ANNUAL GENERAL MEETING (AGM): PROCEDURES & COMPLIANCES

This is Part 1 of a 2-part series blog that will cover the Procedures and Compliances as per the Companies Act,2013, and related laws surrounding the Annual General Meeting (AGM) of a Company.

Introduction

Annual General Meeting or AGM is a yearly meeting of shareholders/members of the company. It is a legal mandate to conduct the AGM every year. There are many reasons for conducting an AGM; the directors of the company present an annual report containing information for shareholders about the company's performance and strategy, Shareholders with voting rights vote on current issues, such as appointments to the company's board of directors, executive compensation, dividend payments, and the selection of auditors, etc. Therefore, AGM carries immense importance for the proper and fluid functioning of the company, furthermore, it is in the interest of the shareholders and directors to conduct annual general meetings and review and recalibrate the strategies of the company in relation to business and legal compliances. This article aims to identify and simplify the procedures and pre-conditions involved in an annual general meeting for a better understanding of Indian and foreign, shareholders and directors.

Conditions for AGM

  1. All companies except one person company (OPC) should hold an AGM after the end of each financial year. [Section 96(1)]
  2. A company must hold its AGM within a period of six months from the end of the financial year. However, In case of the first annual general meeting of the company, it shall not be necessary for the company to hold any annual general meeting in the year of its incorporation when the meeting is held within a period of nine months from the date of closure of the first financial year of the company. [Section 96(1)]

    Example:  If a company is incorporated on 01-01-2022, the first financial year should be closed on 31-03-2023 as provided in clause (41) of section 2. The annual general meeting in such case shall be required to be convened on or before 31-12-2023. The said meeting shall be treated as the annual general meeting for the years 2022 and 2023. However, if the company is incorporated on 31-12-2021, the first financial year shall be closed on 31-03-2022 and the annual general meeting shall be convened on or before 31-12-2022.
  3. The time gap between two annual general meetings should not exceed 15 months. [Section 96(1)]
  4. Every Annual General Meeting shall be called during business hours, that is, between 9 a.m. and 6 p.m. on any day that is not a National Holiday, at the Registered Office of the Company, or at some other place within the city, town, or village in which the Registered Office of the Company is situated. For an Unlisted company, it may be held at any place in India if consent is received from all the members in advance. [Section 96(2)]

Procedure for Conducting Annual General Meeting (AGM)

  1. Conduct a Board Meeting [Section 173 and Secretarial Standard on Board Meeting (SS-1)]

Conduct a Board Meeting to: - [Section 179]

  1. To fix the day, date, time and agenda for the Annual General Meeting.
  2. To approve the draft notice of Annual General Meeting along with explanatory statement.
  3. To authorize Company Secretary or any other officer to issue notice of Annual General Meeting to every member or to every person entitled to receive this notice.
  4. To appoint a scrutinizer for scrutinizing the voting process, if providing e-voting facility to the shareholders.
  1. Notice for Annual General Meeting

The Notice should be given either in writing or through electronic mode at least 21 days before the Meeting. [Section 101(1)]

In case of companies having a website, the Notice shall be hosted on the website. [1.2.3. of Secretarial Standard on General Meetings].

Contents of notice -

  1. Place where the meeting will be conducted [Clause 1.2.4 of Secretarial Standard on General Meetings].
  2. Date, day and time on which the meeting will be conducted [Clause 1.2.4 of Secretarial Standard on General Meetings].
  3. The business which will be discussed in the meeting - [Clause 1.2.5 of Secretarial Standard on General Meetings]
  4. The date on which notice is served
  5. Signature of the convener of the meeting
  1. Convene a General Meeting

Quorum should be present throughout the Meeting. Business should not transact when the Quorum is not present so. [Clause 3.1 of Secretarial Standard on General Meetings]. Presence of Chairperson must be required.

3.1. Financial Statement

At every annual general meeting, the Board of Directors of the company will lay the financial statements for the financial year. [Section 129 (2)]

3.2. Board's Report (Section 134)

The company has to attach to its financial statements laid before the shareholders in AGM, a report by its Board of Directors, including, but not limited to the following items: -

  1. Summary of financial results
  2. Brief on the operational performance of the company along with its subsidiary, associates and joint venture companies.
  3. Director's Responsibilities Statement.
  4. Explanations or comments by the Board on every qualification, reservation or adverse remark made by Statutory/Secretarial Auditor, If any.
  5. Amount recommended as dividend or transfer to reserves.
  6. Material changes and commitments, if any, affecting the financial position of the company.
  7. Particulars on related party transactions
  8. of meetings of the board
  9. Brief on corporate social responsibility
  10. Particulars of loans, guarantees or investments.
  11. Brief on the conservation of energy, technology absorption and foreign exchange earnings.
  12. Details of directors and key managerial personnel etc.

