A Guide to Annual General Meeting

An AGM or an Annual General Meeting is a meeting between the shareholders and the Board of Directors. The board of directors and the shareholders generally meet at an AGM to discuss important matters of the company and its business. The directors present an annual report at the AGM to update the shareholders about the company’s performance, financial position, management, future strategy, and past yearly accomplishments. The Indian Companies Act 2013 makes it mandatory for Private limited and limited companies to hold an AGM to keep the shareholders updated.

AGM allows shareholders to discuss matters of mutual interest.

Appointment of Auditors – Maintaining transparency in the appointment of auditors is a good business practice. Reputed companies often ensure that their auditors are top-notch and keep their appointments transparent.
Composition of Board of Directors – The representatives chosen by the shareholders interact with the Board of Directors. In case of any grievances, they may demand a change in the composition of the Board of Directors.
Compensation to the management – Shareholders having voting rights can also discuss the compensation that the top management, like the CEO, CFO, COO, and others, are receiving. They can demand a reduction or increase in compensation depending on the company’s performance.
Dividend Payouts – The shareholders and company directors are required to agree on the dividend to be paid during the FY. If the company is making a profit, it can choose to pay dividends. However, in the case of a loss-making company, it is not necessary to pay the dividend.

Companies Required to Hold an AGM

All companies except One Person Company (OPC) should hold an AGM after the end of each financial year. A company must hold its AGM within a period of six months from the end of the financial year, i.e. within 30 September every year. Do note that the time gap between two annual general meetings should not exceed 15 months.

However, in the case of a first annual general meeting, the company can hold the AGM within nine months from the end of the first financial year. In such cases where the first AGM is already held, there is no need to hold any AGM in the year of incorporation.

What are the Objectives of an Annual General Meeting (AGM)?

Shareholder Engagement: AGMs provide shareholders with an opportunity to participate in the company’s decision-making process. Shareholders can ask questions, raise concerns, and vote on key matters such as electing board members, approving financial statements, and considering proposals for future actions. This direct engagement fosters a stronger relationship between the company and its shareholders.
Decision Making – AGMs play a crucial role in shaping the company’s future. Shareholders vote on key matters, including appointing auditors, declaring dividends, and electing directors. These decisions influence the company’s direction and contribute to its long-term success.
Financial Reporting – The AGM provides an opportunity for the company’s leadership to present a comprehensive review of the past year’s financial performance, including income statements, balance sheets, and cash flow statements. This helps shareholders evaluate the company’s financial health and make informed decisions.
Corporate Governance – An AGM is essential for maintaining good corporate governance. It enables shareholders to hold the board of directors accountable for their decisions and actions. Through the election of directors and approval of key proposals, shareholders can shape the company’s strategic direction and safeguard their investments.

Procedure for Conducting Annual General Meeting

Before the Meeting

Convene a board meeting after giving notice as soon as the financial statements are ready.
Discuss the report of the audit committee on the annual accounts.
Validate the draft of the board’s report in compliance with the provisions of Section 134 of the Companies Act, and authorise the chairman to sign the report on behalf of the board.
Consider the payment of dividend if it is to be declared in the annual general meeting.
Fix place, date and time for the annual general meeting and approve the draft notice. Also, authorise the secretary to issue the notice for the meeting.
To consider the closure of the members in the register and share transfer books of the company.
In the case of listed companies, a notice should be sent to the stock exchange within seven working days about the dates proposed for such closure.
If the directors decide for the publication in a newspaper should be arranged seven days before from the notice of closure of the register of members and the share transfer books.
To arrange for the printing of a notice of the general meeting, ensure the notice containing the following contents:

- Time, date and place of the meeting
- Matters to be transacted in the meeting
- Procedure of e-voting, if any
- Proxy form
- Explanatory statement
- Route Map

At the Meeting

As per the secretarial standard, arrange for the sitting arrangement to enable the directors and the company secretary to be seated by the chairman.
Arrange for the collection of admission slip to get the attendance register signed by the shareholders and make them comfortable in their seating.

Appointment of the Chairman

Ensure the chairman should be present within 15 minutes from the beginning of the meeting at the venue.
In case of absence of the chairman, ensure the directors present at the meeting elect among themselves as the chairman of the meeting.
Read the notice of the meeting and auditor report, if advised by the chairman.
Produce a copy of Memorandum and Articles of Association (AOA) of the company.
Supply to the chairman if any information required by the shareholders relating to accounts and other connected matters.
Ensure the chairman of the audit committee is present at the annual general meeting to give any clarifications related to audit and shareholders queries.

