Within days of the nationwide lockdown due to COVID-19 (Corona), Indian Stock exchanges on 26th March 2020 received intimation of first extraordinary general meeting through audiovisual means. This was not legally facilitated. After a great demand, the Ministry of Corporate Affairs came out with a hurried framework through its General Circular 14/2020 dated 8th April 2020, applicable to all listed or unlisted companies. It raises more question that solution as of now but certainly in a good direction. We will in this post discuss this framework for private and unlisted public companies with less than one thousand members. {Update: This post is updated to incorporate provisions of General Circular 17/2020 dated 13 April 2020}
LOGICS
The Circular clearly remind the stakeholders, the Companies Act, 2020 does not contain any specific provision for allowing the conduct of members’ meeting through video conferencing (VC) or other audiovisual means (OVAM). Therefore, it is prudent for all companies either to choose for e-voting under Section 108 or Postal Ballot under Section 110. These two process E-voting and postal ballot are not available for items of ordinary Business (AGM) and item where any person has a right to be heard. By using the same logic, this circular excluded these items from its purview. This Circular being extra-ordinary measure suggests its use only under unavoidable circumstances and till 30th June 2020, a date likely to be extended.
Before reading this provision, we must emphasise that we are discussing the framework as applicable to companies with less than 1000 members and not opting for e-voting and postal ballot. These provisions are part of Paragraph 3(B) of this circular.
MEETINGS
With the exclusion of ordinary business items, this circular does logically not extend to the Annual General Meeting.
This Circular is applicable for special business items to be taken on extraordinary general meetings but not for any item where any person has a right to be heard – like removal of directors or auditors.
The circular suggests limiting such meeting for unavoidable items therefore prima facie suggest the use of postal or e-voting mechanism. My prima facie reading for unavoidable circumstances is special items which may require proper discussion.
NOTICE
{The notice to the members may be given only through email registered with the company or with the depository participant/depository. [GC-15/i-B-I] A copy of the notice shall also be prominently displayed on the website, if any, of the company. [GC-17/i-B-II]
In order to ensure that all members are aware that a general meeting is proposed to be conducted in compliance with applicable provisions of the Act read with General Circular No. 14/2020 dated8th April 2020, the company shall:
-
- Contact all those members whose email addresses are not registered with the company over the telephone or any other mode of communication for registration of their email addresses before sending the notice for meeting to all its members; or
- Where then contact details of any of the members are not available with the company or could not be obtained as per (a) above, it shall cause a public notice by way of advertisement to be published immediately at least once in a vernacular newspaper in the principal vernacular language of the district in which the registered office of the company is situated and having a wide circulation in that district, and at least once in the English language in an English newspaper having a wide circulation in that district, preferable both newspapers having electronic edition and specifying the advertisement the following information:
- That the company intend to convene a general meeting in compliance with applicable provisions of the Act read with the General Circular 14/2020 dated 8th April 2020 and General Circular 17/2020 dated 13th April 2020 and for the said purpose it proposes to send notices to all its members by email after, at least. 3days from the date of the publication of the public notice;
- The details of the email addresses along with a telephone number on which the members may be contacted for getting their email addresses registered for participation and voting in the general [GC-17/i-B-III]
The chairman of the meeting shall satisfy himself and cause to record the same before considering the business in the meeting that all efforts feasible under the circumstances have indeed been made by the company to enable members to participate and vote on the items being considered in the meeting. [GC-17/i-B-IV]
The company may opt not to send notices through post or speed post, if sending notices by email or giving public notice seeking email addresses of its members.}
The circular, besides usual law governing notice, require additional information in the notice.
The notice shall contain designated email address to be used for the purpose email voting. [Sub – paragraph X]
The notice shall contain information of this framework and clear instruction on how to access and participate in the meeting. The company shall provide the helpline number to assist participants who might need assistance with using the technology. [Sub – paragraph XV]
A copy of the meeting notice shall be prominently displayed on the website, if any, of the company. [Understanding from Sub – paragraph XV]
NOTICES ALREADY ISSUED
In case a notice for an extraordinary general meeting is already issued, a fresh notice of shorter duration with due disclosures in consonance with this Circular is required to be issued. [Sub – paragraph XVI]
Such notice shall not require a fresh consent for shorter notice under section 101(1) which requires consent from 95% of the paid-up capital or the voting powers, if such consent is already received. [Sub – paragraph XVI]
PROXIES
The facility of appointment of proxies by members will not be available for such meetings. [Sub – paragraph VIII]
AUTHORISED REPRESENTATIVE OF MEMBERS
In pursuance of section 112 and section 113 of the Act, representatives of the members may be appointed for:
- the purpose of voting through remote e-voting; or
- participation and voting in the meeting held through video conferencing (VC) or other audiovisual means (OAVM). [sub – paragraph VIII]
TIME OF THE MEETING
The convenience of different persons positioned at different time zones shall be kept in mind before scheduling the meeting. [Sub-paragraph II]
However, I will read shall in this sub–paragraph as will and therefore directory only.
