As demanded by most corporate professional and compliance professionals, Ministry of Corporate Affairs ("MCA") has clarified the mode of conducting general meetings for corporates in the era of the outbreak of Coronavirus. Several representations have been received by MCA for providing relaxations in the provisions of Companies Act, 2013 (the "Act") and rules made thereunder to allow companies to pass ordinary and special resolutions of urgent nature, in view of the difficulties faced by the stakeholders on account of the threat posed by Covid-19. The issues raised in the said representations have been examined considering the overall situation at present. It is categorically brought to your attention that as per the law, there are no express provisions which ascribe the viability for conducting AGMs and EGMs.
In continuation to
initiatives of the government with respect to the existence pandemic of
COVID-19 in the country, a series of active steps have been taken by the
government to combat the persisting threat of COVID-19 over the country for
ease of doing business. Now, MCA has issued a General Circular Circular No 14/2020 dated April
08, 2020 vide which Clarification on Passing Ordinary and
Special Resolutions by Companies - on account of threat posed by Covid-19 has
been issued.
The Act does not contain any specific provision for
allowing the conduct of members’ meetings through video conferencing (VC)
or other audio-visual means (OAVM). It has been noted that
section 108 of the Act and rules made thereunder provide for relevant companies
to allow e-voting (including remote e-voting) in case of general
meetings convened by them. Further Section 110 of
the Act, on the other hand, allows the companies to pass resolutions (except
items of ordinary business and items where any person has a right to be heard)
through postal ballot (which includes electronic ballot and electronic voting
under section 108),
In view of the current extraordinary circumstances
due to the pandemic caused by COVID-19 prevailing in the country, requiring
social distancing, companies are requested to take all decisions of urgent
nature requiring the approval of members, other than items of ordinary business
or business where any person has a right to be heard, through the mechanism of
postal ballot/e-voting in accordance with the provisions of the Act and rules
made thereunder, without holding a general meeting, which requires the physical
presence of members at a common venue. Though the facility for the postal
ballot is allowed, the arrangement for the same may be difficult due to the
current prevailing situation.
In case holding of an extraordinary general meeting
(EGM) by any ‘company is considered unavoidable, the following procedure needs to be adopted for conducting such a
meeting on or before 30.06.2020, in addition to any other
requirement provided in the Act or the rules made thereunder;
A) For companies which are
required to provide the facility under the Act, or any other company which has
opted for such facility
(i) EGMs, wherever unavoidable, may be held through
VC or OAVM and the recorded transcript of the same shall be maintained in safe
custody by the company. In case of a public company, the recorded transcript of
the meeting, shall as soon as possible, be also made available on the website
(if any) of the company. (Note: The duartion for maintaining the safe
custody has not been specified by MCA. As per the rules notified for conducting
Board Meetings by VC, law cast duty on the company for maintaining recorded
transcript until the audit for that relevant FY is completed. Hence, the same
may be followed in this case.)
(ii) Convenience of different persons positioned in
different time zones shall be Kept in mind before scheduling the meeting.
(iii) All care must be taken to ensure that such
meeting through VC or OAVM facility allows two-way teleconferencing
or webex for the ease of participation of the members and the
participants are allowed to pose questions concurrently or given time to submit
questions in advance on the E-mail address of the company. Such a facility must
have a capacity to allow at least 1000 members to participate
on a first-come-first-served basis.
(However FIFO (first come first served) may not
apply in certain case stated below)
The large shareholders (i.e. shareholders holding
2% or more shareholding), promoters, institutional investors, directors key
managerial personnel the chairpersons of the Audit Committe Nomination and
Remuneration Committee and Stakeholders Relationship Committee, auditors etc.
may be allowed to attend the meeting without restriction on account of
first-come- first-served principle.
(iv) The facility for joining the meeting shall be
kept open at least 15 minutes before the time scheduled to start the meeting
and shall not be closed till the expiry of 15 minutes after such scheduled
time. (i.e Pre and Post Meeting 15 Minutes
Requirements)
(v) Before the actual date of the meeting, the
facility of remote e-voting shall be provided in accordance with the Act and
the rules.
(vi) Attendance of members through VC or OAVM shall
be counted for the purpose of reckoning the quorum under section 103 of the
Act.
