Annual General Meeting: Meaning, Legal Requirements and Quorum

Annual General Meeting (AGM) is a yearly meeting of the company’s shareholders, stockholders, members, firms and organizations. Annual General Meeting (AGM) is held every financial year and it is mandatory for everyone to attend. A company is one of the most popular types of business arrangements in India and is widely selected by entrepreneurs and non-individual entities to run businesses and achieve their objectives. In India, the Companies Act, 2013 is the umbrella act regulating companies and all related compliances. The purpose of forming the Companies Act is to provide a legal framework for the formation of companies, covering the strata of incorporation, compliance, accountability, management, administration, etc.

Section 2(20) of the Companies Act, 2013 defines a company as a “Company incorporated under this act or any previous company law.”

Geeky Takeaways:

• A company is an artificial person created by law and has a separate legal entity, perpetual succession, a common seal, and limited liability.
• As members manage the affairs of the company, it is required that they all gather along with all the office bearers of the company and discuss performance, targets, upcoming action plans, etc.
• In the Annual General Meeting, functions like reviewing company accounts, approving audited accounts, elections, and financial records of the past year are discussed.

What is Annual General Meeting?

An Annual General Meeting (AGM) is held between the management and the shareholders of the company to have an interaction about the company’s business affairs. The Companies Act, 2013 has made it a compulsory statutory regulation to hold an Annual General Meeting to discuss the yearly results, auditor’s appointment, director’s appointment, etc. In an AGM, the shareholders with voting rights vote on the agenda, which is brought to the floor, and the management presents the financial statements of the company along with the auditor’s report.

The Companies Act, 2013 has established provisions regarding the conduct of the Annual General Meeting. Shareholders use the AGM as a platform to make the management aware of their views and concerns about the affairs of the company. Conducting Annual General Meetings is important as they ensure transparency about business affairs, provide a platform to include shareholders, and hold management accountable. All companies except the OPC are required to hold an AGM.

Legal Requirement for Holding an Annual General Meeting

Provisions related to the Annual General Meetings (AGMs) are mentioned in Section 96 of the Companies Act, 2013. This section defines all the general requirements for companies to hold an AGM, specifies the timeline for conducting it, and also discusses the provisions related to the first AGM for newly incorporated companies.

1. First AGM for New Companies: As per the provision, for a newly incorporated company, the first AGM should be held within nine months from the closing of its first financial year. It is worth noting that a company can’t seek an extension to hold the first AGM.

2. AGM for Other Companies (not their first AGM): AGMs are required to be conducted within six months from the end of the financial year. When a company fails to hold its AGM within the stipulated time as per the act, it has to seek an extension by the tribunal.

3. Maximum Allowable Time Gap: According to the Companies Act, 2013, there should not be a gap of more than 15 months between two consecutive AGMs. This provision is stated under Section 96(1).

4. Timing and Location of AGM: Every AGM should be held during business hours on a day;i.e., between 9 a.m. to 6 p.m., that is not a national holiday. The AGM of the company can take place at the registered office of the company or another location within the city, town, or village where the registered office of the company is situated. Unlisted companies have the option to hold the AGM anywhere in India if all members consent in advance. This provision is mentioned in Section 96(2).

5. Notice for the Meeting: The notice of the AGM should be sent in writing through speed post or electronic mode at least 21 days before the meeting. If the company has a website, the notice is to be hosted on the website as well. The notice shall be sent to the latest known address of the shareholder.

6. Meeting on Shorter Notice Period: The company can call for an AGM at a notice period of less than 21 days if 95% of the shareholders give their consent to hold such a meeting. Consent may be shared via writing or electronic means.

7. Content of the Notice: The notice should include, the venue of the meeting; the day, time, and date of the meeting; agenda items to be discussed; the date of issuing the notice; signature of the convener.

8. Maintain the Minutes Book: The company is required to maintain the minutes of the AGM and details of resolutions passed by postal ballot. It shall be signed by the chairperson and maintained in a book within thirty days of the conclusion of the meeting. The pages of the minutes must be consecutively numbered.

9. Resolution Filing: The company is required to file all the resolutions passed during the AGM, along with the explanatory statement. Form MGT-14 is used to do the filing with the ROC as per the provisions of Section 117(1) of the Companies Act, 2013. Any special resolutions or other resolutions passed should be filed within thirty days of passing.

10. Reporting of the AGM: Once the AGM is conducted, every listed company has to file a report on the AGM in form MGT-15, along with all the resolutions passed in the meeting and the explanatory statement, within thirty days from the conclusion of the AGM. This is provided under Section 121(1) of the Companies Act, 2013.

