A mandatory yearly event, the Annual general meeting (AGM) gives Shareholders investors and members an opportunity to express their opinions about the company's operations. Transparency between shareholders, investors and management is something very crucial since it helps the company in gaining the trust and confidence of the shareholders, stakeholders. An annual compliance meeting conducted once a year helps in ensuring transparency since one of the important aspects are discussed in the meeting. From announcing the dividends to the financial performance of the company, everything is discussed in the meeting. This allows the shareholders and stakeholders to seek justification for unsatisfactory performance and holds the management accountable to the shareholders and investors.
The annual general meeting is conducted between the management of the company and its shareholders on an annual basis. Usually, the board of directors and shareholders , investors meet each other and the company's annual report containing the records of performance, strategies, and financial reports are presented to the shareholders and investors. The company's performance is analyzed and discussed in the meeting. An annual general meeting provides the shareholders with an opportunity to seek answers for unsatisfactory performance. An annual general meeting is important as it promotes transparency between the company and its shareholders, investors. Additionally. Shareholders with voting rights vote on the company's current issues and decisions.
- Highlights on Annual General Meeting (AGM)
- A company's directors and shareholders, investors meet annually for an Annual General Meeting (AGM) to discuss and decide on important business issues.
- An AGM's main goals include decision-making, corporate governance, shareholder involvement, and financial reporting.
- At an AGM, the corporation conducts shareholder voting, evaluates its performance, and discusses future strategies. If shareholders are unable to attend in person, proxy voting is permitted.
- Annual General meeting must be held within 6 months of the end of the financial year, with no more than fifteen months.
- Except for one-person companies (OPCs), all businesses have to conduct annual general meetings (AGMs).
Importance of AGMs for Stakeholders
AGMs play a pivotal role for various stakeholders:
- For Shareholders: They offer an opportunity to voice opinions, understand the company’s performance and strategy, and exercise their voting rights on crucial matters.
- For Management: It provides a platform to communicate directly with shareholders, receive feedback, and build trust.
- For Auditors: AGMs provide a forum for auditors to present their findings and address any concerns regarding the company's financial health.
Legal Framework Under the Companies Act, 2013 The Companies Act, 2013 provides a comprehensive framework governing AGMs. Key provisions include:
- Time Frame for Holding AGM
- Every company, other than a One Person Company, is required to hold an AGM within six months from the end of the financial year. However, the first AGM must be held within nine months from the end of the first financial year.
- Power of Tribunal to Call Meetings
- If any company fails to hold an AGM in accordance with the provisions of this Act, the shareholders may apply to the National Company Law Tribunal (NCLT) to call the meeting.
- Notice of Meeting
- Under section 101 : - A clear notice of 21 clear days must be given to all shareholders, directors, and auditors, detailing the date, time, venue, and agenda of the meeting.
- Voting Mechanism
- The Act mandates that companies provide for remote e-voting for shareholders to exercise their voting rights, facilitating increased participation and transparency.
- Financial Statements
- The financial statements must be approved by the board of directors before the AGM and then presented to shareholders for their consideration.
Best Practices for Conducting an AGM
To ensure a successful AGM, companies should adhere to the following best practices:
- Ensure Compliance: Follow the provisions laid down in the Companies Act, 2013 regarding notice, agenda, and quorum requirements to avoid any legal repercussions.
- Prepare an Informative Agenda: The agenda should be clear, comprehensive, and shared with shareholders well ahead of the meeting.
- Promote Participation: Encourage shareholder participation by utilizing digital platforms for remote voting, especially in light of recent global trends towards virtual meetings.
- Engage Shareholders: Incorporate Q&A sessions to allow shareholders to voice their concerns and seek clarifications directly from the management.
- Document Proceedings: Maintain detailed minutes of the meeting, recording all discussions, questions raised, and decisions made. Ensure these minutes are shared with stakeholders post-meeting.
Consequences of Not Holding AGM
If company fails to hold AGM in stipulated time and contravene the provisions of section 96 to 98 then such company and officer in default is penalised under section 99 Shall be subject to a fine of up to one lakh rupees, and in the case of a continuing default, an additional fine of up to five thousand rupees for each day the default persists.
Conclusion :- The Annual General Meeting is not just a legal requirement but also a vital component of corporate governance that fosters transparency, accountability, and shareholder engagement. By adhering to the provisions of the Companies Act, 2013 and implementing best practices, companies can facilitate meaningful dialogues with their stakeholders, paving the way for sustainable growth and trust in the corporate sector. As we move forward in an era where increased alignment with shareholder interests is paramount.