3.3. Statutory Auditor Report (Section 143)

An auditor shall make a report for the shareholders of the company on the accounts examined by him and on every aspect of financial statements prepared under the act to be put forth before the shareholders at the AGM.

3.4. Announcement of Result of e-voting [Section 108, Rule 20 of the Companies (Management and Administration) Rules, 2014 and Clause 8.6 of SS -2]

The Scrutinizer will submit a report on total votes casted in favour or against the resolution and the report shall be submitted to the Chairman or any person authorized by him, who shall declare the result. And this result shall be displayed for at least 3 days on the notice board of the Company at its Registered Office, Corporate Office and Head Office and shall be posted on the website of the Company.

3.5. Maintain the Minutes Book for Signing the minutes. [Section 118 and SS-2]

Every company shall cause minutes of the proceedings of every general meeting of any class of shareholders or creditors, and every resolution passed by postal ballot, to be prepared and signed and kept within thirty days of the conclusion of every such meeting concerned or passing of a resolution by postal ballot in books kept for that purpose with their pages consecutively numbered. [Section 118(1)]

Consequences of Not Conducting an Annual General Meeting

If a company fails to comply with provisions under Section 96 of the Companies Act, 2013 then the tribunal is empowered to order an Annual General Meeting under Section 97 and Section 98.

Moreover, if the Company or the authorized person fails to comply with Section 96 to Section 98 the tribunal (i.e. National Company Law Tribunal) is empowered to levy a fine extending to Rs. 1(one) lakh to the company and every officer who is in default. In case such default continues a further fine of Rs. 5000 per day can be charged during the period which the default continues.

Compliances after conducting an AGM

The following is a checklist of all the compliances that a company is supposed to perform post the AGM:

  1. An Annual Return with the Registrar in Form MGT-7 under 60 days of its AGM shall be filed. [Section 92]
  2. File the resolution passed with the explanatory statement annexed to the notice in Form MGT-14 with the ROC for special resolution and other resolutions passed under Section 117, within 30 days of passing such resolutions. [Section 117]
  3. Company shall ensure that the Minutes of Meetings (MoM) of its AGM are entered in minute book within 30 days of the conclusion of AGM. [Section 118]
  4. Company shall pay the dividend or dispatch the dividend warrants within 30 days from the date of declaration of such dividend. [Section 123]
  5. Prepare a statement containing the following details: [Section 124 r/w 125]
    1. name of the persons.
    2. last known addresses; and
    3. unpaid dividend to be paid to each such person within 90 days of transfer to Unpaid Dividend Account and display it on the website of the Company.

      In addition to the foregoing, any amount related to unpaid dividend accounts of companies required to be credited to the Investor Education Protection Fund by the companies as provided in section 125(2) of the Act shall be remitted online to the Authority along with a Statement in Form IEPF - 1 containing details of such transfer within 30 days of such amounts becoming due to be credited to the Fund. Furthermore, within 60 days following the AGM, the business must file Form IEPF - 2 with the Registrar, which contains information on unclaimed and underpaid payments.
  6. Company shall file the Audited Financial Statements along with the consolidated financial statement, if any, in Form AOC-4, AOC-4 CFS, or AOC-4 XBRL, as the case may be, with the Registrar within 30 days of AGM. [Section 137]
  7. Company shall submit the resolution of the Auditor's appointment if any with the Registrar in Form ADT-1 within 15 days of AGM. [Section 139]
  8. Company shall submit the resolution of Director's appointment if any, (except for Director retiring by rotation) with the Registrar in Form DIR-12 within 30 days of AGM. [Section 152]

There are other sectoral or conditional compliances to be performed post the AGM for it is recommended to consult a Lawyer or a Company Secretary.

Conclusion

AGM is one of the key tools which helps the shareholders to secure their interest in the company. If the firm has been underperforming, the AGM is when shareholders can challenge the board of directors and management about why. In addition, for all other purposes as mentioned above is equally significant to comply with and understand the procedures of AGM for any Indian or foreigner trying to do business in India. A Company Secretary is one of the most important persons for rightfully conducting the Annual General Meeting. Hence, all rules & statutes discussed herein should comply in consultation with an attorney or a certified Company Secretary.

Part 2 of this series will discuss the key issues, including but not limited to Disputes, Pitfalls, Commercial Intent, and interest of Shareholders in the Annual General Meeting as per the Companies Act, 2013 and related laws.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.