Opinion | The time has come to review pre-digital era compliances under Companies Act

India is facing an unprecedented crisis due to the covid-19 pandemic. Notwithstanding efforts to control the pandemic and steps to mitigate the impact on corporates, the dislocation to business and compliance requirements will continue for some more time.

There is a need for de-novo review of some of the routine compliances under the Companies Act, 2013, and Sebi regulations, currently hindered by a near impossibility of performance in the context of new norms of social distancing, fewer people at one place, avoidance of central air-conditioning etc.

It would be a bit of a contrast with these norms, if companies have to convene their Annual General Meeting (AGM) with a large congregation of members in centrally air-conditioned halls. Probably keeping these things in view, the Ministry of Corporate Affairs (MCA) has taken the initiative to allow companies to conduct their Extra-Ordinary General Meetings for special businesses via electronic mode and send EGM notices in electronic form.

With the introduction of e-voting and postal ballot, AGMs have lost their sheen as voting takes place even before the AGM starts. Whereas the quorum requirement for AGM of large and widely held listed entities is 30 members only, typically a large number of members attend in person. These numbers are, however, a tiny percentage of the shareholder base of the company.

Physical presence is also not mandatory for shareholders to exercise the right to vote. Consequent to the introduction of e-voting, the percentage of shareholders physically voting has become insignificant. Thus, there is a case to do away with the requirement of an AGM with physical presence, and yet uphold the supremacy of shareholders by taking the following measures:

§ The existing rules on postal ballot (e.g. provision for voting period of 30 days) may be adopted mutatis mutandis, with an exception that there will be no physical postal ballots and voting shall be via electronic mode only.

§ AGMs in FY20 only may be conducted via one-way webinar.

§ Members can send queries in advance, via email (at least 48 hours before the AGM), and the same can be addressed during the AGM. Alternatively, they may be given the option to post their queries during the webinar in the chat-box, and they can be addressed in the Q&A session after the conclusion of the AGM proceedings.

§ As per the Companies Act, 2013, remote e-voting is closed at 5pm on the day before the AGM. Instead, now remote e-voting can be extended/kept open till the conclusion of the AGM, so that members can vote during the AGM also.

At this critical juncture, the government should also dispense with printing and dispatch of annual reports/physical copy of annual report and AGM notice. Since these documents would pass through many hands during their postal transit, the same may be best avoided while the covid-19 risk exists. Companies can publish AGM notice in national newspapers and one regional newspaper where the registered office of the company is situated. Annual reports are, in any, case available on the website of the company and stock exchanges. Physical copy of the report can also be provided on specific request of a shareholder. Although the Companies Act, 2013, has now made it mandatory to transfer shares of companies in electronic form, a large number of shareholders have not updated their email id in the records of the depositories, and companies have no option but to send physical copies of the Annual Report to them. Interestingly, this is much against the government’s go-green initiative to save paper.

Here is an opportunity for the MCA to do away with a few pre-digital era compliances without diluting the spirit of corporate governance. It would give the much-needed fillip to the government’s initiatives of ‘Ease of doing Business’.

Tridib Barat is a Company Secretary. The views expressed here are personal.