Companies allowed to hold EGMs through VC or OAVM during Covid-19

Author: thinkinglegal | April 17, 2020 - 19:47 | Tags: Regulatory Advisory and General Corporate

On 08 April 2020, the Ministry of Corporate Affairs (“MCA”), issued a General Circular No. 14/2020 giving a clarification on passing of ordinary and special resolutions by the companies under the Companies Act, 2013 (“Act”) on account of the threats posed by Covid-19. Later, on 13 April 2020, MCA issued a follow up clarification General Circular No. 17/2020. (“Circulars”)

In these unprecedented times, MCA has requested the companies to take all decisions of urgent nature requiring the approval of members, other than items of ordinary business or business where any person has a right to be heard, through the mechanism of postal ballot/e-voting in accordance with the provisions of the Act without holding a general meeting, which requires physical presence of members at a common venue.

The Act does not contain any specific provision for allowing conduct of members'
meetings through video conferencing (“VC”) or other audio visual means (“OAVM”). However, unavoidable EGMs may be held through VC or OAVM and the recorded transcript of the same shall be maintained in safe custody by the company. In this regard, public companies shall as soon as possible make the same available on the website of the company.

All care must be taken to ensure the convenience of different persons positioned in different time zones and that such meeting allows two way teleconferencing for the ease of participation of the members. The facility for joining the meeting shall be kept open at least 15 minutes before the time scheduled to start the meeting and shall not be closed till the expiry of 15 minutes after such scheduled time. The companies shall ensure that all other compliances associated with the provisions relating to general meetings are made through electronic mode.

In addition to above and to any other requirement provided in the Act, the following procedure needs to be adopted for conducting such a meeting on or before 30 June 2020 or till further notice, whichever is earlier:

I. For companies which are required to provide the facility of e-voting under the Act, or otherwise opted.

Who is required to have e-voting?

i. In terms of Section 108 of the Act read with Companies (Management and Administration) Rules, 2014 (“Rules”), a listed company or a company having not less than one thousand shareholders, shall provide to its members facility to exercise their right to vote at general meetings by electronic means.

Who may attend the meeting?

ii. The VC or OAVM facility must have a capacity to allow at least 1000 members to participate on a first-come-first-served basis. The shareholders holding more than 2% shareholding, promoters, institutional investors, directors, key managerial personnel, the chairpersons of various committees, auditors, etc. may be allowed to attend the meeting without restriction on account of first-come-first-served principle. At least one independent director is required to attend the meeting. Institutional investors are also encouraged to attend meetings.

Who can vote?

iii. Before the actual date of the meeting, the facility of remote e-voting shall be provided in accordance with the Act and the rules. Accordingly, only those members, who are present in the meeting through VC or OAVM facility and have not cast their vote on resolutions through remote e-voting and are otherwise not barred from doing so, shall be allowed to vote.

How will voting be conducted?

iv. The Chairman present at the meeting shall ensure that the facility of e-voting system is available for the purpose of voting during the meeting held through VC or OAVM.

The voting shall be conducted:

(a) less than 50 members - the voting may be conducted either through the e-voting system or by a show of hands, unless a demand for poll is made in accordance with section 109 of the Act, in which case, the voting shall be conducted through the e-voting system;

(b) in all other cases, the voting shall be conducted through e-voting system.

No proxies by members

v. The facility of appointment of proxies by members will not be available for the meetings held through VC or OAVM. However, in pursuance of Section 112 and Section 113 of the Act, representatives of the members may be appointed for the purpose of voting in such meetings.

How will notice be given?

vi. The notices to members may be given only through e-mails registered with the company or with the depository in accordance with the provisions of Rule 18 of the Rules.

vii. The following matters shall also be stated while publishing the public notice as required under Rule 20(4)(v) of the Rules:

(a) a statement that the EGM including the date and time, has been convened through VC or OAVM in compliance with applicable provisions of the Act read with the Circulars;

(b) availability of notice of the meeting on the website of the company and the stock exchange,

(c) the manner in which the members who are holding shares in physical form or who have not registered their email addresses with the company can cast their vote through remote e-voting or through the e-voting system during the meeting;

(d) the manner in which the members who have not registered their email addresses with the company can get the same registered with the company.

The Chairman of the meeting shall satisfy himself and cause to record the same before considering the business in the meeting.

viii. The notice for the general meeting shall make disclosures and provide instructions with regard to the manner in which framework provided in these Circulars shall be available for use by the members. The company shall also provide a helpline number through the registrar & transfer agent, technology provider, or otherwise, for those shareholders who need assistance with using the technology before or during the meeting. A copy of the meeting notice shall also be prominently displayed on the website of the company.

ix. In case a notice for meeting has been served prior to the date of the initial Circular, the framework proposed in the Circulars may be adopted for the meeting, in case the consent from members has been obtained in accordance with section 101(1) of the Act, and a fresh notice of shorter duration with due disclosures in consonance with the Circulars is issued consequently.

Filing of Resolutions

x. All resolutions passed in accordance with this mechanism shall be filed with the Registrar of Companies within 60 days of the meeting.

II. For companies which are not required to provide the facility of e-voting under the Act -

Who may attend the meeting?

i. The 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-served basis. The same exception shall apply as provided in paragraph (ii) of Part I above for companies which are required to provide the facility of e-voting under the Act. At least one independent director is required to attend the meeting. Institutional investors are also encouraged to attend meetings.

How will the Chairman for the meeting be appointed?

ii. Unless provided in the articles of the company, the Chairman for the meeting shall be appointed:

(a) in accordance with section 104 of the Act where there are less than 50 members present at the meeting;

(b) by a poll conducted in a manner provided below in all other cases.

How will notice be given?

iii. The notices to the member shall be in the manner provided under the Paragraph (vi) of Part I. A copy of the notice shall also be prominently displayed on the website, if any, of the company.

iv. 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 the Circulars, the company shall:

(a) contact all those members whose e-mail addresses are not registered with the company before sending the notice for meeting to all its members; or

(b) where the contact details of any of 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 and specifying that the company intends to convene a general meeting in compliance with applicable provisions of the Act read with the Circulars and for the said purpose it proposes to send notices to all its members by e-mail after, at least, 3 days from the date of publication of the public notice.

The Chairman of the meeting shall satisfy himself and cause to record the same before considering the business in the meeting.

How will voting be conducted?

v. The company shall provide a designated email address to all members to convey their vote during the meeting. The members shall cast their vote on the resolutions only by sending emails through their email addresses which are registered with the company. The Company shall maintain the confidentiality of the password and other privacy issues associated with the designated email address.

vi. Where less than 50 members are present in a meeting, the voting may be conducted by show of hands, unless a demand for poll is made by any member in accordance with Section 109 of the Act. Once such demand is made, the procedure provided in the preceding sub-paragraphs shall be followed. In case the counting of votes requires time, the said meeting may be adjourned and called later to declare the result.

vii. The procedure and the mechanism provided under Paragraphs (v), (viii), (ix) and (x) of Part I shall apply.

This post has been contributed by Ms. Vaneesa Agrawal and Mr. Rishi Ahuja.

[DISCLAIMER:  This article is for academic purpose and is solely to provide readers with general information regarding developments in Indian law. The information contained herein does not constitute legal or a professional advice.