AGM – Annual General Meeting
AGM – Annual General Meeting
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. This article will look at the AGM – Annual General Meeting in detail.File Now!
What Is an Annual General Meeting (AGM) and Its Purpose?
An 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.
Which Companies Must Hold AGM?
Except one-person companies (OPCs), holding an Annual General Meeting (AGM) is an obligatory legal requirement for both Private Limited and Limited Companies. This requirement applies to all companies, including public and private entities, those limited by shares or guarantees, those with or without share capital, and even unlimited companies. Every year, these companies are obligated to convene an AGM.
Annual General Meeting (AGM) – Section 96 of the Companies Act
Under the Companies Act, the Annual General Meetings (AGMs) provisions are primarily outlined in Section 96. This section defines the requirement for companies to hold an AGM and specifies the timeline for conducting it. It also discusses the first AGM for newly incorporated companies.
Conditions for Holding an Annual General Meeting (AGM)
Conditions for Holding an AGM are explained in detail below:
Time Frame for AGM
As per the Companies Act 2013, the timing of the Annual General Meeting (AGM) is subject to specific provisions based on whether it’s the first AGM for a new company or subsequent AGMs for other companies:
First AGM for New Companies
For a new company, the first AGM must be held within nine months from the conclusion of its first Financial Year. This provides some flexibility in scheduling the inaugural AGM.
Subsequent AGMs for Other Companies
For established companies (not their first AGM), AGMs are typically required to be conducted within six months from the end of the Financial Year. This time frame is more stringent than a new company’s first AGM.
When a company cannot hold its AGM within the stipulated time, it has the option to seek an extension.
Also, read about, MCA Clarification on Annual General Meeting (AGM) 2022
Maximum Time Gap
There should not be a gap of more than 15 months between two consecutive AGMs (Section 96(1)).
Timing and Location
Every AGM should be held during business hours (between 9 a.m. and 6 p.m.) on a non-National Holiday. It can take place at the Registered Office of the Company or another location within the city, town, or village where the Registered Office is situated (Section 96(2)). Unlisted companies can hold the AGM anywhere in India if all members obtain consent in advance.
Extension of Time for Holding an AGM:
Registrar of Companies’ Authority: The Registrar of Companies (RoC) has the Authority to grant an extension of up to three months for holding an AGM.
- Application Process: To request an extension, the company must apply through e-form GNL-1, providing reasons for the extension and the duration for which it is required. The RoC will record the reasons for granting the extension.
- First AGM Exception: Notably, no extension is available for holding the first annual general meeting; it must be conducted within the prescribed time frame.
Procedure for Conducting an Annual General Meeting (AGM)
The procedure for conducting an Annual General Meeting (AGM) is a comprehensive process involving various steps. Here’s a detailed breakdown of the procedure:
Convene a Board Meeting
A board meeting must comply with Section 173 and the Secretarial Standard on Board Meeting (SS-1). The purpose of this board meeting includes:
- Fixing the date, time, and agenda for the AGM.
- Approving the draft notice of the AGM along with an explanatory statement.
- Authorizing the Company Secretary or another officer to issue the notice to all members or entitled recipients.
- Appointing a scrutinizer if e-voting is provided to shareholders.
Notice for Annual General Meeting
The AGM notice should be written in writing or electronic mode at least 21 days before the meeting (Section 101(1)).
If the company has a website, the notice must also be hosted on the website (Secretarial Standard on General Meetings).
The notice should include:
- Venue of the meeting.
- Date, day, and time of the meeting.
- Agenda to be discussed.
- Date of notice issuance.
- Signature of the convener.
Convene a General Meeting
Ensure that the quorum, including the presence of the Chairperson, is maintained throughout the meeting (Secretarial Standard on General Meetings).
Financial Statement (Section 129(2)): The Board of Directors must present the financial statements for the financial year at every AGM.
Board’s Report (Section 134): The company must attach a report by its Board of Directors to the financial statements laid before shareholders at the AGM. The report includes:
- Summary of financial results.
- The company’s Operational performance and its subsidiaries, associates, and joint ventures.
- Director’s Responsibilities Statement.
- Explanation or comments by the Board on auditor qualifications, reservations, or adverse remarks.
