricts physical movement and makes it impractical to conduct a physical meeting was unthought of, hence, the Companies Act did not provide for convening General meetings through Video Conferencing (VC). The pandemic necessitated that the Regulator prescribe some mechanism to hold general meetings through VC to maintain the continuity of business and compliance requirement. The Ministry of Corporate Affairs (MCA) came out with the General circular 14/2020 dated 8th April 2020, which was a much needed panacea. The circular encouraged the companies to pass all urgent matters which were not of “ordinary business or where any person has the right of being heard” through postal ballot/E-voting as provided by the Law.
“Ordinary business” covers consideration of financial statements, Board’s report, Auditors Report, Declaration of Dividend, appointment of Director in place of those retiring, appointment and fixing of remuneration of Auditors. Removal of Directors is one matter “where the person has the right of being heard.”
The circular clarified that where holding of Extra ordinary general meeting (EGM) is unavoidable, the procedure as mentioned in the Circular shall be followed for EGMs held before 30th June 2020.
The process for holding & voting at these EGMs is divided into two segments- a) companies required to provide evoting services and b) others.
- Recoded Transcript of the meeting shall be in safe custody& in case of public company be uploaded on the website of the Company- No time line provided for upload.
- Convenience of difference persons in different time zones shall be considered in fixing the time of the meeting.
- Two way teleconferencing or webex is required, minimum 1000 members to be allowed on first come first serve basis excluding shareholders holding 2% or more, Chairperson of Audit committee & other committees, KMPs, Promoters, Directors,
- Shareholders should be allowed to join 15 minutes before the meeting and 15 minutes after the scheduled time of the meeting
- Evoting prior to the meeting and during the meeting for those who have not voted earlier, however, shareholders will not be allowed to change the voting.
- Members present through VC will be counted for quorum, the facility for appointment of proxy is dispensed with since meeting is through VC or OAVM.
- In absence of any provision in the Articles for appointment of Chairman, for over 50 members present –Chairman can be elected by show of hands, in other cases Chairman shall be elected by poll conducted through E voting.
- Evoting- There was some anomaly in the process of Evoting as prescribed in the Circular, therefore a clarification circular no 17 dated 13th April 2020 was issued by MCA clarifying that Evoting facility shall be made available during the meeting too.
- Notice of the meeting– It shall specify that the meeting is being called in compliance with these Circulars through VC or OAVM, helpline number to be provided to help the shareholders in participation and voting at the meeting, notice be placed on the website of the Company and intimated to stock exchanges where the company is listed.
- Clarification was provided in circular no 17 dated 13th April 2020 for the manner of issue of notice to registered email ids and publishing newspaper advertisement for wider reach & requesting physical shareholders to register their emails. In case notice for General meeting has already been issued prior to the issue of this Circular, the mechanism provided in this circular may be followed provided shorter notice consent from the Members is obtained and fresh notice is issued adhering to the norms prescribed in this Circular.
- All resolutions passed in accordance with this circular shall be filed with Registrar of Companies (RoC) within 60 days.
Companies not required to provide E-voting:
- Minimum 500 members be allowed to attend the meeting on first come first serve basis.
- Designated email address to be provided in Notice so that shareholders can send their vote on the said email in case poll is demanded. Confidentiality of the designated email address and email address & other details of the shareholders should be ensured.
- Where less than 50 members are present, show of hands shall be conducted by the Chairman and in case poll is demanded, the emails for voting shall be sent to the Designated email address during the meeting. In case results cannot be declared immediately, meeting shall be adjourned to declare the result.
- With regards to dissemination of information to the shareholders regarding convening of the general meeting, clarification is provided in circular no 17 that company shall contact each shareholder whose email id is not registered with Company before sending the Notice and in case the shareholder cannot be contacted, it shall publish the newspaper advertisement at least 3 days before issuing the notice mentioning the email address and phone number for registration of email id for receiving the notice and participating in the meeting.
- All the other activities/compliance as mentioned above for companies providing mandatory E voting apply mutatis mutandis.
All other general compliances of the Act like inspection of registers and others shall be done through electronic mode.
While the above two circulars covered postal ballot and EGMs, a third MCA circular no 20 dated 5th May 2020 was issued which covered the convening of Annual General Meeting through VC or OAVM during 2020,
Specific instructions as per the above circular are as under:
Other than items of “ordinary business”, only items which were considered “unavoidable” may be considered to be passed through VC or OAVM. Though “Unavoidable” is not defined, a reasonable interpretation can be that any items which would have an impact on the operations of the Company or those matters which cannot be delayed till the next AGM to be held in calendar year 2021 may be considered “Unavoidable”.
Companies required to provide E-voting:
- Physical dispatch of Annual report is dispensed with and only those shareholders whose email ids are registered be sent the copy of the Annual report.
- Newspaper advertisement to be made for the Notice mentioning the details as per the earlier circulars in addition to the manner in which shareholders can provide their mandate to receive the dividends. In case dividend cannot be paid through electronic mode, the Company may later on normalization dispatch the dividend warrant.
- In case the Company has received permission from the competent authorities to hold the physical AGM, it shall in addition provide VC or OAVM facility for other shareholders to participate.
Companies not required to provide E-voting:
- AGM can be hold through VC or OAVM provided shareholders not less than one half of its Members & having not less than 75%percent voting power have their email ids registered with the Company.
- Physical dispatch of Annual report is dispensed with and only those shareholders whose email ids are registered be sent the copy of the Annual report.In case dividend cannot be paid through electronic mode, the Company may later, on normalization of Covid 19 situation, dispatch the dividend warrant.
Additionally, this circular also provided for companies to apply for extension of AGM at appropriate time in case they are unable to hold the AGMs as per the above framework.
As per circular no 28 dated 17th August 2020, application for extension of AGM upto three months as allowed by the Companies Act 2013, may be made by Companies through filing of E form GNL 1 with the jurisdictional ROC on or before 29th September 2020 and the RoC was directed to view all these extension applications liberally.
Going by the spread of Covid 19 till date and restricted physical movement, it is palpable that most companies would be availing of extension and convening AGMs through VC or OAVM this year. In the long term, many of the companies would realize that holding AGMs through VC, is more convenient and cost effective, and encourages wider participation of the stakeholders. Hence, while for this year, holding virtual meetings and AGMs is more of a necessity, we would see that many companies would voluntarily adopt this practice even for future meetings also.