Quorum for the Annual General Meeting

Section 103 of the Companies Act, 2013 states the provisions regarding the Quorum. Quorum means the minimum number of members to be present to constitute a valid meeting. Section 103 states that unless the articles of the company provide for a larger number requirement, the Quorum for the meeting shall be as mentioned:

1. For a Public Company

• If the total number of members is below 1000, there are 5 members required to be personally present to form a Quorum.
• If the total number of members is above 1000 but below 5000, there are 15 members required to be personally present to form a Quorum.
• If the total number of members is above 5000, there are 30 members required to be personally present to form a Quorum.

2. For a Private Company

• The number of members is not significant; however, at least two members must be present within half an hour of the commencement of the meeting.

Issues undertaken at the Annual General Meeting

1. Review of the Financial Statements: Management puts the financial statements on the floor. The income statement, balance sheet, and cash flow statement are presented to shareholders to adopt the financial statements. Management also discusses another significant financial event that occurred over the past year.

2. The Election of the Board of Directors: The management of the company is undertaken by the board of directors, and they are conferred with the powers to make important decisions on behalf of shareholders. Shareholders cast their votes for the candidates they think are deserving candidates to manage the affairs of the company.

3. Appointing Auditors: This is one of the most important aspects of the AGM. The auditor is an independent party that is appointed to ensure that the financial statements of the company depict the true and fair picture of the affairs of the company and are free from any material misstatement. The shareholders pass a resolution at the meeting to appoint the auditor for a particular period, and even the remuneration of the auditor is fixed by the shareholders.

4. Compensating the Leadership: As the office bearers are selected to manage the affairs of the company, another aspect is to remunerate them for their efforts and advice. This includes paying salaries, bonuses, and other forms of compensation to the office-bearers. The board reviews the performance of the company’s top leadership and makes decisions regarding their payment, and then shareholders give their assent to the agenda.

5. Dividend Payment: The Board of Directors must state in the Directors Report the amount of dividend that they agree to pay as a dividend. The dividend recommended by the Board of Directors in the Board’s Report must be declared at the AGM of the company, and the shareholders share their assent or disagreement with the same. A declaration of dividend constitutes an item of ordinary business to be transacted at every AGM.

6. Approving the Minutes of the Previous AGM: Managing the minutes of the meeting allows the board to ensure proper records of all decisions made at the previous meeting. Shareholders can ask to make any corrections before the board finalizes the minutes of the meeting.

7. Making Changes to the Company’s Constitution: The members or shareholders of the company vote for the changes that require the approval of the members or shareholders either by ordinary resolution or by special resolution. The changes could be any amendment of articles of association, share capital, etc.

Conclusion

Every company is managed by its officers and shareholders. Shareholders and management need to meet and discuss business affairs and other important aspects of the company. Section 96 of the Companies Act of 2013 establishes the provision of an Annual General Meeting, where the act has a statutory requirement to conduct an AGM, except in the case of One Person Company (OPC). AGM is held so that special and ordinary business of the company can be discussed, among which the appointment of a director and auditor is considered important. The amount of the dividend is also decided by the management. The financial statements and the auditor report are also laid down in the AGM for shareholders to adopt and discuss. The Companies Act, 2013 has specified certain statutory requirements that are to be followed to conduct an AGM. Some of the important provisions are the quorum required, the sending of notice, the filing of a resolution, etc.

Frequently Asked Questions (FAQs)

1. Why is an Annual General Meeting held?

Answer:

An Annual General Meeting (AGM) is held between the management and the shareholders of the company to have an interaction about the company’s business affairs to discuss the yearly results, auditor’s appointment, director’s appointment, etc.

2. Can a company hold an AGM on August 15th?

Answer:

No, as per the provisions od Companies Act 2013, an AGM shall be held on any day other than a day that is declared a national holiday. In this case, as August 15 is celebrated as Independence Day and it is declared a national holiday, the AGM can’t be held on this day.

3. What if a shareholder can’t physically attend an AGM?

Answer:

A shareholder can appoint a proxy in case he is unable to attend an AGM. The proxy does not necessarily need to be a member of the company. The proxy forms have to be submitted to the company at least 48 hours before the date of the meeting.

4. What is a Quorum and its applicability in the case of a private company?

Answer:

Quorum means the minimum number of members to be present to constitute a valid meeting. In the case of a private company, a minimum of two members are required.

5. What should be the content of the notice?

Answer:

The notice should include:

• Venue of the meeting.
• Day, time, and date of the meeting.
• Agenda items are to be discussed.
• Date of issuing the notice.
• Signature of the convener.

6. What are the provisions related to the first AGM?

Answer:

As per the provision, for a newly incorporated company, the first AGM should be held within nine months from the closing of its first financial year. It is worth noting that a company can’t seek an extension to hold its first AGM.

7. Can a company call an AGM by sending a notice with a time limit shorter than 21 days?

Answer:

The company can call for an AGM at a notice period of less than 21 days if 95% of the shareholders give their consent to hold such a meeting. Consent may be shared in writing or electronically.