As per section 96 of Companies Act, 2013 (“Act”), every company is required to hold AGM of its members within 6 months from the close of Financial Year (FY). AGM should be called during business hours and shall be held either at the registered office or some other place within the city, town or village where the registered office of the company is situated. Further, approval of audited financial statements of a company, being an item of ordinary business listed under section 102 should be transacted only at an AGM of the shareholders.
Considering that fiscal year 2019-20 has ended, companies will be required to carry out several time-bound compliances under the Companies Act, 2013 and regulations prescribed by Securities and Exchange Board of India (SEBI). This, inter alia, includes finalizing and publishing its annual financial statements/annual reports and dispatching physical copies of the same to shareholders who have not opted to receive the same electronically.
In order to observe social distancing norms to fight the spread of COVID-19, it will not be prudent for companies to conduct physical AGMs. Further, since printing and postal facilities have also been impacted due to COVID-19, it may not be possible to print and dispatch notice of the AGM as well as annual reports to its shareholders in physical form.
In order to overcome these challenges, NASSCOM recently made a representation to Ministry of Corporate Affairs (MCA) to consider the following recommendations:
- Dispense with the requirement of holding AGM physically for all companies till September 30, 2020 and permit transacting ordinary items of business solely through e-voting facility.
- Permit payment of dividend to shareholders only through online payment facilities to the registered bank account or other permitted modes (like ECS credit).
For this purpose, Companies and Depositories should be asked to request the shareholders to update their details with the depository/ company. In case details are not updated, companies may be permitted to keep such unpaid dividend amount in a separate account, till the time situation resumes to normal. The requirement to print and dispatch physical dividend warrants may be temporarily dispensed away with.
- Permit dispatch of annual report and notice of AGM through e-mail, without requiring companies to print and post such documents. For shareholders who have not registered their email ids, companies may be directed to upload annual report and notice for the AGM on their website and publish web-link of such documents through newspaper advertisement.
These measures will greatly benefit companies and provide them with the much-needed flexibility in time of this exigency, while complying with the provisions of law.