Within days of the nationwide lockdown due to COVID-19 (Corona), Indian Stock exchanges on 26th March 2020 received intimation of first extraordinary general meeting through audiovisual means. This was not legally facilitated. After a great demand, the Ministry of Corporate Affairs came out with a hurried framework through its General Circular 14/2020 dated 8th April 2020, applicable to all listed or unlisted companies. It raises more question that solution as of now but certainly in a good direction. Thereafter Ministry issued General Circular 17/2020 dated 13th April 2020. We have already discussed this framework for companies which are not required to provide the facility of e-voting under the Act. We will in this post discuss this framework for Companies which are required to provide the facility of e-voting under the Act or any other company which has opted for such facility.
The Circular clearly remind the stakeholders, the Companies Act, 2020 does not contain any specific provision for allowing the conduct of members’ meeting through video conferencing (VC) or other audiovisual means (OVAM). Therefore, it is prudent for all companies either to choose for e-voting under Section 108 or Postal Ballot under Section 110. These two process E-voting and postal ballot are not available for items of ordinary Business (AGM) and item where any person has a right to be heard. By using the same logic, this circular excluded these items from its purview. This Circular being extra-ordinary measure suggests its use only under unavoidable circumstances and till 30th June 2020, a date likely to be extended.
With the exclusion of ordinary business items, this circular does logically not extend to the Annual General Meeting.
This Circular is applicable for special business items to be taken on extraordinary general meetings but not for any item where any person has a right to be heard – like removal of directors or auditors.
The circular suggests limiting such meeting for unavoidable items therefore prima facie suggest uses of postal or e-voting mechanism. My prima facie reading for unavoidable circumstances is special items which may require proper discussion.
NOTICES FOR E-VOTING OR POSTAL BALLOT
The company shall send notice by email to all its shareholders who have registered their email address with the company or depository participant/ depository. The company would also duty-bound to provide a process of registration of e-mail addresses of members and state so in its public notice. The communication of the assent or dissent of the members would only take place through remote e-voting system, as no meeting will be required to be called. [GC-17/(iii)]
The framework casts two duties on companies: the first send notices through emails and second by issuing public notice seek and provide the process for registration of email addresses of members.
MANNER OF SENDING NOTICES FOR EGM
The notice to the members may be given only through email registered with the company or with the depository participant/depository. [GC-17/i-A-I]
The company may opt not to send notices through post or speed post, if sending the notice by email or giving public notice seeking email addresses of its members.
CONTENTS OF THE NOTICE
Both circulars, besides usual law governing notice, require additional information in the notice.
While publishing the public notice as required under rule 20(4)(v) of the rules, the following matters shall also be state, namely:
- A statement shall that the EGM has been convened through VC or OAVM in compliance with applicable provisions of the Act read with General Circular 14/2020 dated 8th April 2020 and GC 17/2020 dated 13th April 2020;
- The date and time of the EGM through VC or OAVM;
- Availability of notice of the meeting on the website of the company and the stock exchange;
- The manner in which the members who are holding shares in physical form or who have not registered their email addresses with the company can cast their votes through remote e-voting or through the e-voting system during the meeting;
- The manner in which the members who have not registered their email with the company can get the same registered with the company; and
- Any other detail considered necessary by the company. [GC-17/i-A-II]
The notice shall contain information of this framework and clear instruction on how to access and participate in the meeting. The company shall provide a helpline number to assist participants who might need assistance with using the technology. [Sub – paragraph XIII]
A copy of the meeting notice shall be prominently displayed on the website, if any, of the company and due intimation may be made to the exchanges in the case of listed companies. [Understanding from Sub–paragraph XIII]
NOTICES ALREADY ISSUED
In case a notice for an extraordinary general meeting is already issued, a fresh notice of shorter duration with due disclosures in consonance with this Circular is required to be issued. [Sub – paragraph XIV]
Such notice shall not require a fresh consent for shorter notice under section 101(1) which requires consent from 95% of the paid-up capital or voting power, if such consent is already received. [Sub – paragraph XIV]
CHAIRMAN DUTIES ON SUCH NOTICES
The chairman of the meeting shall satisfy himself and cause to record the same before considering the business in the meeting that all efforts feasible under the circumstances have indeed been made by the company to enable members to participate and vote on the items being considered in the meeting. [GC-17/i-A-III]
This understanding should be recorded in minutes and may also be recorded along with required filing with the registrar in case Form MGT-14 is required to be filed.
