AGM full form, stands for Annual General Meeting and is a crucial company compliance event designed to facilitate communication between a company’s management and its shareholders. The Companies Act of 2013 mandates the convening of an AGM to deliberate on matters such as annual financial results, the appointment of auditors, and other relevant issues. In accordance with the Companies Act of 2013, a company must adhere to the prescribed procedures for conducting the AGM.
The Companies Act, 2013 is a comprehensive legislation that regulates the functioning of companies in India. One of the significant requirements of the Act is conducting an Annual General Meeting (AGM) by companies. The Annual General Meeting (AGM) is an important event for every company as it provides an opportunity for the shareholders to interact with the management and get an update on the company’s performance. The Companies Act, 2013 (the Act) mandates every company to hold an AGM every year within six months from the end of the financial year.
Meaning of the Annual General Meeting (AGM)
n Annual General Meeting, in Company Law, is an interaction between a company’s shareholders and directors. During this meeting, shareholders with voting rights have the Authority to propose and vote on motions.
- Legal Requirement: The AGM is mandated by law, and all companies must hold it yearly.
- Shareholder Participation: It encourages shareholders to participate in the company’s affairs actively.
- Financial Check: Shareholders review and approve the company’s financial statements to ensure accuracy.
- Auditors and Directors: Decisions about auditors and directors are made during the AGM.
- Compensation and Dividends: Compensation for officers and dividend payments are discussed and approved.
- Open Discussion: Shareholders can also raise any other concerns or issues.
Importance of Annual General Meeting
The AGM is an essential corporate event as it provides an opportunity for shareholders to meet the company’s management, ask questions, and clarify doubts regarding the company’s performance and future plans. It also allows shareholders to vote on critical matters, such as the Appointment of Directors, approval of the company’s financial statements, and the declaration of dividends. The AGM ensures transparency and accountability in the functioning of a company, and it is an effective way to strengthen the relationship between the company and its shareholders.
The AGM is an important event in the life of a company for various reasons:
- Transparent communication: The AGM provides an opportunity for the management to transparently communicate with shareholders about the company’s financial performance, future plans, and any other pertinent information.
- Accountability: The AGM enables shareholders to hold the management accountable for its actions and decisions.
- Democracy: The AGM upholds the democratic principles of a company by giving shareholders the right to vote on key issues and resolutions.
- Compliance: Conducting an Annual General Meeting as per Companies Act is mandatory, and failure to do so can result in legal consequences.
Mandatory provisions related to Annual General Meeting
- Notice of Meeting: The company must issue a notice of the AGM to all its members at least 21 days before the meeting. The notice must include the date, time, and venue of the meeting, along with the agenda.
- Quorum: The quorum for an AGM should be either five members or 1/3rd of the total members, whichever is lower. If the quorum is not present, the meeting will stand adjourned.
- Business to be Transacted: The business to be transacted at the AGM includes the approval of the annual financial statements, the appointment of auditors, and the declaration of dividends.
- Voting: Shareholders can vote either by show of hands or by a poll. In case of a poll, the voting can be done through electronic means also.
- Timing: An AGM must be held within six months from the end of the financial year. However, the Registrar of Companies (ROC) can grant an extension of up to three months.
- Agenda: The agenda of the AGM must include matters such as the approval of the annual report, declaration of dividends, appointment or reappointment of directors, and any other business that requires shareholder approval.
Companies Required to Hold an AGM
Except for One-Person Companies (OPCs), every company must have an AGM at the conclusion of each fiscal year. The AGM must be held within six months of the conclusion of the fiscal year.
In the event of the first general meeting of the year, however, the company may have an AGM within nine months after the conclusion of the first fiscal year. There is no requirement to convene an AGM in the year of establishment if the first AGM has already been held. It is critical to remember that the time interval between the two annual general meetings should not exceed 15 months.
The procedure for holding an Annual General Meeting
The company must give a clear 21 days’ notice to its members for calling the AGM. The notice should mention the place, the date and day of the meeting, and the hour at which the meeting is scheduled. The notice should also mention the business to be conducted at the AGM. A company should send the notice of the AGM to:
- All members of the company including their legal representative of a deceased member and assignee of an insolvent member.
- The statutory auditor(s) of the company.
- All director(s) of the company.
The notice may be given in writing through speed post or registered post or via electronic mode. The notice should be sent to the address of the member as per the records of the company.
In the case of electronic communication, the notice should be sent to the e-mail address of the member as per the records of the company. The notice can be text typed in an email or an attachment to an email. The notice of the AGM should be placed on the website of the company or any other website as may be mentioned by the government.
An AGM can be called at a notice period shorter than 21 days if at least 95% of the members entitled to vote in the meeting agree to the shorter notice. The consent may be given in writing or through electronic mode.
What is the Agenda of an AGM?
The matters discussed or business transacted in an AGM consists of:
- Consideration and adoption of the audited financial statements.
- Consideration of the Director’s report and auditor’s report.
- Dividend declaration to shareholders.
- Appointment of directors to replace the retiring directors.
- Appointment of auditors and deciding the auditor’s remuneration.
- Apart from the above ordinary business, any other business may be conducted as a special business of the company.
The ordinary business of the company will be passed by an ordinary resolution where the votes cast in favour are more than the votes cast against the resolution.
