All you need to know about AGM under Companies Act, 2013
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.
Requirements of AGM under Companies Act under Section 96
- Every company must hold an AGM once in a year, except One Person Company (OPC).
- In case of first AGM of a company, it should be held within 9 months from being incorporated.
- All the AGMs after first AGM should held within 6 months from the end of Financial Year.
- The Registrar may extend the time for AGM (other than first annual general meeting), for any special reason, shall be held, not exceeding three (3) months.
- The gap between two AGM’s should not be more than fifteen (15) months.
- Every AGM should be held during business hours on any day except national holiday.
- Annual General Meeting should be held at the registered office of the company.
- In case of an Unlisted Company, the AGM may be held at any place in India with consent given by all members in advance (in writing or electronic means).
- For a Section 8 company, the Board decides the date, time and place of the AGM.
Procedure to hold an Annual General Meeting (AGM under Companies Act)
- The company must provide 21 days clear notice for holding a AGM under companies act. The notice must contain date, day, time and place for the meeting.
- Notice of AGM to be sent to:
- All members including the legal representative of the deceased;
- All the Directors of the company; and
- The statutory auditor(s) of the company.
- The notice of AGM may be given in writing through speed post or registered post, or via electronic means to the address of the member as per the records of the company and in case of electronic communication, the notice should be send to the email id of the member.
- The notice of AGM should also be placed on the website of the company.
- An AGM can be called in a short span of time if 95% members veto decision through electronic means.
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.
- 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.
Matters to be discussed in an AGM under Companies Act
As per the provisions in section 102 (2) of the Companies Act, 2013, the following businesses may be transacted during an AGM:
- Ordinary business under Section 102(2) (a):
- Consideration of financial statements and the reports of board of directors and Auditor(s).
- Appointment of Directors or replacement of retiring Directors.
- Dividend declaration to shareholders.
- Appointment of Auditor(s) and deciding Auditor’s renumeration.
- Special Business under section 102 (2) (b):
- Apart from the businesses mentioned under section 102 (2) (a), the rest are deemed to be special business, transacted during an AGM.
- For ordinary business decisions a normal resolution is passed but for special decisions related to the business a special resolution of 75% members is required.
Members of AGM have certain rights:
- Voting can be done through postal ballot or via e-voting.
- Members can appoint proxies to attend and to vote on their behalf.
- The appointment of the proxy must be in writing.
- In case, the proxy is appointed by a corporate shareholder, then the proxy form must be signed by the authorised signatory of the corporate.
- The members can elect one amongst themselves to act as chairman of the meeting.
- In case, where articles of associations of the company provide for the chairman, then that person shall chair the AGM of the company.
Default in Holding an AGM under Companies Act
Section 97 of the Companies Act, 2013, if company fails to hold an AGM under section 96 within stipulated time, the Tribunal, may itself or on application by its members or directors ask the AGM to be held.
Who can apply to the Tribunal:
Process to make an application:
- Form: NCLT-1
- Affidavit verifying the petition
- Bank draft evidencing payment of application fee
- Any other relevant document
Right time to initiate such an application:
- Once the last date to issue notice of the AGM has expired.
Failure to Comply with Section 96 & 97
As per section 99 of the Companies Act, 2013:
- If the company fails to hold a meeting then the company and every officer of the company
- and every officer would be penalised. If the fine continues then Rs.5000 would be charged daily.
It is now evident that it is necessary to hold an AGM under the companies act once in a year to discuss business. It is one time in a year where management and the shareholders of the company meet. Sections 96 to 99 and 102(2) (a) & (b) of the Companies Act, 2013 deals with provisions of Annual General Meeting.
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