Background: Annual General Meeting (AGM) of various eminent public companies like Reliance have often appeared in the news, but many people are not very familiar with the concept of AGM. An AGM is conducted to let the members know about the past performances and future strategies of the company. This article discusses what, when and how these meetings are conducted and the purpose behind holding such meetings.
An Annual General Meeting (AGM) is a meeting that must be convened mandatorily by all private and public companies (other than One Person Company) once a year.
What is an AGM?
An Annual General Meeting (AGM) is a meeting that must be convened mandatorily by all private and public companies (other than One Person Company) once a year. It must hold at the Registered Office of the Company and must be a working day.
It is only at the AGM that the shareholders and the directors of the Company get to interact with each other. Attending AGMs can help an organization grow as members can review the company’s growth rate and decide on the future scope for improvement.
The main objective of an AGM is to transact about Ordinary Business and Special Business
Ordinary Business consists of the following discussions:
- One of the basic objectives of holding an Annual General Meeting is to present and get the audited financial statements approved by the shareholders and members of the Company.
- The Board shall convene an AGM for shareholders to vote and elect the upcoming Board of Directors in place of those retiring from their post on a rotational basis.
- Selection of Auditors and finalising their compensation for the new accounting term is another main objective of conducting an AGM.
- The shareholders shall at the AGM declare and confirm the dividends as proposed by the Board.
Special Business would include:
- If the Board wants to increase the Authorized Share Capital of the Company, they need to get the approval of members in the AGM
- Articles of Association can be altered by seeking approval of members in AGM
- Since AGM is conducted on behalf of the Company, it would address any grievances or issues as raised by the stockholders and protect their interests.
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Other Legal Requirements for AGM
- Notice for calling of an AGM is to be served by the Board of Directors at least 21 clear days in prior of holding the meeting. The place, date and time for the meeting should be chosen as per prescribed regulations.
- The requirement of Quorum that must be present throughout the meeting is as under:
- In the case of Public Companies of up to 1000 members- At least 5 members must be present;
- In the case of Public Companies of between 1000 to 5000 members- At least 15 members must be present;
- In the case of Public Companies of between more than 5000 members- At least 30 members must be present;
- At least 2 members must be present, in the case of Private Companies
- Proxies can be sent, in case, a member is unable to attend the meeting in person. However, this is permissible only if the proxy forms are submitted to the Company at least 48 hours in advance of the meeting.
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Periodicity of holding an AGM
- As per the Companies Act 2013, the time for holding the first AGM is 9 months from the closing date of the first Financial Year.
- However, subsequent AGMs can be called within 6 months from the closing of the Financial Year.
- It must be noted that two AGMs cannot be held at a gap of more than 15 months.
- 3 months extension can be requested from the Registrar if an AGM cannot be conducted within the prescribed time limits.
The agenda and the events transacted at the meeting has to be written and recorded in the Minutes Book for future reference.
Penalty for not holding an AGM
A company, however, big or small, those that are incorporated in India have to comply with the AGM requirements every calendar year, failing which the Company and its members may have to face serious consequences.
If there is a default in holding an Annual General Meeting, then the Company and its officers shall be liable to pay a fine of up to INR 1 lakh and in case, the default continues, a fine of INR 5,000 shall be paid for each day of continuing default.
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