It is a well-known fact that Private Limited Company is a highly preferred mode of starting any kind of business. There are a few mandatory ROC compliances that companies are...
Annual General Meeting, commonly known as AGM, is a mandatory yearly compliance requirement that every company needs to follow. In the case, any company fails to conduct the AGM, it will be considered as default. As a result, the company would be subject to a hefty penalty. Therefore, it is imperative for every company to hold an AGM every year and that too within a prescribed time.
In this write-up, we have tried to cover every significant aspect of an Annual General Meeting. Hence, let us start with the definition of AGM.
What is Annual General Meeting?
Annual General Meeting is a meeting that every private limited company and the public company has to conduct every year for serving several organizational agendas. In this meeting, all the directors and shareholders, along with the Chairman of the company gather and discuss various issues and objectives of the company. Besides, an AGM protects the interest of the shareholders. Let’s find out the main intent of an AGM.
Purpose for holding an AGM
The primary reason for conducting an annual general meeting is to provide an overall status of the organization. The chairman of the organization conducts the meeting and prepares the minutes. Every director and shareholder of the company shall be present in the meeting and provide the required reports. Besides, the main purposes of the annual general meeting are as follows:
- Approval of the audited accounts
- Finalization/regularization of appointed directors
- Approval of appointed auditors
- Approval of financial statements & Director’s report
- Minutes of the previous meeting
Apart from these, other entities that are taken care of in the meeting are: approving the proposed dividends, compensation of officers and other issues that shareholders or any director of the company have.
What is the prescribed time period for conducting an annual general meeting in India?
|Due dates for holding an AGM of the company|
|First AGM||Within 18 months from the date of company incorporation|
|Next and all other subsequent AGM||Within 15 months from the date of previous AGM|
As you can see in the above table, newly incorporated companies have a relaxation of 18 months for holding an AGM from the date of the company’s incorporation. However, it is not mandatory to conduct any AGM in the year of the corporation.
Further, all other subsequent meetings are supposed to be conducted within 15 months from the date of previous AGM and within six months from the financial year closure .i.e., 30th September.
Whether or not your company has performed any activity, you need to conduct an AGM mandatorily in every calendar year.
How to conduct an Annual General Meeting in India?
The very first step to conducting an AGM is to send a notice regarding the same to every member, directors, shareholders, auditors, and debentures trustees. The notice for AGM must be sent 21 days before the meeting is conducted. Further, the notice should also consist of the company’s annual report.
However, under certain circumstances, a shorter notice of 7 days may be sent with the approval of the members of the company qualified to vote at the meeting.
It is obligatory for every director and shareholder to be present in the meeting and present all the reports associated with the company in the AGM. The chairman of the company will preside the meeting and the minutes must be noted. Further, every concern pertaining to the organization will be discussed in the meeting and a resolution for the same would be given.
Quorum for Annual General Meeting
In the case of Private Limited Company, 2 members and for Public Company, 5 members present in the meeting should be the quorum of AGM. This implies in the condition the Articles of Association provides any larger quorum.
In the case, the quorum isn’t present within half an hour from the appointed meeting time, the meeting stands adjourned to the same day but in the next week, the same time and same place or as decided by the Board of Directors. However, if the quorum isn’t present even at the adjourned meeting, then the members already present will be the quorum.
Legal consequences/Penalty for not conducting an Annual General Meeting within the stipulated time
In the case, the Private or Public Limited Company fails to comply with the provisions of Section 96 of the Companies Act, 2013; the Tribunal under Section 97 of the Companies Act, 2013 has the authority to direct company to hold an Annual General Meeting on the basis of the application made by any member of the company to the Tribunal. Further, it can also order any ancillary or consequential directions or measures as it deems relevant and appropriate to the company.
|Defaulting in holding Annual General Meeting (AGM)|
|Type of non-compliance||Fine in Rs.|
|1. If the company fails to hold an AGM||Rs. 1 lakh|
|2. If the contravention continues even after the order from Tribunal||Rs. 5000/- per day till the default continues|
As per the provisions of Section 96 of the Companies Act, 2013, it is imperative to hold or conduct an AGM within the stipulated time. In cases, the company doesn’t conduct AGM, then the company, along with other officers in default will be subject to punishment. The fine for non-compliance could amount to Rs 1 lakh. However, if the contravention continues after the order from the Tribunal, the fine may extend to Rs 5000/- per day.
Is there any extension for holding an AGM?
Yes, there may be an extension for holding an AGM. Under Section 96 (1) of the Companies Act, 2013, the ROC (Registrar of Companies) could extend the period for holding an AGM within which the annual general meeting (not being the 1st AGM) must be conducted, and should not exceed three months.
We hope this article was helpful to you. In cases, you have any doubts regarding the AGM, do leave a comment below. We will answer your query in the least possible time. Apart from this, if you need a professional to look after your company’s compliance, you can contact Swarit Advisors.