Annual General Meeting, commonly known as AGM, is a mandatory yearly compliance requirement that every company needs to follow. In the case, any company fails to conduct the AGM, it will be considered as default. As a result, the company would be subject to a hefty penalty. Therefore, it is imperative for every company to hold an AGM every year and that too within a prescribed time.
In this write-up, we have tried to cover every significant aspect of an Annual General Meeting. Hence, let us start with the type of meetings which needs to be held in a Company as per Companies Act, 2013.
Type of Meetings in a Company
Generally, meetings in a company are categorized based upon the type of members of the company meeting. With this in mind, meetings in a company can be grouped as, one involving the Directors of the company and the second in which the Shareholders of the company partake in the meeting. The meetings of a company may be classified into the following categories:
1. Meeting of Shareholders
Annual General Meeting (AGM)
Extra ordinary General Meeting
2. Meetings of Directors
Meetings of board of directors;
Meetings of directors;
Meetings of creditors.
Meetings of debenture-holders
What is AGM under Companies Act?
AGM under Companies act stands for Annual General Meeting. An AGM is an interaction between the management and the shareholders of the company. It is a yearly meeting between the Directors and Shareholders of the Company, to discuss the business and to present the company’s annual report.
The Companies Act, 2013 along with the Companies (Management and Administration) Rules, 2014 deals with the Annual General Meeting and it mandates to hold an AGM yearly to discuss yearly results, Auditor’s appointment and other business. Section 96 to 99 of the Companies Act, 2013 deals with the provision of AGM under Companies Act.
Purpose for holding an AGM
The primary reason for conducting an annual general meeting is to provide an overall status of the organization. The chairman of the organization conducts the meeting and prepares the minutes. Every director and shareholder of the company shall be present in the meeting and provide the required reports. Besides, the main purposes of the annual general meeting are as follows:
Approval of the audited accounts
Finalization/regularization of appointed directors
Approval of appointed auditors
Approval of financial statements & Director’s report
Minutes of the previous meeting
Apart from these, other entities that are taken care of in the meeting are: approving the proposed dividends, compensation of officers and other issues that shareholders or any director of the company have.
Which Companies Require 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.
However, in the case of a first annual general meeting, the company can hold the AGM in less than 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. Do note that the time gap between two annual general meetings should not exceed 15 months.
Where should the AGM be conducted?
The First AGM should be held within a period of nine months from the date of the closure of the first financial year of the company. However, in the case of consecutive AGMs, it should be held within a period of six months from the date of closure of the financial year.
Furthermore, an AGM is conducted at a day which is not a National Holiday. Additionally, such day should be conducted in the business hours, i.e. between 9 AM to 6 PM. Additionally, it should be held either at the registered office of the company or at a place that is within the city, town or village in which the registered office is located.
Quorum of AGM under Companies Act
In case of Private Company: Two (2) members present at the meeting shall be the Quorum for the AGM.
In case of Public Company:
If number of members in the company is within one thousand, then five (5) members present at the meeting shall be quorum for the AGM.
If number of members in the company is between one thousand and five thousand, then fifteen (15) members present at the meeting shall be quorum for the AGM.
If number of members in the company is more than five thousand, then thirty (30) members present at the meeting shall be quorum for the AGM.
Important Note: If within half an hour from the scheduled time, the quorum for the meeting is not present, then the meeting will be adjourned to the next week.
Procedure to Hold an AGM
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, 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.
After the conduct of AGM, every listed company has to file a report on the AGM in form MGT-15 within a period of 30 days from the conclusion of the AGM.
Minutes of an AGM
Every company has to prepare the minutes of the AGM compulsorily. The minutes of the AGM means the written record of the proceedings of the meeting. They state the events that took place and the resolutions passed in the AGM.
The Company Secretary will record the proceedings of the AGM. Where there is no Company Secretary, any other person duly authorised by the Board or by the Chairman will record the proceedings.
The minutes of the AGM should be signed and entered in the minute book within thirty days from the AGM. The Minutes book will be kept at the Registered Office of the company or at such other place approved by the Board. Any member/shareholder of the company, upon request to the company, can inspect the Minutes book of the AGM on paying the prescribed fee.
Is there any extension for holding an AGM?
Yes, there may be an extension for holding an AGM. Under Section 96 (1) of the Companies Act, 2013, the ROC (Registrar of Companies) could extend the period for holding an AGM within which the annual general meeting (not being the 1st AGM) must be conducted, and should not exceed three months. The extension can be taken as follows
The company should apply for an extension through e form GNL-1 specifying the reasons for the extension and the period for which company requires an extension.
The RoC will record the reasons for giving the extension. However, no extension is available to hold the first annual general meeting.
The annual general meeting is obligatory compliance for companies in India. Moreover, companies not holding or conducting the AGM become liable for legal actions taken against them. Furthermore, at least five members in a Public Limited Company and two members in a Private Limited Company should personally attend the AGM. Also, the Companies Act specifies the time of holding an AGM in the business hours and on a day which is not a National Holiday.
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