Digital AGMs?

Many years ago, shareholders used to attend annual general meetings (AGM) to collect gifts. Discussions between shareholders were invariably about the quality of gifts rather than the management. When regulators banned gifts, the number of shareholders attending AGMs reduced — a trend that seems to be continuing. Some companies tend to look upon AGMs as a formality to comply with the provisions of the Companies Act.

In 2014, the India Bulls group was warned by regulators for conducting six back-to-back AGMs in a mind-boggling and record-breaking 15 minutes. The forthcoming AGMs of the Adani Group appear to go one step better — three AGMs lasting an hour each have been scheduled in the space of three hours with quite a handful of resolutions to pass, including some special resolutions.

To top it all, invitations for the AGM have been sent to lakhs of shareholders though the hall wherein the AGM is proposed to be held can only accommodate 400.

Go digital The question is, at a time everything goes digital, are physical AGMs necessary? Can’t we transition to e-AGMs? The two important reasons for calling an AGM are to get shareholder approval for audited accounts of the company and to approve the dividend if the company has sufficient moolah in the bank.

Ancillary reasons for calling an AGM are to appoint or reappoint auditors and directors who could be new or could be seeking reappointment and to fix their remuneration.

In some companies, there could be other resolutions that need shareholders’ nod. Despite the nature and the quantity of resolutions, the end purpose of all AGMs is to seek shareholder approval.

Section 108 of the Companies Act, read with Rule 20 of the Companies (Management and Administration) Rules 2014, appears to offer a solution. The rules mandate every listed company, which has more than 1000 shareholders, to provide their members the facility to vote at general meeting through electronic means.

E-voting works According to the rules, e-voting shall be open for a minimum of one day and a maximum of three days — this provides enough time for a shareholder to vote.

The Rules are flexible enough to permit a person who has e-voted to attend the AGM and are rigid enough to prevent him from altering his vote at the AGM. The purpose of e voting is to ensure that a larger number of members get to participate in the affairs of the company.

Normally, shareholders have sufficient time to go through the audited accounts of the company, the proposed resolutions and the time the AGM is held. This time frame is to give them sufficient notice to comprehend the financials and the content of the resolutions.

In case they have any objections, they can raise it in the AGM. However, companies are able to predict the questions that could arise in AGM’s and have standard corporate responses ready. The Ministry of Corporate Affairs should contemplate permitting e-AGMS.

These could be on one single working day during normal working hours. The notice of the e-AGM and the resolutions that need shareholder nod can be sent in advance and e voting conducted prior to the e-AGM.

However, not many shareholders may have access to the equipment and software needed for e-AGMs — companies can resolve this by having e-AGM centres in major cities. The day may not be far off when a company conducts its AGM on Twitter!

The writer is a chartered accountant

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