Last updated: September 11th, 2024 9:43 AM

Annual General Meeting (AGM): Full Form, Definition, & Procedure

AGM full form, stands for “Annual General Meeting”, which can be defined as a formal gathering of a company's shareholders and board of directors to discuss key business matters. The main objective of an AGM is to facilitate transparent communication between the leadership and shareholders regarding the company's performance and future plans. It consists of presenting financial statements, voting on critical issues, and electing board members. The typical AGM agenda includes reviewing financial reports, approving dividends, appointing auditors, and addressing shareholder concerns. Compliance with statutory requirements ensures the meeting's legitimacy and adherence to corporate governance laws. This article provides detailed information about the purpose and process of AGMs. [shortcode_33]

Key Points on Annual General Meeting (AGM)

• An Annual General Meeting (AGM) is a yearly gathering of a company’s shareholders and directors to discuss and address key business matters.
• The primary objectives of an AGM include financial reporting, shareholder engagement, corporate governance, and decision-making.
• During an AGM, the company reviews its performance, discusses future strategies, conducts shareholder voting, and allows proxy voting if shareholders cannot attend in person.
• AGMs must be held within six months of the end of the financial year, with no more than 15 months allowed between two AGMs.
• All companies are required to hold AGMs except for one-person companies (OPCs).
• The legal requirements for AGMs are primarily outlined in Section 96 of the Companies Act, 2013.
• Specific conditions include adherence to the time frame for holding the meeting, location requirements, and possibilities for extending the deadline.
• Failure to conduct an AGM can result in tribunal intervention and financial penalties.

What is an Annual General Meeting (AGM)?

An Annual General Meeting (AGM) is a yearly gathering where a company’s shareholders and board of directors meet to discuss important aspects of the company. At the AGM, the directors present an annual report to update shareholders on the company’s performance, strategy, and management. This meeting ensures transparency in administration and decision-making processes. AGMs are not limited to companies; other organisations, such as universities, schools, charities, and unions, may also hold AGMs. In India, the Companies Act (2013) mandates that every Private Limited Company and Limited Company must conduct an AGM to keep shareholders informed.

Objectives of Annual General Meeting (AGM)

Below, we have provided the main objectives of the Annual General Meeting (AGM):

• Financial Reporting: The AGM allows the company's leadership to present a detailed overview of the previous year's financial performance, including income statements, balance sheets, and cash flow statements. This allows shareholders to assess the company's financial health and make informed decisions.
• Shareholder Engagement: AGMs are designed to encourage active participation from shareholders. They can ask questions, raise concerns, and vote on important matters, such as the election of board members, approval of financial statements, and proposals for future actions. This direct interaction helps to strengthen the relationship between the company and its shareholders.
• Corporate Governance: AGM is vital to ensuring good corporate governance. It allows shareholders to hold the board of directors accountable for their decisions and actions. By electing directors and approving key proposals, shareholders can influence the company's strategic direction and protect their investments.
• Decision Making: AGMs are essential for making important decisions about the company's future. Shareholders vote on matters such as the appointment of auditors, the declaration of dividends, and the election of directors. These decisions help to shape the company's trajectory and ensure its long-term success.

How does the Annual General Meeting work?

The following elements constitute the function of the annual general meeting:

• Performance Review: The company's leadership presents a detailed report on the previous year's performance, including financial results, achievements, and challenges. Shareholders can ask questions, raise concerns, and provide feedback.
• Future Strategy: The company's management outlines its vision for the future, including strategic plans, growth initiatives, and potential risks. Shareholders can contribute their perspectives and influence the company's direction.
• Shareholder Voting: AGMs often involve voting on important matters, such as the approval of financial statements, the election of board members, and the distribution of dividends. This allows shareholders to have a direct say in the company's governance.
• Proxy Voting: Shareholders who cannot attend the AGM in person can typically vote by proxy. This involves appointing another shareholder or a proxy solicitor to vote on their behalf.

When is the Annual General Meeting Held?

A company is legally obligated to hold its Annual General Meeting (AGM) within six months of the close of its financial year. In India, this means that most companies must conduct their AGMs by September 30th of each year. However, there is a stipulation that the interval between two consecutive AGMs cannot exceed 15 months. This ensures that shareholders have regular opportunities to review the company's performance and exercise their voting rights.