The facility of appointment of proxies by members will not be available for such meetings. [Sub – paragraph X]
AUTHORISED REPRESENTATIVE OF MEMBERS
In pursuance of section 112 and section 113 of the Act, representatives of the members may be appointed for:
- the purpose of voting through remote e-voting; or
- participation and voting in the meeting held through video conferencing (VC) or other audiovisual means (OAVM). [sub – paragraph X]
TIME OF THE MEETING
The convenience of different persons positioned at different time zones shall be kept in mind before scheduling the meeting. [Sub-paragraph II]
However, I will read shall in this sub – paragraph as will and therefore directory only.
SPECIAL ATTENDEES OF THE MEETING
Where the company is required to appoint the independent director at least one independent director shall attend the meeting through VC or OAVM. [Sub – paragraph XI]
The auditor or his authorized representative, who is qualified to be an auditor, shall also attend such meeting through VC or OAVM. [Sub – paragraph XI]
The intention may be to have the constant and independent watch on the quality of the VC or OAVM.
Where institutional investors are members of a company, they must be encouraged to attend and also vote in the said meeting through VC or OAVM. [Sub – paragraph XII]
PARTICIPATION RELATED FACILITIES
All care must be taken to ensure that such meeting through VS or OAVM facility
- allows two-way teleconferencing or webex for the ease of participation of the members; and
- the participants are allowed to pose questions concurrently or given time to submit a question in advance on an e-mail address of the company. [Sub – paragraph III]
Such VC or OAVM facility must have a capacity to allow at least 1,000 members to participate on a first come first serve basis. [Sub – paragraph III]
The webex is a prime brand of video conferencing system and this term might be avoidable in the circular.
Following persons and shareholders are an exception to the first come first serve principle:
- the large shareholders (i.e. shareholder holding 2% or more shareholding), promoters;
- institutional investors;
- key managerial personnel;
- the chairpersons of:
- the Audit Committee,
- Nomination and Remuneration Committee and
- Stakeholders Relationship Committee; and
- [Sub – paragraph III]
The Facility for joining the meeting shall be kept open at least 15 minutes before the time schedules to start the meeting and shall not be closed till the expiry of 15 minutes after such scheduled time. [Sub – paragraph IV]
The company may at its option permit members and invitees even after these 15 minutes if it has a capacity to allow such joining.
Attendance of members through VC or OAVM shall be counted for the purpose of reckoning the quorum under section 103 of the Act. [Sub – paragraph VI]
The companies and service providers need to devise a mechanism to check quorum and attendance at the time of joining and leaving the meeting.
Chairman of the Meeting
Where the Articles of Association of the company require a specific person to be appointed as chairman, such person shall be chairman.
Otherwise, the chairman for the meeting shall be appointed in the following manner:
- Where there are less than 50 members present at the meeting, the Chairman shall be appointed in accordance with Section 104;
- In all other cases, the Chairman shall be appointed by a poll conducted through the e-voting system during the meeting. [Sub – paragraph VIII]
PROCESS FOR VOTING
Before the actual date of the meeting, the facility of remote e-voting shall be provided in accordance with the Act and the rules. [Sub-paragraph V]
Only those members, who are present in the meeting through VC or OAVM facility and have not casted their vote on resolutions through remote e-voting and are otherwise not barred from doing so, shall be allowed to vote through e-voting system or by a show of hands in the meeting. [Sub-paragraph VII]
The chairman present at the meeting shall ensure that the facility of e-voting system is available for the purpose of voting during the meeting held through VC or OAVM. [Sub-paragraph IX]
RECORD OF PROCEEDINGS
In case of a public company, the recorded transcript of the meeting, shall as soon as possible, be also made available on the website (if any) of the company. [Sub – paragraph I]
I disagree with this provision. Where the minutes are not a public document, why should such a raw recoding should be a public document?
All other compliances as applicable to extraordinary general meetings shall be applicable to such meetings viz disclosures, inspections, authorisation. However, such provisions may be complied with in electronic mode.