(vii) Only those members, who are present in the
meeting through VC or OAVM facility and have not cast their vote on resolutions
through remote e-voting and are otherwise not barred from doing so, shall be
allowed to vote through e-voting system or by a show of hands in the
meeting.
(viii) Unless the articles of the company require
any specific person to be appointed as a Chairman for the meeting, the Chairman
for the meeting shall be appointed in the following manner:
a. where there are less than 50 members
present at the meeting, the Chairman shall be appointed in accordance with
section 104:
b. in all other cases, the Chairman shall be
appointed by a poll conducted through the e-voting system during the meeting.
(ix) The Chairman present at the meeting shall
ensure that the facility of e-voting system is available for the purpose of
conducting a poll during the meeting held through VC or OAVM. Depending on the
number of members present in such meeting, the voting shall be conducted in the
following manner:
a. where there are less than 50 members present at
the meeting, the voting may be conducted either through the e-voting system or
by a show of hands, unless a demand for poll is made in accordance with section
109 of the Act, in which case, the voting shall be conducted through the
e-voting system;
b. in all other cases, the voting shall be
conducted through e-voting system,
(x) A proxy is allowed to be appointed under
section 105 of the Act to attend and vote at a general meeting on behalf of a
member who is not able to attend personally. Since general meetings under this
framework will be held through VC or OAVM, where physical attendance of members
in any case has been dispensed with, there is no requirement of appointment of
proxies. Accordingly, the facility of appointment of proxies by members will
not be available for such meetings. However, in pursuance of section 112 and
section 113 of the Act, representatives of the members may be appointec for the
purpose of voting through remote e-voting or for participation and voting in
the meeting held through VC or OAVM.
(xi) At least one independent director (where
the company is required to appoint one), and the auditor or his authorized
representative, who is qualified to be the auditor shall attend such meeting
through VC or OAVM.
(xii) Where institutional investors are members of
a company, they must be encouraged to attend and vote in the said meeting
through VC or OAVM.
(xiii) The notice for the general meeting
shall make disclosures with regard to the manner in which framework provided in
this Circular shall be available for use by the members and also contain clear
instructions on how to access and participate in the meeting. The company shall
also provide a helpline number through the registrar & transfer agent,
technology provider, or otherwise, for those shareholders who need assistance
with using the technology before or during the meeting. A copy of the meeting
notice shall also be prominently displayed on the website of the company and
due intimation may be made to the exchanges in case of a listed company.
(xiv) in case a notice for meeting has been served
prior to the date of this Circular, the framework proposed in this Circular may
be adopted for the meeting, in case the consent from members has been obtained
in accordance with section 101(1) of the Act, and a fresh notice of shorter
duration with due disclosures in consonance with this Circular is igsued
consequently.
All resolution passed in accordance with this
mechanism shall be filed with the Registrar of Companies within 60 days of the
meeting, clearly indicating therei 1 that the mechanism provided herein along
with other provisions of the Act ‘and rules were duly complied with during such
meeting.
B) For companies which are
not required to provide the facility under the Act, or any other company which
has opted for such facility
(i) EGM, wherever unavoidable may be held through
VC or OAVM and the recorded transcript of the same shall be maintained in
safe custody by the Company. In case of a public company, the
recorded transcript of the meeting shall as soon as possible, be also made
available on the website(if any) of the Company.
Additional Compliance for the
public Company for the record on the website (if maintained), though it would
be suggested to conduct EGM only if it very necessary. Also, the safe custody
duration is not mentioned in the circular.
(ii) Convenience of different persons positioned in
different time zones shall be kept in mind before scheduling the meeting
(iii) All care must be taken to ensure that
such meeting through( VC or OAVM ) facility allows two way
teleconferencing or webex for the ease of participation of the members
and the participants are allowed to pose questions concurrently or given time
to submit questions in advance on the e-mail address of the company. Such
facility must have a capacity to allow at least 500 members or members
equal to the total number of members of the company (whichever is lower) to
participate on a first-come-first-served basis. The large shareholders (i.e.
shareholders holding 2% or more shareholding) promoters, institutional
investors, directors, key managerial personnel, the chairpersons of the Audit
Committee, Nomination and Committee and Stakeholders Relationship
Committee, auditors etc may be allowed to attend the meeting without
restriction on account of first-come-first-served principle.