Which Companies Must Hold AGM?

Except one-person companies (OPCs), holding an Annual General Meeting (AGM) is an obligatory legal requirement for both Private Limited and Limited Companies. This requirement applies to all companies, including public and private entities, those limited by shares or guarantees, those with or without share capital, and even unlimited companies. Every year, these companies are obligated to convene an AGM.

Annual General Meeting (AGM) - Section 96 of the Companies Act

Under the Companies Act, the Annual General Meetings (AGMs) provisions are primarily outlined in Section 96. This section defines the requirement for companies to hold an AGM and specifies the timeline for conducting it. It also discusses the first AGM for newly incorporated companies. 

Conditions for Holding an Annual General Meeting (AGM)

Conditions for Holding an AGM are explained in detail below:

Time Frame for AGM

As per the Companies Act 2013, the timing of the Annual General Meeting (AGM) is subject to specific provisions based on whether it's the first AGM for a new company or subsequent AGMs for other companies:

First AGM for New Companies

 For a new company, the first AGM must be held within nine months from the conclusion of its first Financial Year. This provides some flexibility in scheduling the inaugural AGM.

Subsequent AGMs for Other Companies

For established companies (not their first AGM), AGMs are typically required to be conducted within six months from the end of the Financial Year. This time frame is more stringent than a new company's first AGM. When a company cannot hold its AGM within the stipulated time, it has the option to seek an extension.  Also, read about, MCA Clarification on Annual General Meeting (AGM) 2022

Maximum Time Gap

There should not be a gap of more than 15 months between two consecutive AGMs (Section 96(1)).

Timing and Location

Every AGM should be held during business hours (between 9 a.m. and 6 p.m.) on a non-National Holiday. It can take place at the Registered Office of the Company or another location within the city, town, or village where the Registered Office is situated (Section 96(2)). Unlisted companies can hold the AGM anywhere in India if all members obtain consent in advance.

Extension of Time for Holding an AGM:

Registrar of Companies' Authority: The Registrar of Companies (RoC) has the Authority to grant an extension of up to three months for holding an AGM.

• Application Process: To request an extension, the company must apply through e-form GNL-1, providing reasons for the extension and the duration for which it is required. The RoC will record the reasons for granting the extension.
• First AGM Exception: Notably, no extension is available for holding the first annual general meeting; it must be conducted within the prescribed time frame.

Procedure for Conducting an Annual General Meeting (AGM)

The procedure for conducting an Annual General Meeting (AGM) is a comprehensive process involving various steps. Here's a detailed breakdown of the procedure:

Convene a Board Meeting

A board meeting must comply with Section 173 and the Secretarial Standard on Board Meeting (SS-1). The purpose of this board meeting includes:

• Fixing the date, time, and agenda for the AGM.
• Approving the draft notice of the AGM along with an explanatory statement.
• Authorizing the Company Secretary or another officer to issue the notice to all members or entitled recipients.
• Appointing a scrutinizer if e-voting is provided to shareholders.

Notice for Annual General Meeting

The AGM notice should be written in writing or electronic mode at least 21 days before the meeting (Section 101(1)). If the company has a website, the notice must also be hosted on the website (Secretarial Standard on General Meetings). The notice should include:

• Venue of the meeting.
• Date, day, and time of the meeting.
• Agenda to be discussed.
• Date of notice issuance.
• Signature of the convener.

Convene a General Meeting

Ensure that the quorum, including the presence of the Chairperson, is maintained throughout the meeting (Secretarial Standard on General Meetings). Financial Statement (Section 129(2)): The Board of Directors must present the financial statements for the financial year at every AGM. Board's Report (Section 134): The company must attach a report by its Board of Directors to the financial statements laid before shareholders at the AGM. The report includes:

• Summary of financial results.
• The company's Operational performance and its subsidiaries, associates, and joint ventures.
• Director's Responsibilities Statement.
• Explanation or comments by the Board on auditor qualifications, reservations, or adverse remarks.
• Proposed dividends or transfers to reserves.
• Material changes and commitments affect the company's financial position.
• Details of related party transactions.
• Information on loans, guarantees, or investments.
• Corporate social responsibility information.
• Energy conservation, technology absorption, and foreign exchange earnings.

