Items deemed unavoidable by the board can be considered in the virtual AGMs
MCA has allowed companies to send financial statements, board, auditor report through email
MUMBAI: The Ministry of Corporate Affairs (MCA) on Tuesday allowed companies to hold annual general meetings (AGMs) through video conferencing (VC) or any other audio-visual means during 2020. This follows the ministry's decision to allow companies to conduct extra-ordinary general meeting (EGMs) through VCs.
In view of the continuing restrictions on movement of people because of covid-19 lockdown, it has been decided that the companies be allowed to conduct their AGM through video conferencing, MCA said in the notification.
While the notification resolved the big issue of holding an AGM rather than avoiding it, there are still lot of unanswered questions. The MCA notification is silent on recording of attendance of members, proxies and their rights to vote, manner of raising queries and their responses, recording of minutes.
Also, companies would need to ensure certain checks and balances that the annual exercise of company disclosures and stakeholder consultations does not become futile.
Firms would need to ensure that shareholders can cast their votes through the e-voting system - a settled principle under Companies Act 2013.
In these meetings, the companies would consider only items, other than ordinary business, of special business, which are deemed unavoidable by the board, the ministry said.
“All businesses to be transacted at an AGM are deemed special, other than: the consideration of financial statements and the reports of the Board and auditors; the declaration of any dividend; the appointment of directors in place of those retiring; and the appointment of, and the fixing of the remuneration of, the auditors," said Shardul Shroff, executive chairman, Shardul Amarchand Mangaldas, a law firm.
Due to difficulties in sending physical copies of financial statements, the ministry has allowed companies to send their financial statements, along with board’s reports, auditor’s reports and other required documents through email.
Additionally, the companies are required to provide a window to shareholders for registering their mandate for transferring dividends electronically through the Electronic Clearing Service (ECS) or any other means.
Last month, the ministry had allowed companies, whose financial year ended on December 31, 2019, to hold their AGM by September 30. However, with no clarity on when the lockdown will be lifted entirely, companies had made several representations to hold virtual AGMs.
“Allowing such virtual AGM and EGM would help companies conduct such meetings in a timely manner, transact the relevant items of business and provide adequate information to all stakeholders. Also, the shareholders of such companies would be able to participate in such meetings virtually during the lockdown due to the COVID-19 pandemic," said Shroff.
According to SN Ananthasubramanian, former president ICSI and practicing company secretary, “With travel restrictions still on, home quarantine and social distancing being the norms, this relaxation following the government circulars for holding of EGMs and extension granted for holding of AGMs is indeed a welcome step" but it remains to be seen how this evolutionary concept will actually be implemented and experienced.
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