Relaxation to companies for holding AGM due to Covid-19

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This post has been written by Vanshika Darbari , a third year law student from Maharaja Agrasen Institute of Management Studies, GGSIPU.

A company is composed of members, though it has its identity of its own. The members of the company are to people who constitute the company, as a corporate entity. However, a company being a financial institution, can not act on its own. Therefore, the decisions made by the companies are passed validly through resolutions in the companies members meeting. The members and the directors of the company are vested with the decision making powers and they can be exercised by them through passing resolutions. General meetings of the members provide a platform to express their will in regard to the management of the affairs of the company. The meeting in which the decisions are taken by the shareholders is called a General meeting and the meeting in which decisions are taken by the directors is called a Board meeting.

The Annual general meeting is the meeting of the shareholders for seeking approval of Ordinary business and Special business.

In consideration to the current situation of COVID- 19 Pandemic, Ministry of Corporate Affairs vide General Circular No. 18/2020, F. No.2/4/2020-CL-V dated 21st day of April, 2020 has issued Clarification on Holding of annual general meetings by companies whose financial year has ended on 31st December, 2019.

Relaxation on holding Annual General Meetings by the Companies whose financial year has ended on 31st December,2019

Many companies are facing problems in holding their Annual General Meeting due to social distancing norms and consequential restrictions related thereto. Several grievances have been received by the Stakeholders of different companies regarding the difficulty faced by them in holding their Annual general meeting for the companies whose financial year ended on 31st December, 2019.

The Ministry of Corporate Affairs, on examination of the representation made and taking into consideration the problems faced by the stakeholders, allowed the companies to hold their AGM within the period of 6 months( 9 months in case of first AGM ) from the closure of financial year and not later than a period of 15 months from the date of last AGM.

As per Section 96 of the Companies Act, 2013, a company has to convene its AGM within 6 months of closing of the financial year, except in the case of the first AGM.

And according to Sec 2(41) : Financial year,in relation to any company or body corporate, means the period ending on the 31st day of March every year, and where it has been incorporated on or after the 1st day of January of a year, the period ending on the 31st day of March of the following year, in respect whereof financial statement of the company or body corporate is made up: Provided that where a company or body corporate, which is a holding company or a subsidiary or associate company of a company incorporated outside India and is required to follow a different financial year for consolidation of its accounts outside India, the Central Government may, on an application made by that company or body corporate in such form and manner as may be prescribed, allow any period as its financial year, whether or not that period is a year:

That means Companies which are a holding company or a subsidiary or associate company of a company incorporated outside India post approval of the Central Government, can decide any period as its financial year.

CONCLUSION 

Post interpretation of Sec 96 and 2(41) together, it can be interpreted as follows:

  • It has been clarified that this relaxation is only given to the companies following under the section 2(41) of the Act, who are allowed to decide their financial year and decide their financial year from January to December.
  • Earlier, the last date to convene the AGM for these companies was 30th June i.e within 6 months from the end of the financial year.
  • According to the latest circular of the Ministry of Corporate Affairs, the last date of convening AGM for the companies eligible has been extended from 6 months to 9 months. The revised date of convening the AGM is 30th September, 2020 instead of 30th June,2020.

REFERENCES

[1] http://www.mca.gov.in/Ministry/pdf/Circular18_21042020.pdf

[2] http://www.mca.gov.in/MCASearch/search_table.html

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