SPECIAL ATTENDEES OF THE MEETING
Where the company is required to appoint an independent director at least one independent director shall attend the meeting through VC or OAVM. [Sub – paragraph VII]
The auditor or his authorized representative, who is qualified to be an auditor shall also attend such meeting through VC or OAVM. [Sub – paragraph VII]
The intention may be to have constant and independent watch on the quality of the VC or OAVM.
Where institutional investors are members of a company, they must be encouraged to attend and also vote in the said meeting through VC or OAVM. [Sub – paragraph IX]
PARTICIPATION RELATED FACILITIES
All care must be taken to ensure that such meeting through VS or OAVM facility
- allows two-way teleconferencing or webex for the ease of participation of the members; and
- the participants are allowed to pose questions concurrently or given time to submit questions in advance on the email address of the company. [Sub – paragraph III]
The email address referred here may be the same as provided in sub – paragraph (X).
Such VC or OAVM facility must have a capacity to allow at least 500 members or members equal to the total number of members of the company (whichever is lower) to participate on a first come first serve basis. [Sub – paragraph III]
It may be noted that we are discussing this framework as applicable to companies with less than 1000 members.
The webex is a prime brand of video conferencing system and this term might be avoidable in the circular.
Following persons and shareholders are exceptions to the first come first serve principle:
- the large shareholders (i.e. shareholder holding 2% or more shareholding), promoters;
- institutional investors;
- directors;
- key managerial personnel;
- the chairpersons of:
- the Audit Committee,
- Nomination and Remuneration Committee and
- Stakeholders Relationship Committee; and
- [Sub – paragraph III]
Joining TIME
The Facility for joining the meeting shall be kept open at least 15 minutes before the time schedules to start the meeting and shall not be closed till the expiry of 15 minutes after such scheduled time. [Sub – paragraph IV]
The company may at its option permit members and invitees even after these 15 minutes if it has the capacity to allow such joining.
QUORUM
Attendance of members through VC or OAVM shall be counted for the purpose of reckoning the quorum under section 103 of the Act. [Sub – paragraph V]
The companies and service providers need to devise the mechanism to check quorum and attendance at the time of joining and leaving the meeting.
Chairman of the Meeting
Where the Articles of Association of the company require a specific person to be appointed as chairman, such person shall be chairman.
Otherwise, the chairman for the meeting shall be appointed in the following manner:
- Where there are less than 50 members present at the meeting, the Chairman shall be appointed in accordance with Section 104;
- In all other cases, the Chairman shall be appointed by a poll conducted in a manner provided in this framework. [Sub – paragraph VI]
A close reading of the framework makes option (b) for poll impractical and avoidable.
PROCESS FOR VOTING
Before reading this provision, we must re-emphasis that we are discussing the framework as applicable to companies with less than 1000 members and not opting for e-voting and postal ballot.
DESIGNATED EMAIL ADDRESS FOR POLL
The company shall provide designated email address to all members at the time of sending the notice of meeting so that the members can convey their vote, when a poll is required to be taken during the meeting on any resolution, at such designated email address. [Sub – paragraph X]
This designated email address may be different from the registered email address of the company with MCA. However, I will advise the use of the same.
CASTING VOTE BY EMAIL
During the meeting held through VC or OAVM facility, where a poll on any item is required, the members shall cast their vote on the resolution only by sending emails through their addresses which are registered with the company. The said emails shall only be sent to the designated email circulated by the company in advance. [Sub – paragraph XI]
AUTHENTICITY AND SAFEGUARDS FOR EMAIL ADDRESSES
The confidentially of the password and other privacy issues associated with the designated email address shall be strictly maintained by the company at all times.
Due safeguards with regard to the authenticity of email addresses and other details of the members shall also be taken by the company. [Sub – paragraph XII]
{This paragraph does not provide for polling by members at any time before the general meeting. The poll will take place during the meeting, and the members may convey their assent or dissent only at such stage on items considered in the meeting by sending e-mails to the designated e-mail address of the company, which was circulated by the company in the notice sent to the members. [GC-17/2020 1(iv)]
The polling shall start during the meeting and result may be declared either in the same meeting or its adjourned meeting.}
VOTING BY SHOW OF HAND
Where less than 50 members are present in a meeting, the Chairman may decided to conduct a vote by show of hands, unless a demand for the poll is made by any member in accordance with section 109 of the Act. [Sub – paragraph XIII]
Once such demand is made, the procedure for voting by casting vote using email shall be followed.
COUNTING
In case the counting of votes requires time, said meeting may be adjourned and called later to declare the result. [Sub – paragraph XIV]
FILING OF THE RESOLUTION
All resolution passed in accordance with this mechanism shall be filed with the Registrar of Companies within 60 days of the meeting clearly indicating therein that the mechanism provided herein along with other provisions of the Act and rules were duly complied with. [Sub – paragraph XVII]
RECORD OF PROCEEDINGS
In case of a public company, the recorded transcript of the meeting, shall as soon as possible, be also made available on the website (if any) of the company. [Sub – paragraph I]
I disagree with this provision. Where the minutes are not a public document, why should such a raw recording be a public document?
OTHER COMPLIANCES
All other compliances as applicable to extraordinary general meetings shall be applicable to such meetings viz disclosures, inspections, authorisation. However, such provisions may be complied with in electronic mode.
Aishwarya Mohan Gahrana
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