The Ministry of Corporate Affairs (MCA), taking into account the pandemic situation in the country extended the due date for conducting the Annual General Meeting (AGM) by the companies. Every company should hold AGM at least once in a year under Section 96 of the Companies Act, 2013. A company must hold AGM every year within six months from the date of closing the financial year.
AGM gives a chance to shareholders of a company to put forth their views in the business or transactions of the company. Failure to hold AGM attracts penalty to the directors of the company, and the Company Law Board can call or direct to conduct AGM.
Before conducting an AGM, the Companies Act provides to issue 21 days notice to the members stating the details of the meeting. But due to the coronavirus outbreak, the MCA extended the time to hold the meeting. The companies submitted several representations to the MCA for extension of the time provided under the Companies Act to hold AGM for the financial year ending on 31st March 2020.
Due to lockdown and restrictions on the moment of people, it became difficult for the companies to conduct AGM. Further, there is a need to observe social distancing norms while holding AGM. All these factors caused difficulty for the companies to hold AGM. Thus, MCA issued circulars providing extension in the period to hold AGM to ease the situations of the companies.
The MCA Circular No.28/2020 issued on 17th August 2020 provides that companies can seek an extension for holding of AGM by filing Form GNL-1 to the Registrar of Companies (ROC) before 29th September 2020. MCA in this circular advises the ROC to consider the Form GNL-1 liberally and grant an extension of three months to hold AGM. With the extension of three months, the companies whose financial year ends on 31st March 2020 could hold AGM by 31st December 2020 as against the regular date of conducting AGM within 30th September 2020.
The above mentioned MCA Circular provides for holding AGM by 30th September 2020 or apply for an extension of time beyond 30th September 2020 to the ROC. On Tuesday, the MCA issued fresh directions to all the ROC across the country to extend the time of holding AGM by companies without the filing of formal application .i.e. Form GNL-1 and payment of the fee.
The MCA also directed the ROC to provide an extension to companies for another three months to conduct AGM. The MCA directions cover the relief of extension of time to the companies who have already filed the applications, i.e. Form GNL-1 to the ROC but not approved or rejected. This direction is due to the difficulties caused to the companies in the present situation of the country. These directions are given by the MCA, keeping in mind the demands from various associations for extending time to hold AGM.
For the first time, the MCA has given such relief generally to all companies. The extension of the due date for holding AGM is for the companies whose financial year ends on 31st March 2020 and not for the companies holding their first AGM. The extension provided is for three months from the due date within which the AGM is to take place, meaning the extended date is 31st December 2020 within which the companies should hold AGM. The companies can hold AGM within 31st December 2020 without filing the Form GNL-1 to the ROC.
The MCA directions will benefit many companies. They provide an extension to companies whose Form GNL-1 is still pending with the ROC. Further, even the rejected Form GNL-1 companies also get time till December to hold the meeting automatically due to MCA directions. These directions come as a relief for companies whose application Form GNL-1 got rejected. This extension will apply when the respective ROC issues such an order of extension of time.
There are currently 22 ROC in India. Every company falls under the jurisdiction of one of the ROC out of 22. If the ROC under whose jurisdiction the company comes under issue order of extension, then the company can hold AGM within 31st December 2020. Following the direction of MCA, 15 ROC has issued orders extending the due date of holding the AGM. There is an expectation from the remaining ROC to give a similar order of extension soon.
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