Requirments in layman language-
- two way teleconferencing
or webex for the ease of participation of the members
- participants to be allow to
pose questions, even in advance on the email address of Company
- facility must have capacity to
allow atleast 500 members or actual number of members of the Company.
(iv) The facility for joining the meeting shall be
kept open at least 15 minutes before the scheduled time to start the meeting
and shall not be closed till expiry of 15 Minutes after such scheduled
time. (i.e. Pre and post meeting 15 minutes requirments)
(v) Attendance of members through VC or OAVM shall
be counted for the purpose of reckoning the quorum under section 103 of the Act
Appointment of Chairman
(vi) Unless the articles of the company require any
specific person to be appointed as a Chairman for the meeting, the Chairman for
the meeting shall be appointed in the following manner:
a) where there are less than 50 members present at
the meeting the chairman shall be appointed in accordance with Section 104
b) In all other cases , the chairman shall be
appointed by poll conducted in a manner provided in succeeding sub-paragraphs
(vii) At-least one independent director (where the
Company is required to appoint one) and the auditor or his authorized
representative, who is qualified to be the auditor shall attend such meeting
through VC or OAVM
Proxy
(viii) A proxy is allowed to be appointed under
section 105 of the Act attend and vote at a general meeting on behalf of a
member who is not able to attend personally. Since general meetings under this
framework will be held through VC or OAVM, where physical attendance of members
in any case has been dispensed with, there is no requirement of appointment of
proxies. Accordingly the facility of appointment of proxies by members will not
be available for such meetings. However, in pursuance of Section 112 and
Section 113 of the Act, representatives of the members may be appointed for the
purpose of voting through remote e-voting or for participation and voting
in the meeting held through VC or OAVM.
(ix) Where institutional investor are members
of a Company, they must be encouraged to attend and vote in a said meeting
through VC or OAVM.
(x) The Company shall provide a designated email
address to all members at the time of sending the notice of meeting so that the
members can convey their vote, when a poll is required to be taken during the
meeting on any resolution, at such designated email address.
(xi) The confidentiality of the password and other
privacy issues associated with the designated email address shall be strictly
maintained by the Company at all times. Due safeguards with regard to
authenticity of email address(es) and other details of the member shall also be
taken by the Company.
(xii) During the meeting held through VC or OAVM
facility, where a poll on any item is required, the members shall cast their
vote on the resolutions only by sending mails through email address(es) which
are registered with the Company. The said emails shall only be sent to the
designated mail address circulated by the Company in advance.
(xiii) Where less than 50 members are present in a
meeting, the chairman may decide to conduct a vote by show of hands, unless a
demand for poll is made by any member in accordance with section 109 of the
Act. Once such demand is made, the procedure provided in the preceding
sub-paragraphs shall be followed.
(xiv) In case the counting of votes requires time,
the said meeting may be adjourned and called later to decide the result.
(xv) The notice of the General Meeting shall make
disclosure with regard to the manner in which framework provided in this
circular shall be available for use by the members and also contain clear
instructions on how to access and participate in the meeting. The company
should also provide a helpline number through the RTA, technology provider, or
otherwise, for those shareholders who need assistance with using the technology
before or during the meeting. A copy of the notice shall also be prominently
displayed on the website of the Company.
(xvi) In case a notice for meeting has been served
prior to the date of this Circular, the framework proposed in this circular may
be adopted for the meeting in case the consent from members has been obtained
in accordance with Section 101(1) of the Act, and fresh notice of shorter
duration with due disclosures in consonance with this Circular is issued
consequently.
(xvii) All resolutions passed in accordance with
this mechanism shall be filed with the Registrar of Companies within 60 days of
the meeting clearly indicating therein that the mechanism provided herein along
with other provisions of the Act and rules were duly complied with.
The Companies referred to in paragraphs (A) and (B) above shall ensure that all other compliances associated with
the provisions relating to general meetings viz making of disclosures,
inspection of related documents by members, or authorisation for voting by
bodies corporate etc as provided in the Act and the articles of
associations of the Company are made through electronic mode.
Disclaimer: The entire contents of this document have been prepared on the basis of
relevant provisions and as per the information existing at the time of the
preparation. Although care has been taken to ensure the accuracy, completeness,
and reliability of the information provided, I assume no responsibility,
therefore. Users of this information are expected to refer to the relevant
existing provisions of applicable Laws. The user of the information agrees that
the information is not professional advice and is subject to change without
notice.
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