Procedure to file for extension of holding an AGM for Company
The Annual General Meeting (AGM) is an important governance process for the members of an organization. It can ensure transparency, provide updates and give members an opportunity to vote on a range of matters. Board should use the AGM to communicate with investors and encourage their participation. It is not simply a forum for the directors to present speeches to shareholders, but for shareholders to ask questions and debate.
Provisions under the Companies Act pertaining to AGM’s
According to Section 96 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. Not more than 15 months shall elapse between the date of one annual general meeting of a company and that the next.
In case of the first annual general meeting, it shall be held within 9 months from the date of closing of the first financial year of the company. In any other case annual general meeting shall be held within 6 months from the date of closing of the financial year.
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 3 months.
Reasons for seeking extension of AGM
Some reasons for extension of AGM are:
- Mergers & acquisitions
- Delay in finalizing the Financials
- Delay in audit reports due to non-availability of auditors because of resignation, death, incapacity to sign or such other valid reason
- Loss of data in computer due to virus/system problem
- Natural Calamity
- Change in financial year
- Non availability of shareholders which may result in absence of quorum
- Non-availability of directors on the valid grounds. For instance, sudden death of Directors and consequence of this the limit of directors goes below the minimum requirements of directors.
- Confiscation of Books of accounts by Income Tax Department, Serious and Fraud Investigation Cell or any other Government officials.
Procedure to file application for extension of time for holding AGM:
E Form GNL 1 is to be digitally signed by:
- In case category of applicant is Company, the eForm should be digitally signed by director or manager or secretary or CEO or CFO of the Indian company duly authorized by the board of directors.
- In case category of applicant is Foreign Company, the eForm should be digitally signed by the authorized representative.
- In case the person digitally signing the eForm is a Director – Enter the approved DIN.
- In case the person digitally signing the eForm is a Manager, Chief Executive Officer (CEO) or Chief Financial Officer (CFO), Authorized representative or others – Enter valid income-tax PAN.
- In case the person digitally signing the eForm is a Company Secretary – Enter valid membership number.
- In case of form being certified by practicing professional, Enter valid membership number
E Form GNL 1 is to be submitted along with the following attachments:
- Detailed application
- General profile and history of the company containing details such as name, date of incorporation, main objects of the company
- Facts of the case mentioning nature of offence and period of default, if any
- Reasons of extension
- Period for which extension is required (Note: It should not exceed three months)
Effects of grant of extension
Once the extension is being granted, the company may convene the Annual General Meeting of the Company within the period as allowed by the Registrar of Companies. Extension can be granted only once in a Financial Year as the Act does not allow Registrar of Companies to give further extension.
Penalty in case of default by the company/directors
Company and every officer of the company who is in default shall be punishable with the fine which may extend to Rs 1 lakh and in case of continuing default with a further fine which may extend to Rs 5000 for every day during which such default continues.
Compounding of Offence for not holding AGM
Compounding of offence means a mechanism wherein the defaulter company settles default by paying the money in place of prosecution, thus avoiding prolonged litigation.
If the Annual General Meeting is not held within the due date as mentioned without applying for extension of AGM with the Registrar of Companies then the company will have to apply for compounding of offence with the National Company Law Tribunal (NCLT).
Section 441 of the Companies Act, 2013 pertains to the compounding of offences. The offences which are punishable with fines and penalties can only be compounded either by Regional Director (RD) or by the National Company Law Tribunal (NCLT).