Share holders of a company are the owners of the capital of the company but the real management is done by the board of directors of the company. They are the people who manages the funds of the company and take company to future. But in reality much of the powers of the board of directors are derived from general meetings, where share holders approve and assign powers to directors. Annual general meetings are the meetings in which the shareholders understand what is happening in a company and its state of affairs.
As per the provisions of the Companies Act, 2013, every company other than a One person company shall in each year hold in addition to any other meetings, a general meeting as its annual general meeting, and not more then fifteen months shall be elapse between the date of two date of AGMs.
Provisions of AGM
First Annual General Meeting, it shall be held within period of nine months from the date of closing of the first financial year of the company.
Any other case, within a period of six months, from the date of closing of the financial year.
Provided further that if a company holds its first Annual General Meeting as aforesaid, it shall not be necessary for the company to hold any Annual General Meeting in the year of its incorporation.
Provided also that the Registrar may, for any special reason, extend the time within which any Annual General Meeting, other than the first Annual General Meeting, shall be held, by a period not exceeding three months.”
Key points to be noted
No extension is granted for companies conducting their AGM due date for the first time for the new company.
Extension granted in other case can be maximum for a period of 3 months.
Adjournment of Annual General Meeting.
Adjournment of AGM can be of many reasons. It also can be intentional or unintentional, planned or unplanned.
With the word adjournment, many questions come into mind, intentionally or without intentionally, with planning or without planning, which should be resolved with the statutory provisions of the Act, 2013.
Section 103(2) of the Act, 2013 provides the situation wherein a general meeting be adjourned automatically. The said provisions says that –
“(2) If the quorum is not present within half-an-hour from the time appointed for holding a meeting of the company—
(a) the meeting shall stand adjourned to the same day in the next week at the same time and place, or to such other date and such other time and place as the Board may determine; or
(b) the meeting, if called by requisitionists under section 100, shall stand cancelled.”
Two important points we should note from this provisions
If there is no quorum, the meeting stands adjourned to next week a the the same time and place,
But the other part of the section says that the meeting also an can be conducted at such other date, time and place as decided by the Board.
This is the only provision under the act, which necessitates adjournment of the meeting. But in real life situations, there may be other situations on which the meeting can be adjourned.
If you look on to section 129 of the act, it says that, it is mandatory, on the part of the Board of Directors of the company, to lay down the financial statements of the company of the financial year at every AGM and adopt in that AGM as provided in Section 137 of the act.
There are situations where, if the financial statements are not ready, the meeting may be adjourned.
Now the question is arising herein whether the empowerment to the Board can be read as the absolute power in the hand of them? Or whether the adjournment can be done beyond the stipulated time where, accounts are ready but quorum is not present?
The Act shall be read in the strict manner and the view point(s) provided in the case of Bejoy Kumar Karnani v. Assistant Registrar of Companies will be influencing in the present situation. The power of the Board shall not be read in the destructive manner to the Act.
Whether adjournment of AGM after the maximum time-limit allowed by this section 96 (e.g., 30 September each year) is default of Section 96 of Companies Act, 2013 or not?
By the reading of language of Section 96 of the Act, 2013, as mentioned above, it is clear that Section 96 of the Act, 2013 talks about only the time period of holding of AGM. This section does not state about provisions relating to adjournment of AGM. It only stipulates that AGM shall be held within the prescribed time, it does not stipulate that the meeting shall also get completed within the prescribed time.
The adjourned AGM should be held within the maximum time-limit allowed by this Section 96. Otherwise adjournment of AGM after the maximum time-limit allowed by this Section 96 is default of Section 96 of Act, 2013.
In support of above contention, we would like to refer the following circulars/case laws regarding adjournment of AGM as under-
CLB CIRCULAR LETTER NO. 35/9/72-C. L.III DATED FEBRUARY 2, 1974-
Relevant portion of the said circular is as under- “In case the annual accounts are not ready for laying at the appropriate AGM, it is open for the company concerned to adjourn the said AGM to a subsequent date when the annual accounts are expected to be ready for laying. This may be done by suitable resolution adjourning the said AGM to a specified date or to a date to be specified later on.”
Let us take a case law to explain further the situation.
‘M.D. MUNDHRA AND ORS. V. ASSISTANT REGISTRAR OF COMPANIES-
Facts of this case are, the Assistance Registrar of Companies has prosecuted the Company and its director for not placing the Balance Sheet before the AGM, and the counsel appearing on behalf of Assistant Registrar of Companies, alleged that the said CLB Circular shall be read in conformity to the Act. On the other hand, the view point of the Counsel appearing on behalf of the petitioner(s) i.e. Directors of the Company was that, they have acted on the circular of CLB and that shall not be construed as the violation of the respective provisions of 1956 Act.
After the completion of hearing Calcutta High Court has made the judgement that, if the Company had acted in accordance to the circular issued by CLB, then that shall not be construed as the violation of the provisions stipulated and it is not open for the Assistant Registrar of Companies to initiate prosecution against the Company.
But this position is overturned in a subsequent case.
BEJOY KUMAR KARNANI VS. ASSISTANT REGISTRAR OF COMPANIES
In this case the Hon’ble High Court has reversed the earlier judgement passed by it. The Hon’ble Court did not accept the contention that an AGM could be adjourned beyond the statutory period limits as laid down in sections 96 of the Act, 2013.
High Court of Culcutta in this case also asked a question that, if this circular will be used as a tool to override the provisions of the act, then what is the purpose of discretionary powers given the Registrar of Companies to provide extension on valid grounds.
The Hon’ble High Court has also taken the view that if the said circular will be read as the tool for overriding the act, than what will be the significance of the discretionary power of Registrar of Companies to provide extension to AGM.
Here it also to be noted that, if a resolution is passed in such a adjourned meeting, the date of passing of such resolution will be the date of passing and not an earlier date.