An Annual General Meeting (AGM) offers a platform for interaction between the company’s management and its shareholders. The Companies Act, 2013 mandates the holding of an AGM to discuss annual results, appoint auditors, and address other significant matters. To conduct the AGM, a company must follow the procedures set forth in the Companies Act, 2013. This Act specifies the conduct, timing, and content of AGMs, aiming to enhance corporate governance and accountability.
Key Provisions Regarding Annual General Meeting (AGMs):
Mandatory Nature of Annual General Meeting (AGMs):
The AGM is important because it gives shareholders detailed information about the company’s performance over the past year and allows them to exercise their rights. The Companies Act, 2013 ensures AGMs are run transparently and regularly, which helps build trust and accountability. It’s also a chance for the management to share their future plans and strategies with shareholders.
- Board meeting is important for directors to plan and organize the Annual General Meeting (AGM).
- In these sessions, they:
1) Set the agenda for the AGM
2) Decide on the AGM’s date and venue
3) Issue the AGM notice
4) Review and approve financial statements
5) Discuss appointing auditors
6) Decide on declaring dividends
7) Ensure compliance with legal requirements
- These meetings ensure the AGM runs smoothly and all necessary preparations are made for effective corporate governance and statutory compliance.
- The first AGM must be held within nine months of the end of the first financial year of the company.
- Subsequent AGMs should be held within six months from the end of the financial year, i.e., by September 30 each year.
- Ensure that there is no more than a fifteen-month gap between two AGMs.
- The company can file Form GNL-1 to request an extension for the AGM from the registrar, providing a specific reason. Please note that the extension cannot, in any case, be more than 3 months, and the request for the extension must be filed before the due date of the AGM.
- The AGM must be conducted:
1) During business hours (9 a.m. to 6 p.m.),
2) On a day that is not a national holiday
3) At the registered office of the company or a place within the same city, town, or village as the registered office.
- A clear 21-day notice (Clear days means that the 21 days do not include the day on which the notice is served or the day of the meeting) is mandatory for convening an AGM.
- The notice can be sent either in writing or through electronic means.
- For electronic communication, the notice should be sent to the member’s registered email address, as recorded by the company.
- The notice can be written directly in the email or included as an attachment.
- Additionally, the notice of the AGM should be posted on the company’s website or any other website specified by the government.
- The notice should include:
1) Date of the meeting
2) Time of the meeting
3) Venue of the meeting
4) Agenda to be discussed
This ensures that all members have adequate information to participate meaningfully.
The company should send notice of the Annual General Meeting (AGM) to:
- All members of the company, including the legal representatives of a deceased member and the assignees of an insolvent member,.
- The statutory auditor(s) of the company,
- All director(s) of the company.
Notice can be shorter than 21 days if consent is obtained from at least 95% of the shareholders to convene the AGM within a shorter timeframe.
For a public company, the quorum for a meeting is as follows:
- Five members must be personally present if the total number of members is up to 1,000.
- Fifteen members must be personally present if the total number of members is between 1,001 and 5,000.
- Thirty members must be personally present if the total number of members exceeds 5,000.
In the case of a private company, a quorum for an Annual General Meeting shall consist of at least two members who are personally present and entitled to vote.
If the quorum is not present within half an hour of the scheduled time, the meeting is adjourned to the same day in the next week at the same time and place.
- Financial Statements: The AGM must include the presentation and adoption of the audited financial statements, including the balance sheet, profit and loss account, and cash flow statement, for the financial year.
- Director’s Report and Auditor’s Report: These reports provide insights into the company’s performance, governance, and financial health.
- Declaration of Dividends: Shareholders approve the dividend recommended by the board of directors.
- Appointment or Reappointment of Directors: AGMs often include the election or re-election of directors whose terms are expiring.
- Appointment or Reappointment of Auditors: Shareholders appoint or reappoint the company’s auditors and fix their remuneration.
- Every company must document the AGM proceedings and resolutions in minutes.
- These minutes must be signed and entered into the minute book within thirty days.
- The Company Secretary or an authorized person records these minutes.
- The minute book is kept at the company’s Registered Office or an approved location.
- Members/shareholders can request to inspect the minute book, paying a fee.
- The company must provide a copy of the AGM minutes within seven days upon request.
- Failure to provide the minutes incurs:
1) A Rs. 25,000 penalty for the company
2) A Rs. 5,000 penalty for defaulting officers.
Shareholders who cannot attend the meeting in person can appoint a proxy to attend and vote on their behalf. Proxies must be submitted in a prescribed format at least 48 hours before the meeting.
- The National Company Law Tribunal (the Tribunal) can order a company to hold its Annual General Meeting (AGM).
- If the company or any authorized person fails to comply, they may face fines.
- The tribunal can impose a fine of up to₹ 1 lakh on the company and any defaulting officer.
- If the issue persists, the tribunal can impose an additional fine of ₹. 5,000 per day for each day the non compliance continues.
- These consequences highlight the importance of holding AGMs as per the rules in the Companies Act 2013.
- Non-compliance can lead to significant fines and legal actions by the tribunal.
It is very important to hold the Annual General Meeting of a company within the timeframe. By stipulating clear guidelines for the conduct of AGMs, the Act aims to strengthen corporate governance and protect the interests of shareholders. Following these rules not only meets legal requirements but also builds a strong and reliable corporate environment.
Legal Terminus can provide valuable assistance in smoothly and efficiently handling the annual compliance process. Our experts ensure a hassle-free and timely transition, helping you fulfil your legal and regulatory obligations effectively. Reach out to us now to take advantage of our expert services and free consultation.
This document is intended for informational purposes and provides a general overview of the Companies Act, 2013. It should not be construed as legal advice. Entities and individuals must consult legal experts to ensure compliance with the specific legal requirements and interpretations of the Act.
Prepared by
Mr. Smruti Ranjan Sahoo
(B. Com., LL.B)
