Updated: Jul 15, 2020
The Ministry of Corporate Affairs (MCA) is fully aware of the difficulties faced by companies on account of nation-wide lockdown and social distancing due to COVID-19. The MCA has issued a circular allowing companies to hold Extraordinary General Meetings (EGMs) through VC or Other Audio-Visual Means (OAVM) complemented with e-Voting facility/simplified voting through registered emails, without requiring the shareholders to physically assemble at a common venue, thus safeguarding social distancing motto.
However, the Companies Act, 2013 allows ordinary and special resolutions to be passed through postal ballot/e-voting route without holding a physical general meeting. But, in the present crisis due to COVID-19, postal ballot facilities cannot be utilized by the companies.
For companies where holding of an EGM is considered unavoidable, the following procedure covering the substantial steps are required, for conducting such a meeting on or before June 30, 2020, in addition to any other requirement provided in the Act or the rules made thereunder.
APPLICABLE TO ANY COMPANY HAVING LESS THAN 1000 SHAREHOLDERS.
No relaxation has been provided in timelines for issuing notices to the members and notices have to be sent in accordance with the Companies Act, 2013 or the Articles of Association (AoA) of the company (as the case may be), also the notice must clearly specify the instructions on how to access and participate in the meeting.
A copy of the notice should be prominently displayed on the website of the Company.
In case a notice for meeting has been served prior to the date of the MCA circular dated 8th April, 2020, the framework proposed in the circular, can be adopted for the meeting by sending a fresh notice of shorter duration with due disclosures in consonance with the circular subject to receipt of shorter consent in accordance with the Companies Act, 2013.
The facility of appointment of proxies by members will not be available for such meetings.
A company can hold an Extraordinary General Meeting (EGM) under unavoidable circumstances through Video Conferencing (VC) or Other Audio-Visual Means (OAVM) and the recorded transcript to be kept in the safe custody of the company.
In case of public company, the recorded transcript of the meeting shall be made available on their website, as soon as possible.
Convenience of all the persons in different time zones must be taken into account before scheduling the meeting.
For easy participation of the members, two-way teleconferencing or webex facility must be available for the meeting held through Video Conferencing (VC) or Other Audio-Visual Means (OAVM).
The participants should be allowed to post questions concurrently or give time to submit questions in advance on the email address of the company.
Video Conferencing (VC) or Other Audio Visual Means (OAVM) facility must have a capacity of 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 following persons can attend the meeting without any restrictions on account of first-come first-served principle: (i) large shareholders (shareholders holding 2% or more shareholding), (ii) promoters, (iii) institutional investors, (iv) directors, (v) key managerial personnel, (vi) the chairpersons of the audit committee, Nomination and Remuneration Committee and Stakeholders Relationship Committee, (vii) auditors, etc.
The facility for joining the meeting shall be kept open at least 15 minutes before the start time of the meeting and the meeting shall not be closed till the expiry of 15 minutes after such scheduled time.
Attendance of the members through Video Conferencing (VC) or Other Audio-Visual Means (OAVM) shall be counted for the purpose of determining the quorum and all the members who has joined the meeting through VC or OAVM can vote at the meeting, unless otherwise as stated in the Articles of Association.
The Chairman shall be appointed in the following manner, unless the Articles of the company require any specific person as the Chairman for the meeting:
In case of less than 50 members present at the meeting: The members shall elect one of themselves to be the Chairman by way of show of hands; and
In all other cases: The Chairman shall be appointed by way of a poll conducted in a manner provided below.
An independent director and the auditor or his authorized representative, qualified to be the auditor shall attend the meeting Video Conferencing (VC) or Other Audio Visual Means (OAVM).
Institutional investors who are members of the company must be encouraged to attend the meeting through Video Conferencing (VC) or Other Audio Visual Means (OAVM).
The notice of the meeting shall provide a designated email address to all the members to convey their vote in case a poll is to be taken during the meeting on any resolution.
The company must provide a unique password or common password to join the meeting and it must maintain the confidentiality relating to such password, authenticity of the email address (es) along with other details of the members and other issues with respect to the designated email address at all times.
In case a poll is required on any item during the meeting, the member shall cast their vote only by sending emails through their email addresses registered with the company.
In case of less than 50 members, the Chairman may decide to vote by show of hands, unless a poll is demanded by any member.
The company may adjourn the meeting in case counting of votes requires time and the result may be declared at such adjourned meeting.
The company must also provide a helpline number through the registrar and share transfer agent (in case of public company) or technology provider, for those shareholders who require assistance in using the technology before or during the meeting.
All resolutions (whether ordinary or special) passed in accordance with this mechanism shall be filed with the Registrar of Companies within 60 days of the meeting, clearly indicating that the mechanism provided in MCA circular dated 8th April, 2020 along with other provisions of the Act and the rules were duly complied with during such meeting.
This framework and facility allows the companies to hold the shareholders’ EGM through VC or OAVM without compromising on the requirements of the law and requirements of the current lock down situation. Other safeguards/provisions have also been included in the Circular to ensure transparency, accountability and protection of investors.
The MCA circular dated 8th April,2020 is available at http://www.mca.gov.in/Ministry/pdf/Circular14_08042020.pdf for your in-depth reference.