Virtual AGMs – an essential pandemic initiative

Virtual AGMs – an essential pandemic initiative

According to Section 96 of the Companies Act 2013, all companies,except one-person companies, must hold their first annual general meeting (AGM) within nine months from the end of their financial year and subsequent AGMs within six months from the end of the next financial year, ensuring the time gap between two AGMs does not exceed 15 months. AGMs must be held during business hours either at the company’s registered office or another place in the city, town or village in which the company’s registered office is located. However, an unlisted companies’ AGMs can be held anywhere in India with the consent of all of its members.

In view of the COVID-19 pandemic, the Ministry of Corporate Affairs (MCA) on May 5th,2020, issued relaxations permitting companies to convene their AGM through video conferencing (VC) or other audio-visual means (OAVM). While the governing Companies Act, 2013, does not have provisions for a virtual AGM, the MCA deemed it a necessary solution to cope with the current scenario. The relaxation applies to companies that must provide or have opted for e-voting facilities under the Companies Act, 2013 . Companies that are not required to provide e-voting facilities but have at least half of their members’ email addresses on record can also hold virtual AGMs provided they meet all the requirements established by MCA.

The relaxations regarding the convening of AGM includes

• the dispatch of notice and financial statements (including board reports, auditors’ reports and other documents required to be attached) to members and others entitled to receive, will be through email
• the dividends will be directly deposited to shareholders’ bank accounts through the Electronic Clearing Service (ECS) or any other means. For shareholders, whose bank accounts are not available, company will dispatch the dividend warrant/cheque by post
• Companies must ensure that compliances associated with general meetings such as making any disclosures, inspection of related documents/registers by members, or authorizations for voting by bodies corporate, etc are made through electronic mode.

Virtual AGMs have been welcomed by shareholders and companies alike. Tata Consultancy Services (TCS) held India’s first virtual AGM on June 11, 2020. Barring a few technical glitches, the meeting was a successful experience as it recorded over 1300 shareholder’s participation, double the usual number of around 600 people. Reliance Industries Ltd held the most attended virtual AGM in India yet, with more than 300,000 shareholders participating from 473 cities and 41 countries. It is clearly indicative that shareholders are more likely to attend the AGM online than travel for the physical meet.

This temporary relaxation by the MCA could be a substantial step towards the introduction of digital and innovative ways of holding AGMs in future. When compared with physical AGMs, virtual AGMs are not only cost-effective for companies but also lesser in terms of the operational expenses and efforts required by shareholders. With no solution for the pandemic on the horizon, experts wonder if virtual AGM is the way forward and if MCA would amend the law to include similar provisions for the future. The probability of companies opting for hybrid AGMs – where shareholders could meet physically, while those who prefer to join virtually can also do – also seems quite probable for the following years.