A meeting means ‘an assembly of people for a particular purpose, especially for formal discussion.’ The Company meetings must be convened and held in compliance with the provisions of the Companies Act. 2013 and the rules framed there under.
Annual General Meeting (AGM)
Annual General Meeting by its name says that it is to be held annually by each and every company. It is compulsory in nature for every company whether big or small, private or public, listed or unlisted.
Logic behind the provisions of an Annual General Meeting
In the company form of business, there is separation of ownership and management. Those who are the owner’s i.e shareholders, may not run the company and those who are in the management i.e Board of directors may not be the shareholders of the company. So, it is the duty of the Board of directors to, at least in once in a year, appear before the owners of the Company i.e shareholders in a meeting and put the financial data of the last year before the owners of the company.
Legal Provisions behind an Annual General Meeting
Section 96 of the Companies Act makes it mandatory to hold the first AGM within the timeframe of 9 months from the date of the closing of the financial year of a company i.e within 31st December if F.Y closes on 31st March. In all other cases, the company has to hold its AGM within a period of 6 months from the closing of its financial year. Additionally, it provides that the gap between the holdings of two AGM’s should not be more than 15 months.
The business which is to be transacted in an AGM is provided under Section 102(2)(a) according to which all such business transacted at an AGM shall be deemed special, other than the following business:
- the consideration of financial statements and the reports of the board of directors and auditors;
- the declaration of any dividend;
- the appointment of directors in place of those retiring and
- the appointment of and the fixing of the remuneration of the auditors.
Apart from the above businesses, the rest are deemed to be a special business, transacted during the AGM.
Extension of time for holding an Annual General Meeting
It is noted that no extension of time can be allowed for delaying the first AGM of company. The Registrar may, for any special reason, extend the prescribed time period of holding AGM by a period not exceeding 3 months for subsequent AGM.
Consequences of late holding an Annual General Meeting
Companies which are not holding their AGM within stipulated time period are contravening the requirements of section 96 of the Act and liable to pay fine under section 99 of the Companies Act, 2013. The offence under this section is a continuing offence till the compliance is made.
According to Section 99, if any default is made in holding an annual general meeting of the company in accordance with section 96 or in complying with any directions of the tribunal, the company and every officer of the company who is in default shall be punishable with fine which may extend to Rs.1,00,000/- and in the case of a continuing default, with a further fine which may extend to Rs.5000/- for every day during which such default continues.
What if Annual Accounts are not ready by the due date of AGM?
Even if Annual Accounts are not ready, it is the duty of the Board to call and convene AGM within the stipulated timeline.
What if AGM is held after due date? Whether it is treated as Void?
No. AGM held after the due date is not to be treated as Void. Company is liable for fine for the default of late holding of an AGM for the number of days of delay.
Compounding of Offences
Compounding is nothing but “admission of guilt” wherein company in default approach the authority with the admission of its mistake and authority after levying lump-sum fine, discharge the company. The delay or mistake in holding an AGM is not a Cognizable Offence, therefore, it can very well be compounded under section 441.
Any offence punishable under this Act whether committed by a company or any officer thereof [not being an offence punishable with imprisonment only, or punishable with imprisonment and also with fine], may, either before or after the institution of any prosecution, be compounded by—
(a) the Tribunal (NCLT); or
(b) where the maximum amount of fine which may be imposed for such offence does not exceed Rs.25 Lakh, by the Regional Director or any officer authorised by the Central Government,
on payment of such amount as Tribunal or the Regional Director may order. Provided that the sum so specified shall not, in any case, exceed the maximum amount of the fine which may be imposed for the offence so compounded.
On the composition of an offence under Section 441, an intimation of the same shall be given by the company to the Registrar within 7 days from the date of composition of offence.
Process of Compounding of Offence
- Call the Board Meeting to discuss
- the nature default and the offence under the Companies Act;
- an amount of fine as per the relevant section;
- to give authority to director to sign compounding application and other necessary documents;
- to authorize professional to file application and appear before the authority for compounding of offence.
- Filling of e-form GNL-1 with the RoC
Application for compounding shall be submitted electronically in eform GNL1. This form will be forwarded by ROC either to the NCLT or to the Regional Director depending upon the amount of fine involved.
- Hearing before the authority, if required
There is no specific provision in the Act for personal hearing in cases of compounding matters. If required by authorities, it can be attended by Director or by independent professional on behalf of the company.
- File form INC-28 with the RoC
Where any offence is compounded, intimation thereof shall be given by the company to the Registrar in e-form INC-28 within 7 days from the date on which the order is made available to the company.
Failure of compliance with the order of compounding is an offence punishable with imprisonment of six months or fine not exceeding Rs 100,000/- or with both.
Effects of Compounding
Compounding will have the same effect as Acquittal of accused as per Section 320 of the Criminal Procedure Code, 1973. Once the offence is compounded, no further prosecution shall be initiated in respect of that offence. If any prosecution is going on in any court in respect of such offence then on the successful compounding of the same, the person against whom the prosecution is going on shall be discharged and it will have the effect of an acquittal.