COVID-19 outbreak has forced MCA to think of ways for ease of doing business and give compliance reliefs to companies and LLPs. One such example is allowing companies to hold extra-ordinary general meeting (EGM) electronically.
On April 8, 2020, MCA issued a circular for companies who are required to hold EGMs but find it difficult to conduct physical meetings.
The Companies Act, 2013 (CA-13) contains provisions for conducting board meeting through video conference (VC) or through other audio-visual means (OAVM) but not for general meeting of members.
In view of the COVID-19 outbreak and the difficulties in holding physical meetings, MCA has notified measures and laid down procedures for conducting EGMs. The procedure is valid for EGMs conducted till June 20, 2020.
The circular is divided into two parts : one for companies, like listed companies, who are required to provide e-voting facility under the CA-13 and the other part for companies, like private or unlisted companies, which are not required to provide the facility but have to convene the EGM.
Here is the summary of the procedure:
PART ONE : FOR COMPANIES WHO ARE REQUIRED TO PROVIDE E-VOTING FACILITY UNDER THE CA-13 OR HAVE OPTED TO PROVIDE E-VOTING FACILITY
#1 – Notice of the meeting
- The notice of the meeting should disclose the manner in which the VC facility will be available to the members.
- The notice should have clear instructions on how to access and participate in the meeting
- The company should provide helpline number for shareholders who need assistance with technology before or during the meeting.
- A copy of the notice should also be prominently displayed on the website of the company, if any. Listed companies may also intimate stock exchanges about the same.
#2 – Time of the meeting
The companies are required to keep in mind the convenience of shareholders residing in different time-zones.
#3 – Participation of members
Companies should make sure that –
- The meeting allows two-way teleconferencing or webex.
- The members can pose questions during the meeting or are given time to submit questions in advance on the email address of the company
- At least 1000 members are allowed to participate on first-come-first- serve basis.
- The first-come-first-serve basis will not be applicable to large shareholders (having 2% or more shareholding), promoters, institutional investors, directors, key managerial persons, chairpersons, auditors and members of other committee of the Board of directors.
- The facility should be open at least 15 mins before and 15 mins after the scheduled time of the meeting.
#4 – Quorum of meeting
- All the members attending the meeting through VC will be counted for quorum of the meeting
- At least one independent director (where the company is required to appoint) and the auditor (or his authorized representative) should attend the meeting.
- Institutional investors should be encouraged to attend the meeting
#5- Appointment of Chairman
Unless the Articles of Association (AoA) of the company otherwise provide, the Chairman of the meeting should be appointed in the following manner:
- For the meeting with less than 50 members, the members should elect one of themselves to be the Chairman on show of hands unless a demand for poll is made by members.
- In other cases, by poll conducted through e-voting system during the meeting.
#6 – Voting before and during the meeting
- Before the actual date of the meeting, members should be provided with remote e-voting facility.
- All those members who have not voted through remote e-voting, to be allowed to case vote through e-voting or by show of hands during the meeting.
- During the meeting, the voting should be conducted in following manner:
- Where there are less than 50 members, the voting will be conducted through either e-voting or by show of hands unless a demand for poll is made by members. If there is a demand for poll, the voting will be conducted through e-voting.
- In all other cases, voting will be through e-voting facility
#7 – Appointment of proxy
Since no physical presence will be required for the meeting, members cannot appoint proxies. However, members can appoint representatives for e-voting or participating in the meeting.
#8 – Records of the meeting
- The recorded transcript of the meeting should be maintained in safe custody by the company.
- In case of public company, the transcript should be made available on the website of the company, if any, as soon as possible.
- All resolutions passed during such meeting should be filed with MCA within 60 days of the meeting, clearly stating that the mechanisms of the circular and the provisions of the CA-13 were complied with during such meeting.
PART TWO – FOR COMPANIES WHICH ARE NOT REQUIRED TO PROVIDE E-VOTING FACILITY UNDER THE CA-13.
Most of the requirements of this part are same as part one except the following:
- The facility should be such that atleast 500 members or number equal to total number of members (whichever is lower) can participate on first-come-first- serve basis
- Voting to be done by poll in the following manner:
- The company should provide a designated email address at the time of sending notice. Members will be required to convey their vote, when a poll is required to be taken, at such email address.
- Company should take due safeguards to maintain confidentiality of email address and password as well as check authenticity of the email address and other details of the members.
- Where there are less than 50 members, Chairman may decide to conduct voting by show of hands unless a demand for poll is made by members.
- During the meeting, where poll is required, members can vote on the resolution only by sending emails to the designated email address of the company. The email address of the members should be registered with the company.
- In case the counting of votes takes time, the meeting may be adjourned and called later to declare the result.
In both the cases, if the company has already served notice to its members prior to the issue of circular, the companies can conduct meetings through VC or OAVM on fulfillment of two conditions:
As per the provisions of the CA-13-
- consent of the members is received and
- fresh notice of shorter duration is issued consequently.
This is a welcome move by MCA to ease the procedure to be followed for conducting EGMs by companies.
However, the companies are also required to ensure that all other compliance w.r.t general meetings, like making disclosures, inspection of documents, etc., as required in AoA, under the CA-13 and rules thereof are made through electronic mode only.
MCA has allowed companies to conduct EGMs electronically only till June 30, 2020. In other cases, companies can take approval of the shareholders through e-voting or postal ballot route. With the AGM season coming up and the increasing uncertainty due to the outbreak, will MCA allow companies to continue to conduct general meetings electronically is what we have to see.