Every Company, other than One Person Company (OPC), must hold a general meeting in each year apart from other meetings as Annual General Meeting (AGM). The AGM must be held within six months from the closing date of the Financial Year. Furthermore, a notice of 21 days has to be sent to all members.
The Directors of the Company present an annual report containing information for shareholders about the Company’s performance and strategy. Apart from presenting an annual report, the shareholders with voting rights vote on current issues. These issues are as appointments to the Company’s Board of Directors, executive compensation, dividend payments, and selection of auditors.
In large companies, this meeting is the only time during the year when shareholders and executives interact. Furthermore, shareholders who do not attend the meeting in person usually vote by proxy. Additionally, there is often time set aside for shareholders to ask questions to the Directors of the Company.
There are various rules governing the Annual General Meeting.
- Memorandum of Association
- Articles of Association
- Corporate bylaws
Such rules contain basic guidelines or provisions detailing how far in advance shareholders must be notified of where and when an AGM will be held. In most AGM meetings, the following topics are required to be discussed:
- Minutes of the Previous Meeting:
- The minutes of the previous year’s AGM must be presented and approved.
- Financial Statements:
- The company presents its annual financial statements to its shareholders for approval.
- Ratification of Director’s actions:
- The shareholders approve and ratify (or not) the decisions made by the board of directors over the previous year. This often includes the payment of a dividend.
- Election of Board of Directors:
- The shareholders elect the board of directors for the upcoming year.
If a Company does not hold an AGM, as per Section 96, the Company and it’s every officer come in the Category under Section 99 of the Company Act, 2013 and are punishable with fine which may extend to INR 1 Lakh and in case of continuing default, it may extend to INR 5000 for every day.
The Registrar of Companies (ROC) may extend the period within which the AGM (not being the first AGM) shall be held. The extension should not be exceeding 3 months under section 96(1). Moreover, an application for extension of the first AGM will not be accepted. Application for extension of time should be submitted electronically in e-form GNL-1.
An Annual General Meeting (AGM) is a mandatory yearly gathering of a company’s interested shareholders. At an AGM, the directors of the company present an annual report containing information for shareholders about the company’s performance and strategy.
An Extraordinary General Meeting (EGM) refers to any shareholder meeting called by a company other than it’s scheduled annual meeting.