An Annual General Meeting (AGM) is an yearly meeting under the Companies Act, 2013 for an interaction between management and the shareholders of the company. Section 96 of the Act makes it compulsory for a company to hold an AGM to discuss various matters such as yearly results, appointment of auditor etc. A company must follow the procedure provided under the Act to conduct the meeting.
All companies except the One Person Company (OPC) are required to hold an AGM after the end of each financial year. Section 96 mentions that the first annual general meeting shall held within a period of nine months from the date of closing of first financial year. However, in other cases AGM shall be held within a period of six months from the date of closing of a financial year. Further, it says that the time period between two annual general meeting should not be more than fifteen months.
The company must give a clear 21 days notice to its members for calling the Annual General Meeting. The notice shall contain the place, the date and day of the meeting, the hour at which the meeting is scheduled. It should also contain the business to be conducted in the meeting.
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 and to all director(s) of the company.
The notice in writing can be given 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. If notice is sent via electronic communication, it 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 posted on the website of the company or any other website as may be mentioned by the government.
An AGM can also 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.
An annual general meeting shall be called during business hours, that is, between 9 a.m. and 6 p.m. on any day that should not be a National Holiday and shall be held either at the registered office of the company or at some other place within the city, town or village in which the registered office of the company is situated.
In the case of private company, a quorum required for an AGM is two members present in the meeting. In case of public company, the quorum required for an AGM is five members present at the meeting if the number of members is within one thousand. Fifteen members present at the meeting if the number of members is more than one thousand but within five thousand and thirty members present at the meeting if the number of members is more than five thousand.
If the quorum for the meeting is not present within half an hour from the scheduled time, the meeting will be adjourned to the same day in the following week for the same time and at the same place.
The matters that can be discussed in an AGM are-
- Consideration and adoption of the audited financial statements.
- Consideration of the Director’s report and auditor’s report.
- Dividend declaration to shareholders.
- Appointment of directors to replace the retiring directors.
- Appointment of auditors and deciding the auditor’s remuneration.
- Apart from the above ordinary business, any other business may be conducted as a special business of the company.
In the special business transactions, the resolution may be passed as an ordinary resolution or a special resolution, depending on the applicable legal provisions. A special resolution requires at least 75% votes in favour of the resolution.
Minutes of the meeting
The minutes of the AGM means the formal written record of the proceedings of the meeting. They state the events that took place and the resolutions passed in the AGM. It is compulsory for every company to prepare the minutes of the meeting. It is the duty of a Company Secretary to record the minutes of the AGM in Minutes Book. The Minutes book will be kept at the Registered Office of the company or at such other place approved by the Board. Upon the request of the members, the company will give a copy of the minutes of the AGM to the member within seven days of request. If the minutes are not given by seven days of the request, the company shall be liable to a penalty of Rs.25,000 and every officer of the company who is in default shall be liable to a penalty of Rs.5,000.
Consequences for Default
If a company fails to hold an AGM within the stipulated time period, the tribunal may itself or on an application made by any director or member order an AGM to be conducted as per its directions. If the company further defaults in holding a meeting in accordance with the directions of the Tribunal, the company and every officer of the company who commit the default shall be punishable with a fine of up to Rs.1 lakh. In case of continuing default, a fine of Rs.5,000 per day is levied for each day during which the default continues.
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