- Proposed dividends or transfers to reserves.
- Material changes and commitments affect the company’s financial position.
- Details of related party transactions.
- Information on loans, guarantees, or investments.
- Corporate social responsibility information.
- Energy conservation, technology absorption, and foreign exchange earnings.
Statutory Auditor Report (Section 143): The statutory auditor provides a report to shareholders on the examined accounts and financial statements presented at the AGM.
Announcement of Result of e-voting (Section 108, Rule 20, and SS-2)
- The scrutineer submits a report on votes cast in favor or against resolutions, and the Chairman or an authorized person declares the result.
- The result is displayed on the company’s notice boards and website for at least three days.
Maintain the Minutes Book (Section 118 and SS-2)
Minutes of the AGM and resolutions passed by postal ballot must be prepared, signed, and maintained in a book within 30 days of the meeting’s conclusion or resolution’s passing. The pages must be consecutively numbered.
Consequences of Not Conducting an Annual General Meeting
Failure to comply with the provisions outlined in Section 96 of the Companies Act 2013 can lead to several consequences:
- Tribunal Intervention: The National Company Law Tribunal has the Authority to order the convening of an Annual General Meeting under Section 97 and Section 98 of the Companies Act, 2013.
- Financial Penalties: If a company or any authorized person fails to adhere to the provisions from Section 96 to Section 98, they may face monetary penalties. The tribunal can impose a fine on the company and every officer found to be in default, with the fine amount extending to Rs. 1 lakh.
- Continuing Default: If the default continues beyond the initial penalty, the tribunal may impose an additional fine of Rs. 5,000 per day for each day during which the default persists.
These consequences emphasize the importance of conducting AGMs in accordance with the statutory requirements and timelines as specified in the Companies Act 2013. Failure to do so can result in both financial penalties and legal intervention by the tribunal.
Compliances After Conducting an AGM
After conducting an Annual General Meeting a company is required to fulfill several compliance obligations. Here is a checklist of post-AGM compliances:
Reporting of the AGM
Following the Annual General Meeting completion, every listed company must file a report on the AGM using Form MGT-15.vThis report must be submitted within 30 days from the conclusion of the AGM.
Annual Return Filing (Form MGT-7)
File the Annual Return with the Registrar of Companies (ROC) in Form MGT-7 within 60 days of the AGM (Section 92).
Resolution Filing (Form MGT-14)
File resolutions passed during the AGM, along with the explanatory statement, in Form MGT-14 with the ROC. Special resolutions and other resolutions passed under Section 117 should be filed within 30 days of passing (Section 117).
Minutes of Meeting (MoM)
Ensure that the Minutes of Meetings (MoM) of the AGM are entered in the minute book within 30 days of the conclusion of the AGM (Section 118).
Pay the declared dividend or dispatch the dividend warrants within 30 days from the declaration date (Section 123).
Unpaid Dividend Statement
Prepare a statement containing each person’s name, last known address, and unpaid dividend amounts. Display this information on the company’s website. Additionally, amounts related to unpaid dividend accounts must be credited to the Investor Education Protection Fund (IEPF) within 30 days of becoming due and reported online to the Authority using Form IEPF-1. Within 60 days following the AGM, file Form IEPF-2 with the Registrar, containing information on unclaimed and underpaid payments (Section 124 r/w 125).
Financial Statement Filing (Form AOC-4, AOC-4 CFS, or AOC-4 XBRL)
File the Audited Financial Statements, along with the consolidated financial statement (if any), in the appropriate form (AOC-4, AOC-4 CFS, or AOC-4 XBRL), with the ROC within 30 days of the AGM (Section 137).
Auditor’s Appointment (Form ADT-1)
File the resolution related to the appointment of the auditor in Form ADT-1 with the ROC within 15 days of the AGM (Section 139).
Director’s Appointment (Form DIR-12)
File the resolution related to appointing directors (except for directors retiring by rotation) in Form DIR-12 with the ROC within 30 days of the AGM (Section 152).
It’s important to note that additional sector-specific or conditional compliances may vary based on the nature of the company’s operations. It is advisable to consult with a lawyer or a Company Secretary to ensure full compliance with all relevant regulations and obligations.
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