Covid-19: Centre eases deadline to hold AGMs for certain companies

KR Srivats New Delhi | Updated on April 22, 2020

Corporates whose financial year ended on Dec 31, 2019, get three more months to hold annual general meetings

Corporates whose financial year ended on December 31, 2019, have got some time relief to hold their annual general meetings (AGMs). Companies can now hold their AGMs by September 30, 2020, without it being viewed as a violation, the Ministry of Corporate Affairs (MCA) has said.

This is some relief against the backdrop of the Covid-19 induced lockdown, given that the law stipulates that a company should hold its AGM within a period of six months (nine months in case of first AGM) from the closure of the financial year and not later than a period of 15 months from the date of the previous AGM.

Several Indian affiliates/subsidiaries of multinational companies are expected to benefit from the additional time period granted by Indian authorities, say company law experts.

Experts’ take

Harish Kumar, Partner at legal firm L&L Partners, said the time extension of three months for holding AGM for companies having financial years ended on December 31, ,2019 is a much needed step which will benefit primarily those Indian companies that are foreign-owned and controlled. By and large, these companies have been following a financial year other than the one ending on March 31, for the purpose of consolidation of their accounts with overseas holding companies as per the requisite approval under the Companies Act.

Saurav Kumar, Partner, IndusLaw, said the dispensation will be a relief to several companies that are a holding company or a subsidiary of a body corporate incorporated outside India, and which follow the January to December calendar. “In the normal course, they would have had to hold the AGM towards the end of June. For avoidance of doubt, the circular should have also clarified that the 15-month condition between two AGMs also automatically stands extended to September 30,” he said.

Virtual AGMs

Against the backdrop of the Covid-19 induced lockdown around the world, several managements of listed companies outside India have already opted to hold their AGMs behind closed doors because of the pandemic. Investor groups have, however, decried such a move as it would deny shareholders a chance to directly question management on issues such as strategy in a post-Covid-19 world.

Some of the listed companies in the UK have already decided to hold “hybrid” AGMs with an element of virtual participation by shareholders. Some are even looking to follow up their closed-door AGMs with additional online question-and-answer sessions. It remains to be seen whether Indian regulatory authorities would allow companies to hold virtual annual general meetings.

It may be recalled that the MCA had earlier this month allowed Indian listed companies (with 1,000 shareholders or more) to hold their extraordinary general meetings through video-conferencing or through other audio-visual means and e-voting.

Published on April 22, 2020

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