Article on AGM Date Relaxation
The Ministry of Corporate Affairs (‘MCA’) provides three (3) months relaxation for holding of Annual General Meetings (‘AGMs’) by companies whose financial year ended on December 31, 2019
Owing to the pandemic situation warranted by COVID-19, the MCA has taken into account the several representations received from companies and industry stakeholders regarding the challenges and difficulties being faced in the holding of AGMs due to the social distancing norms and other consequential restrictions being mandated in these socially, politically and most importantly economically testing times.
In view of the aforesaid, the MCA has vide its General Circular No. 18/2020 dated April 21, 2020, issued a clarification on the holding of AGMs by companies whose financial year has ended on December 31, 2019.
Analysis of the Existing Legal Framework
- As per the provisions of Section 96 of the Companies Act, 2013, every company shall hold its first AGM within a period of nine (9) months from the closure of its first financial year and thereafter within a period of six (6) months from the closure of any subsequent financial year and not more than a period of fifteen (15) months shall elapse between two subsequent AGMs.
- As per Section 2 (41) of the Companies Act, 2013, every company is required to follow the financial year commencing from 01 April to 31 March of the following year. In case of any 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, it may make an application to Central Government and upon approval can follow such different financial year, as may be permitted.
Relaxation accorded by MCA
The relaxation accorded by MCA vide its General Circular No. 18/2020 dated April 21, 2020, is that if any company whose financial year (other than first financial year) has ended on 31st December, 2019, holds its AGM for such financial year within a period of nine (9) months from the closure of the financial year (i.e. latest by 30th September, 2020), the same shall not be viewed as a violation of Section 96 of the Companies Act, 2013. The references to due date of AGM or the date by which the AGM should have been held under the Companies Act, 2013 or the rules made thereunder shall be construed accordingly.
In these times of corporate governance and compliances being one of the important pillars of organisational effectiveness and efficiency, every company and its officers are under a statutory and ethical obligation to conduct AGM in strict compliance with the Companies Act, 2013 and rules framed thereunder including with respect to the prescribed timelines. Having said that, this relaxation is a welcome step considering the present lockdown imposed in the country due to the COVID-19 pandemic, since it will ensure ease of compliance and also enhance the level of corporate compliances all over the country. This will also assuage the foreign investors, build their confidence in doing business in our country and will further the efforts of the Government towards ease of doing business in India.