All you need to Know about Annual General Meeting (AGM) of a Company

Every company needs a collaborative meeting with major stakeholders to discuss the main elements, such as company performance and profit generation, as well as multiple crucial things. These meetings, particularly known as AGMs, occur annually before the end of the financial year.
The Companies Act, 2013 mandates that every company, whether public or private limited, conduct an AGM. During an AGM, companies evaluate various parameters such as administration and overall performance and make major decisions. Let’s learn more about AGM's meaning, and along with that, let’s build up the discussion to understand the legal framework and conditions for the conduction of a general meeting.

What is an Annual General Meeting (AGM)?

To understand what an annual general meeting, we first need to know its characteristics, the legal structure and objectives.

AGM meaning

AGM full form in the company stands for An Annual General Meeting. This type of meeting is one of the most vital ones held in a company among other meetings such as Board Meetings or Extraordinary General Meetings. It is only during an AGM, companies decide on their future strategies as well as evaluate the overall performance of the company. It is during these meetings that company members interact with the stakeholders, and try to understand if the stakeholder's interest is aligning well with the company.

Parts of an AGM

An annual general meeting does not start as a normal meeting, rather, it has an organised approach to begin the meeting. Here are the most significant ones:

• Recapitulation and approval of the last meeting - Meeting minutes from the last meeting are often looked up and carefully reviewed by the Board Members. The members may address any discrepancy or anomaly from the last meeting and try to resolve it before moving to the current annual meeting.
• Call to Order - In this, the Board members set specific time that will be allotted to any meeting participants, and also specify the roles every participant is expected to play. It may be hosting the meeting, or presenting the department's activities and more.
• Annual Report Presentation - The Board presents all the financial reports to the meeting participants, which includes major financial sheets such as balance sheets or profit and loss statements. All annual profits and losses are even reported during this period.
• Review of previous year's performance - This point perfectly answers the question of “what is annual general meeting”. In this type of meeting, the board members present the financial summary from the previous year, which includes the general actions and decisions collectively taken.
• Nomination of new Board members - This part is a highly significant part of the meeting, whereby the new Board members are elected. A new member is elected only when the majority of the stakeholders nominate for a new director.

Legal Framework for AGM Under Companies Act

The overall legal framework for AGM is guided by Section 96 of the Companies Act, 2013. This Act mandates that all organisations need to hold an annual general meeting except personal companies. The law also mandates two major clauses: The company needs to hold the meeting within September 30, or not later than 6 months from the date of the end of the financial year. An annual meeting should be held within fifteen months after the date of the last annual meeting, or there should not be a gap of more than fifteen months between two annual meetings.

Conditions for Conduction AGM

There are a few specific conditions that all need to be followed to conduct an AGM.

• The Board needs to inform all the participants prior 21 days before the actual scheduled meeting.
• The Board needs to inform about the specifics such as the day and date of the meeting, as well as the detailed time during which the meeting will commence.
• The meeting should be shared with all of the members, company directors, statutory auditors and legal representatives of any deceased member.
• The notice should be shared by an electronic medium or by mail.
• The Board needs to publish the notice on the website of the company.
• The notice needs to be mentioned by an official or a gazetted officer of the government.

Quorum for AGM

The quorum for AGM refers to the minimum number of members needed to be present during the board meeting. Section 103 of the Companies Act, 2013 dictates various requirements for a minimum number of members to be present to constitute a quorum. Here is a more concise list: In the case of public companies:

• If there are a maximum of a thousand members present during the day of the meeting, the quorum will be five members.
• If more than a thousand members but less than five thousand members are present during the meeting day, then fifteen members have to be present.
• If during the meeting date, more than five thousand members are present, then the quorum should be of thirty members. In the case of private companies Two members must constitute the quorum in the case of a private company, irrespective of the total number of members present during the day of the board meeting.

Gap Between Two Annual General Meetings

The gap between the two annual general meetings should not be more than fifteen months. There is a specific time limit for holding annual meetings for every company, and that needs to be within the 30th of September of every year. In case a company is holding its first annual meeting, it can hold the meeting within nine months from the end date of the first financial year.

Minutes of Annual General Meeting

In the case of an annual meeting, the minutes of the meeting significantly matter. Minutes of the meeting straightly refer to a summary of all the important points and takeaways of the meeting. All the resolutions passed during the meeting are clearly stated in the minutes. There are, however, certain rules for passing the minutes of the meeting. Minutes should be constructed within 30 days after the annual general meeting has ended. The meetings also should be presented to the board members within seven days of request by the members. In case of any failure, the company will have to submit a penalty of ₹25,000.

Time extension to hold AGM

In the case of asking for a time extension to hold an AGM, a company must ask prior by applying online through GNL-1. In the e-form, the company must fill out the actual reason and time extension needed. Only the Registrar of Companies (RoC) is liable to extend the required extension. Depending on the reason and time extended, the RoC may consider an extension. An extension cannot be applied in the case of the first annual general meeting.

Objectives of an AGM

The major objectives of holding an annual general meeting consist of:

• Appointing a new director on majority votes of shareholders
• Deciding on allocation of dividend to the shareholders
• Adoption of the audited financial statements
• Presentation of performance reports to shareholders
• Nominating an auditor and also deciding on the remuneration of the auditor

Procedure for Conducting an AGM

The procedure for holding an AGM involves a few steps, starting with the due notice period within which a company should inform the members. In the case of both public and private companies, the notice of an annual meeting should be supplied within 21 days. The people who should be notified about the meeting consist of:

• Statutory auditors of the company
• Major directors of the company
• Legal representatives of any deceased member However, there is an exception in the minimum number of days of supplying the notice. The notice can be supplied at less than 21 days only if at least 95% of the members choose to vote for holding an AGM at less than 21 days. A part of the procedure is also to conduct an annual meeting between the working hours of 9 am to 6 pm excluding statutory holidays. In the case of deciding the venue for holding the meeting, the board members collectively decide on the location.

Consequences of Not Conducting AGM

If any company fails to conduct the AGM during the specified period, the director of the company or any member of the Tribunals may order the meeting to be held again. In case the company further defaults the meeting even after the Tribunal has ordered it, a fine of ₹1 lakh will be imposed on every Board member of the company.

Conclusion

Annual General Meetings offer the opportunity to share the performance of the company directly with the shareholders. It is also a place where the audited financial reports are presented, and the new Board Directors are elected. From 2020, companies are allowed to hold an annual meeting via video conferencing or by any form of audio-visual means.