However, in case of special business transactions, the resolution may be passed as an ordinary resolution or a special resolution, depending on the applicable legal provisions. A special resolution requires at least 75% votes in favour of the resolution.
An AGM should be conducted during the business hours between 9 a.m. and 6 p.m. only. The meeting can be conducted on any day, which is not a national holiday, including holidays declared by the Central Government. The meeting can be held at any place which is within the limits of the city or town or village in which the registered office is situated.
A government company can also hold its AGM at any other place as the Central Government may approve. An unlisted company can hold an AGM at any place in India after obtaining consent from its members in writing or in electronic mode. In the case of a Section 8 company, the Board decides the date, time and place of the AGM as per the directions given in a general meeting of the company.
Minutes of the Annual General Meeting
Minutes are an official written record, either physical or electronic, of a meeting’s proceedings. A Minutes Book is a book that is kept in either electronic or physical form to record Minutes.
Each company is required to prepare the minutes of the AGM. The minutes of the AGM are a written record of the proceedings of the previous meeting and the resolutions made at the AGM. The AGM proceedings shall be recorded by the Company Secretary or any other person legally authorized by the Board or Chairman. Within 30 days of the AGM, minutes must be begun, signed, and placed into the minutes register. The Minutes Book will be stored at the Company Registration Office or another location designated by the Board of Directors. If the company’s board requests it, any member/shareholder of the company may see the AGM Minute Book for a charge.
Consequences and Penalty for Default in Holding an AGM
In case a company fails to hold an AGM within the stipulated time or extension obtained by it, the Tribunal may itself or on an application made by any director or member order an AGM to be conducted as per its directions.
If the company further defaults in holding a meeting in accordance with the directions of the Tribunal, the company and every officer of the company who commits the default shall be punishable with a fine of up to Rs 1 lakh. In case of continuing default, a fine of Rs 5,000 per day is levied for each day during which the default continues.
Special Procedure For The Year 2020
Update as of 5th May 2020: Companies are allowed to hold Annual General Meeting via Video Conferencing (VC) or Other Audio-Visual Means (OAVM) in the year 2020. The procedure is as given below:
| Points | With E-voting |
| Content of Notice | The notice must include the framework laid down by the circular. As per General Circular no 17/2020 dated 13th April 2020, the following matters must also be stated while publishing the notice as per 20(4)(v) of the rules – 1) A statement that the EGM has been convened as per the Act and provisions of the General circular no 14/2020. 2) The date and time of the EGM through VC or OAVM. 3) Availability of the notice of the meeting on the website and stock exchange. 4) Details of how members not having registered email address can vote using remote e-voting or e-voting during the meeting. 5) The manner in which the email addresses of members can be registered. 6) The manner in which the members holding physical shares and not registered their email addresses can cast their vote through remote e-voting or through the e-voting system during the meeting. 7) The manner in which the members can opt to receive dividends directly into their bank accounts via ECS or any other means, 8) Any other detail that needs to be conveyed. |
| Mode of issuing Notice | In the current circumstances, the notices can be sent via e-mails registered with the company or depository participants. Before sending out notices together with the financial statements, company must publish atleast once in a vernacular newspaper in the district in which the registered office of the company is situated and one english newspaper also preferably having electronic editions. |
| Access to Auditor’s Report | Due to the difficulty in sending out physical copy of the financial statements (including Board’s report, Auditor’s report, or other documents), these can be sent out via e-mail to the members, trustees and the persons entitled. |
| Dividend dispatch measures | The companies can make adequate arrangements to allow the mermbers to give their mandate for receiving dividends directly in their bank accounts through the ECS or any other means. For shareholders not have not shared bank accounts details may receive the dividend warrant/cheque by post. |
| Matters considered in the AGM | Only the items of special business, considered to be unavoidable by the Board, may be transacted, apart form ordinary business. |
| Mode of conducting a meeting | The meeting must be conducted through Video Conferencing or other audio-visual means (OAVM). |
| Place of conducting AGM | At any other place in the district where the registered office of the company is located taking cautionary steps as stipulated. It can also hold meeting virtually with some members physically present and providing the facility of VC or OAVM, for allowing other members of the company to participate in such meeting. |
| Quorum of the AGM | All the members physically present in the meeting and those attending the meeting through the.facility of VC or OAVM shall be taken together for arriving at the quorum under section 103 of the Act. |
| How is voting done? | All resolutions will continue to be passed via the facility of e-voting system. |
The provisions for conducting AGM through VCs or OAVM have been extended till 30 September 2024.
FAQs
How many AGMs must be conducted in a year?
A company other than OPC must conduct at least one Annual General Meeting (AGM) in a financial year. The first AGM of the company, i.e. a newly incorporated company, should be held within nine months from the closing of the first financial year. Hence, the company doesn’t need to hold an AGM in the year of its incorporation.
Which section of the Companies Act contains provisions relating to AGM?
Section 96 of the Companies Act 2013, comprises provisions relating to AGM.
Do AGM rules apply to a General Meeting?
There are many types of general meetings in a company, which are – Annual general meeting, Extra Ordinary general meeting, meetings of members, meetings of creditors or debenture holders. All rules that apply for a general meeting is provided from Section 101 to 112 of the Companies Act, 2013 and Rule 18 to 23 of The Companies (Management and Administration) Rules, 2014. The rules regarding the procedure to hold AGM, quorum, members’ rights and minutes of an AGM apply to all the general meetings of a company.
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