All of us are well aware that a company must convene its annual general meeting within the timeline stipulated under the Companies Act, 2013. But there may be circumstances wherein a company is unable to hold its annual general meeting within such stipulated time-limit. Can such a company get some additional grace period to hold its meeting and, if yes, what is the procedure and related conditions? Here, in this article, let’s find out this!
What is the time limit prescribed for holding an AGM?
According to Section 96(1) of the Companies Act 2013, every company other than One Person Company needs to hold an annual general meeting (AGM) every year. One Person Company is exempt from holding an annual general meeting.
The key provisions relating to the holding of an AGM are segregated into two parts as under:
The first AGM of a company needs to be held within a period of 9 months from the close of the first financial year, i.e., the financial year in which the company is incorporated. Hence, it shall not be necessary for the company to hold any AGM in the year of its incorporation.
For example, Aviation Limited was incorporated on 11th December 2018. Now, according to Section 96(1), the company’s first financial year will close on 31st March 2019. It may hold its first AGM by 31st December 2019, i.e., within 9 months of the close of its financial year.
Subsequent AGM (regular)
The Subsequent AGM of a company needs to be held within a period of 6 months from the close of every financial year.
The time gap between two meetings: Section 96 further states that an AGM should be held once in each calendar year and the gap between two AGMs cannot be more than 15 months’ time.
1. Within 6 months of the close of the relevant FY
2. Within 15 months of the last AGM
3. In each calendar year
Note: The three time-limits under the Act as specified above are separate and cumulative. Non-compliance of any of them would constitute an offence and, therefore, the last date for holding an AGM shall be the earliest of the above three limits.
Extension of AGM under Companies Act 2013
The aforesaid period of six months or interval of fifteen months, as is the specified time-limit for holding AGM under Section 96(1), may be extended by a period not exceeding three months with the prior approval of the Registrar of Companies.
In case, it is not possible for a company to hold an annual general meeting within the prescribed time limit, the Registrar may extend the time within which any AGM shall be held. The Registrar has been accorded the power to grant an extension of 3 months to any company for holding its AGM, on account of special reasons. But this benefit cannot be availed in respect of the first AGM of a company. In other words, no such extension can be granted by the Registrar for the holding of the first AGM.
For example, Wooden Furniture Private Limited closed its financial year on 31st March 2019. The last AGM was held on 30th April 2018. According to Section 96(1), the company must hold its AGM for the financial year 2018-19 on or before the earliest of the following dates:
- 30th September 2019 which is 6 months from the close of the FY
- 30th July 2019 which is 15 months from the date of the last AGM
Thus, Wooden Furniture Private Limited needs to hold its AGM on or before 30th July 2019 unless an extension is granted by ROC on special grounds. Even if the extension is granted, the due date for holding the AGM would be 30th October 2019.
Reasons for extension of AGM
Some of the reasons for obtaining an extension may be:
- Non-signing of financial statements owing to non-availability of auditors due to resignation, death, incapacity to sign, or such other valid reason
- Delay in finalization of financial results and/or completion of the audit
- Non-readiness of the financial statements due to natural calamity, loss of financial data, absence of directors, etc.
- Non-availability of the requisite number of shareholders which may result in absence of a quorum
- Falling of the number of directors below the ceiling prescribed by the Act
- Mergers and acquisition
- Confiscation of books of accounts by Income Tax Department, fraud investigation cell, or any other Government agencies
- Such other reasons as the Registrar may consider valid and justified
Procedure for seeking an extension of AGM
- Send a notice of board meeting to each director of the company for propounding the matter of obtaining an extension of AGM.
- Convene a board meeting on a specified date
- Pass a board resolution for the extension of the time-limit for holding an annual general meeting
- File an application to the Registrar of Companies in e-Form GNL-1
- e-Form GNL-1 should be accompanied by a certified true copy of board resolution and a detailed application mentioning the reason and period of extension sought
- Follow up with the office of the Registrar of Companies
- On examination of relevant documents, ROC may grant the extension
- Obtain a certificate of the grant of extension of AGM from the Registrar
Form for extension of AGM
E-Form GNL-1 is required to be filed pursuant to Rule 12(2) of the Registrar of Companies (Registration Offices and Fees) Rules, 2014, and the Companies Act, 2013.
A user company can file an application in e-Form GNL-1 seeking approval from ROC for the extension of the time-limit of holding of AGM up to 3 months.
The application must be made before the required due date of the AGM (i.e., on or before 29th September 2020, if the AGM’s due date is 30th September 2020).
Along with e-Form GNL-1, the company needs to attach a detailed application to ROC for extension of AGM and a copy of the board resolution passed for the purpose of making such an application.
Board resolution for extension of AGM
A board resolution (to be attached with e-Form GNL-1) should be passed whereby the Board of Directors of the company are requested to grant approval for filing an application in e-Form GNL-1 to the concerned ROC for seeking an extension of time (maximum 3 months) from the last date on which the AGM of the company should have been held.
Application to ROC for extension of AGM
The Registrar is more likely to grant an extension sought for the time-limit of holding AGM when the concerned company furnishes a detailed application explaining the reasons for the delay to convince the ROC regarding its inability to hold AGM within the stipulated period.
The detailed application to ROC for extension of AGM (to be attached with e-Form GNL-1) should contain the following details:
- Reasons for extension
- Period for which extension is required (It should not exceed three months)
Penalty for default in the holding of AGM
Section 99 provides that if any default is made in holding a meeting of the company, the company and every officer of the company who is in default shall be punishable with a fine which may extend to Rs. 1 lakh, and in case of continuing default, with a further fine which may extend to Rs. 5,000 for each day during which such default continues.
MCA’s clarification for the Financial Year 2019-2020
The Ministry of Corporate Affairs (MCA) vide a General Circular No. 20/2020, dated 5th May 2020 provided relaxations to all companies regarding the holding of AGM through video conferencing (VC) or other audio-visual means (OAVM). This was granted on account of the hardships faced by many corporates in meeting their compliance requirements due to the disruption caused in their operations because of Covid-19.
Another General Circular No. 28/2020, dated 17th August 2020 was issued by MCA to clarify that a company can voluntarily apply to seek an extension in the due date of holding AGM for the financial year ended 31st March 2020 through the filing of e-Form GNL-1. The Circular accentuated the fact that no blanket extension will be granted, rather each company will have to submit a request in e-Form GNL-1 and get their individual approval by virtue of Section 96.
A specimen board resolution for seeking an extension of AGM is shown below:
Hope the information provided in this article proves helpful to you!