After the Meeting

Prepare minutes of the proceedings and record the minutes of the meeting and the same has to be signed by the chairman within 30 days from the meeting.
Send an intimation of appointment of directors by filing form DIR-12 with the registrar of companies within 30 days from the appointment along with the applicable fee.
File copies of special and other resolution along with the form MGT-14 within 30 days of the meeting to the registrar of companies.
File profit and loss account and balance sheet reports of the directors and the auditors and notice of the meeting in form AOC-4 with 30 days from the meeting.
To deposit the dividend distribution tax at the applicable rate within the specified time limit under the income tax act.
The copy of the balance sheet to be forwarded to the RBI, where the company has invited public deposits.
Open a separate bank account as “Dividend Account” and deposit the total amount of dividend within five days from the authorised persons.
Dividend warrants and a notice of dividend to be signed by the authorised persons.
File annual return in form MGT-7 with the registrar of companies within 60 days of the meeting and the certificate of the company secretary should be in Form MGT-8 and ensure that the annual return is also signed by the company secretary.
In the case of listed companies, a report of the annual general meeting in form MGT-15 should be submitted to ROC within 30 days of the meeting.

What is the Agenda of an AGM?

The business transacted at an AGM typically includes:

Approval of the audited financial statements.
Review of the Director’s and auditor’s reports.
Declaration of dividends to shareholders.
Appointment of directors replacing those retiring.
Appointment of auditors and determination of their remuneration.

In addition to these ordinary matters, any other business can be classified as special business. Ordinary business is approved by an ordinary resolution, which requires a majority of votes in favor. Special business may require either an ordinary resolution or a special resolution, depending on legal requirements. A special resolution must be passed with at least 75% of votes in favor.

AGMs must be conducted during business hours, between 9 a.m. and 6 p.m., on any day except national holidays, including those declared by the Central Government. The meeting must be held at a location within the city, town, or village where the company’s registered office is located.

Exceptions:

A government company may hold its AGM at a location approved by the Central Government.
An unlisted company can hold its AGM anywhere in India with prior consent from its members, either in writing or electronically.
For a Section 8 company, the Board determines the date, time, and venue based on directions given in a general meeting.

Quorum for an AGM

For private companies, the quorum for an AGM is completed if two members are present at the meeting. However, in the case of a public company, the quorum will be as follows –

1000 members – 5 should be present at the meeting
1000-5000 members – 15 should be present at the meeting
More than 5000 members – 30 members should be present in the meeting

If the required quorum is not met within 30 minutes of the scheduled time, the meeting will be adjourned to the same time, day, and place in the following week.

Member’s Rights in an AGM

The company’s members, including shareholders, have the right to attend and vote at the AGM. Voting can be done through a physical ballot, postal ballot, or e-voting.

Members may appoint proxies to attend the AGM and vote on their behalf, but only for poll votes. Proxies must be appointed in writing, and the proxy form must be signed by the member. If the proxy is appointed by a corporate shareholder, the form must be signed and sealed by an authorized signatory of the corporation.

Members can elect one of their peers as the meeting’s chairman. However, if the company’s Articles of Association specify a chairman, that individual will preside over the AGM.

Minutes of an Annual General Meeting (AGM)

Every company must prepare minutes of the AGM, which are a written record of the meeting’s proceedings, including the events and resolutions passed.

The Company Secretary is responsible for recording the proceedings. If there is no Company Secretary, the Board or Chairman may designate another person to record the proceedings.

The minutes must be signed and entered into the minute book within 30 days of the AGM. The minute book should be kept at the company’s registered office or another location approved by the Board. Members or shareholders can inspect the minute book upon request, subject to a prescribed fee.

The company must provide a copy of the AGM minutes to any member within seven days of the request. If the minutes are not provided within this period, the company will be fined ₹25,000, and any officer in default will face a fine of ₹5,000.

FAQs

What are the Reasons for Seeking an Extension of AGM?

Mergers and acquisitions.
Delay in finalizing financial statements.
Delay in audit reports due to the unavailability of auditors, such as in cases of death, resignation, incapacity to sign, or other valid reasons.
Loss of information from a computer caused by viruses or system-related issues.
Non-readiness of economic records due to natural disasters, loss of commercial data, or vacant director positions.
Changes in the financial year.
The absence of a quorum is due to the unavailability of shareholders.
Unavailability of directors for valid reasons, such as the sudden death of a director, which causes the number of directors to fall below the minimum required.
Confiscation of books of accounts by the Income Tax department, Serious Fraud Investigation Office, or other government authorities.

Penalty for Default in Holding an AGM?

If a company fails to hold an AGM within the required time or any extended period granted, the Tribunal may order the company to conduct the AGM, either on its own or upon an application made by a director or member.

If the company further defaults in holding the AGM as per the Tribunal’s directions, both the company and any officer responsible for the default may be fined up to ₹1 lakh. For continuing defaults, an additional fine of ₹5,000 per day will be imposed for each day the default persists.

The Annual General Meeting (AGM) plays a crucial role in fostering transparency and communication between a company’s management and its shareholders. It provides an opportunity for shareholders to stay informed, voice concerns, and influence key decisions that shape the company’s future. Adhering to the legal requirements and procedures ensures smooth and effective AGMs, which contribute to good governance and the overall success of the company.

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