India - COVID 19 Update - MCA Permits Holding Of EGMs Through Video Conferencing.
Legal News & Analysis - Asia Pacific - India - Regulatory & Compliance
21 April, 2020
In light of the difficulties being faced by stakeholders due to the COVID-19 pandemic, the Ministry of Corporate Affairs (‘MCA’), through a general circular dated April 8, 2020 (‘Circular’) read with circular dated April 13, 2020 (‘Additional Circular’), has permitted companies to hold extraordinary general meetings (‘EGMs’) though video conferencing or other audio visual means (collectively, ‘VC’) until June 30, 2020, to enable companies to take decisions on unavoidable matters, subject to compliance with certain conditions prescribed in the Circular, in addition to any other requirements provided under the Companies Act, 2013 (‘Act’) or the relevant rules.
At the outset, the Circular states that companies are requested to take all decisions of an urgent nature, requiring approval of members (other than items of ordinary business, or business where a person has a right to be heard) through postal ballot/e-voting, without holding a general meeting. However, where holding an EGM is unavoidable, the Circular requires EGMs to be held through VC, for which set out below are the key relaxations and compliances provided under the Circular read with the Additional Circular.
i. Maintenance of Transcripts of the EGM: The recorded transcripts of the EGMs held through VC must be maintained by the company. In case of a public company, such recorded transcripts are required to be uploaded on the website (if any) of the company.
ii. Participation of Members:
a. The VC facility should permit two-way teleconferencing or webex to allow members to participate in the meeting and pose questions. Members may be allowed to submit questions in advance on the e-mail address of the company.
b. The EGMs should be scheduled and held at a convenient time keeping in mind the fact that members may be in different time zones.
c. For companies which are required to provide e-voting, or have opted to provide e-voting, the VC facility must have a capacity to allow at least 1000 members to participate in the meeting on a first-cum-first-served basis. For other companies, the VC facility must have a capacity to allow: (i) at least 500 members; or (ii) all the members of the company, whichever is lower, to participate in the meeting on a first-cum-first-served basis.
d. Certain categories of persons (shareholders holding 2% or more shareholding, promoters, institutional investors, directors, etc.) may be permitted to attend the meeting without any restriction of first-come-first served principle. However, at least one independent director (where the company is required to appoint one) and the auditor or his authorised representative (who is qualified to be an auditor) must attend such meeting. Additionally, the Circular states that where institutional investors are members of a company, they must be encouraged to attend the EGM and vote through the VC.
iii. Timing: The facility to join the meeting must be kept open for at least 15 minutes before the time scheduled to start the meeting and must not be closed till the expiry of 15 minutes after such scheduled time.
iv. Quorum: Attendance of members through the VC facility will be counted for the purpose of reckoning quorum for the meeting in accordance with Section 103 of the Act.
v. Appointment of Chairman: Where articles of association of a company do not provide for a specific person to be the chairman of the meeting, the chairman will be appointed: (i) in accordance with the provisions of Section 104 of the Act where there are less than 50 members present for the meeting; or (ii) by way of voting during the meeting in other cases.
vi. Manner of Voting:
a For companies which are required to provide e-voting, or have opted to provide e-voting:
The chairman of the meeting will be required to ensure that the facility of e-voting is available for the purpose of voting during the EGM held through VC facility.
b. In case of other companies:
Members can cast their vote by sending an e-mail to the designated e-mail address provided by the company. It is clarified that members cannot send e-mails in advance before the meeting, and may convey their assent or dissent only at such stage on items being considered in the meeting. Where there are less than 50 members present for the meetings, the chairman can allow voting to take place by a show of hands, unless a demand for poll is made. In case the counting of vote requires time, the meeting may be adjourned and called later to discuss the result.
vii. Appointment of Proxies: Proxies are not allowed to be appointed for EGMs held through the VC facility. However, appointment of representatives under Section 112 and Section 113 of the Act is permitted for the purpose of voting through remote e-voting or for participation and voting in a meeting held through VC.
viii. Notice: The notice for the EGM: (i) must be served upon members only through e-mails registered with the company or the depository participant / depository; (ii) must set out the manner in which the framework prescribed under the Circular is being made available; and (iii) instructions on how to access and participate in the meeting. The company should 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. Such a notice must be displayed on the website of the company. In case of listed companies, due intimation must be made to the stock exchanges. Where a notice for an EGM has been served prior to the date of the Circular, a company can adopt the framework provided under the Circular provided consent is obtained from members under Section 101(1) of the Act, and a fresh notice as required under the Circular is issued consequently by the company. For companies which are not required to provide for e-voting under the provisions of the Act, it must provide a designated email address to all members at the time of sending the notice so that the members can convey their vote at such email address. In case a designated email address is provided, provisions relating to password security and other privacy issues should be strictly maintained by the company. Additionally, due safeguards with respect to authenticity of email addresses and other details of members should also be taken by the company.
To ensure that members are aware that an EGM is being convened, the company is required to do the following:
• contact members whose e-mail address is not registered with the company over telephone or through any other mode of communication to register their e-mail address with the company; or
• where contact details of any member are not available with the company, or such details could not be obtained as above, the company will be required to immediately issue a public notice by way of an advertisement at least once in a vernacular newspaper in the principal vernacular language of the district in which the registered office of the company is situated and having wide circulation in that district, and at least once in an English newspaper having a wide circulation in such district, preferably both newspapers having electronic editions, specifying: (i) intention of the company to hold an EGM in compliance with the provisions of the Act read with the Circular and the Additional Circular, and that for the said purpose, it will send notices to its members by e-mail after at least three days of the publication of such public notice; and (ii) details of the e-mail address along with the telephone number which members can contact to get their e-mail addresses registered with the company and for voting in the EGM.
ix. Particulars to be Specified in the Notice:
For companies which are required to provide e-voting, or have opted to provide e-voting, in addition to the requirements set out under Rule 20(4)(v) of the Companies (Management and Administration) Rules, 2014 (‘Management Rules’), the notice sent by the company will also be required to set out certain additional details prescribed by the Additional Circular such as: (i) a statement to the effect that the EGM has been convened through the VC in compliance with applicable law; (ii) date and time of the EGM; (iii) manner in which the members holding physical shares or those who have not registered their email address can cast their vote; and (iv) the manner in which members can register their email addresses.
x. Resolutions to be filed with the Registrar: All resolutions passed at such EGM are required to be filed with the Registrar of Companies within 60 days of the meeting, clearly indicating compliance with the provisions of the Circular and the Act.
xi. Meeting by way of Postal Ballot: On account of concerns being raised on unavailability of provisions for dispatch of notices for postal ballots, for companies which are required to provide e-voting facility, or have opted to provide e-voting facility, it has been clarified that, if any business is being undertaken by way of postal ballot, up to June 30, 2019 or till further orders (whichever is earlier), Rule 20 of the Management Rules as well as the framework set out in the Circular and Additional Circular will apply mutatis mutandis. Therefore, even in such a case, the company would have to send an e-mail notice to all its members who have registered their e-mail address with the company or the depository participant / participants. Further, the company must also provide a process of registration of e-mail addresses of members and state so in its public notice. Voting in such cases must take place through remote e-voting, as there will be no general meeting.
xii. Other Compliances: Other provisions relating to general meetings under the Act will continue to apply. Inspection of documents, making of disclosures etc. have to be made available by the company through electronic mode. Further, before considering any business in the meeting, the chairman is required to be satisfied and record that the company has taken all feasible efforts under the circumstances to enable the members to participate and vote in the meeting.
For further information, please contact:
Zia Mody, Partner, AZB & Partners