Statutory Auditor Report (Section 143): The statutory auditor provides a report to shareholders on the examined accounts and financial statements presented at the AGM. Announcement of Result of e-voting (Section 108, Rule 20, and SS-2)

• The scrutineer submits a report on votes cast in favor or against resolutions, and the Chairman or an authorized person declares the result.
• The result is displayed on the company's notice boards and website for at least three days.

Maintain the Minutes Book (Section 118 and SS-2)

Minutes of the AGM and resolutions passed by postal ballot must be prepared, signed, and maintained in a book within 30 days of the meeting's conclusion or resolution's passing. The pages must be consecutively numbered.

Consequences of Not Conducting an Annual General Meeting

Failure to comply with the provisions outlined in Section 96 of the Companies Act 2013 can lead to several consequences:

• Tribunal Intervention: The National Company Law Tribunal has the Authority to order the convening of an Annual General Meeting under Section 97 and Section 98 of the Companies Act, 2013.
• Financial Penalties: If a company or any authorized person fails to adhere to the provisions from Section 96 to Section 98, they may face monetary penalties. The tribunal can impose a fine on the company and every officer found to be in default, with the fine amount extending to Rs. 1 lakh.
• Continuing Default: If the default continues beyond the initial penalty, the tribunal may impose an additional fine of Rs. 5,000 per day for each day during which the default persists.

These consequences emphasize the importance of conducting AGMs in accordance with the statutory requirements and timelines as specified in the Companies Act 2013. Failure to do so can result in both financial penalties and legal intervention by the tribunal.

Compliances After Conducting an AGM

After conducting an Annual General Meeting a company is required to fulfill several compliance obligations. Here is a checklist of post-AGM compliances:

Reporting of the AGM

Following the Annual General Meeting completion, every listed company must file a report on the AGM using Form MGT-15.vThis report must be submitted within 30 days from the conclusion of the AGM.

Annual Return Filing (Form MGT-7)

File the Annual Return with the Registrar of Companies (ROC) in Form MGT-7 within 60 days of the AGM (Section 92).

Resolution Filing (Form MGT-14)

File resolutions passed during the AGM, along with the explanatory statement, in Form MGT-14 with the ROC. Special resolutions and other resolutions passed under Section 117 should be filed within 30 days of passing (Section 117).

Minutes of Meeting (MoM)

Ensure that the Minutes of Meetings (MoM) of the AGM are entered in the minute book within 30 days of the conclusion of the AGM (Section 118).

Dividend Payment

Pay the declared dividend or dispatch the dividend warrants within 30 days from the declaration date (Section 123).

Unpaid Dividend Statement

Prepare a statement containing each person's name, last known address, and unpaid dividend amounts. Display this information on the company's website. Additionally, amounts related to unpaid dividend accounts must be credited to the Investor Education Protection Fund (IEPF) within 30 days of becoming due and reported online to the Authority using Form IEPF-1. Within 60 days following the AGM, file Form IEPF-2 with the Registrar, containing information on unclaimed and underpaid payments (Section 124 r/w 125).

Financial Statement Filing (Form AOC-4, AOC-4 CFS, or AOC-4 XBRL)

File the Audited Financial Statements, along with the consolidated financial statement (if any), in the appropriate form (AOC-4, AOC-4 CFS, or AOC-4 XBRL), with the ROC within 30 days of the AGM (Section 137).

Auditor's Appointment (Form ADT-1)

File the resolution related to the appointment of the auditor in Form ADT-1 with the ROC within 15 days of the AGM (Section 139).

Director's Appointment (Form DIR-12)

File the resolution related to appointing directors (except for directors retiring by rotation) in Form DIR-12 with the ROC within 30 days of the AGM (Section 152). It's important to note that additional sector-specific or conditional compliances may vary based on the nature of the company's operations. It is advisable to consult with a lawyer or a Company Secretary to ensure full compliance with all relevant regulations and obligations.

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