How to Conduct an EGM During Lockdown?

COVID 19, a word that has gripped the world with fear. The WHO has declared it as a pandemic, due to its ever-increasing numbers. In India, all measures are being taken to contain it, and the Ministry of Corporate Affairs (MCA) has provided various relaxations to companies to ensure compliances are met in the wake of social distancing and lockdown.

One of them is about conducting the Extraordinary General Meetings (EGM) during this period. An EGM is usually a shareholder meeting called for by the company’s management to take certain untimely decisions for the business. It can also be called as a special general meeting or emergency general meeting and differs from the annual general meeting.

Latest Update

The time limit for companies to hold EGM through VC or OAVM or transact items through postal ballot is extended upto 30th September 2020.

MCA Guidelines for Conducting an EGM

The MCA vide its General Circular No 14/2020 (first circular) dated 8th April 2020, has provided clarifications for passing general and special resolutions and convening an EGM in unavoidable circumstances up to 30th of June 2020 in light of the current social distancing norms. As per the circular, there is no provision in the Companies Act 2013 (the Act) and rules made thereunder to allow video meetings of members.

However, section 108 of the Act and rules made thereunder provide for e-voting for relevant companies to convene general meetings and section 110 of the Act and rules made thereunder provide postal ballot including e-voting to pass special resolutions. Point to be noted is that section 110 does not allow the passing of resolutions for ordinary businesses and items where any person has any right to being heard.

The MCA has further issued General Circular no 17/2020 (second circular) dated 13th April 2020 clarifying various difficulties in following the first circular. The second circular MCA has also extended the time for holding an EGM. The second circular mentions time for holding an EGM as 30th June 2020 or till further orders issued, whichever is earlier.

Conducting an EGM in the Face of an Ongoing Crisis

The circular details guidelines for conducting an EGM based on the following categories: 1. For companies that need to provide e-voting facility or have opted for e-voting.(As per section 108 of the Companies Act, 2013 read along with Rule 20 of the Companies (Management and Administration) Rules 2014, every listed company and company not having less than 1000 shareholders must mandatorily provide e-voting facility ) 2. For companies that do not need to provide e-voting facility. The guidelines provided under both categories have been outlined here below:

Thus, the MCA has clarified through the first and second circular manner in which an unavoidable EGM can be convened amidst the COVID 19 pandemic.

Frequently Asked Questions on Convening an EGM

How is a poll to be taken on the resolutions?

For companies under category A, A poll is to be taken during the ongoing meeting through e-voting and for companies under category B, the poll is to be conducted by receiving emails at the designated email address.

Does the company have to hold the recorded transcript?

Yes. The recorded transcript of the meeting must be held in safe custody. In the case of public companies, it must be published on the website as soon as possible.

How is the Chairman to be appointed for the meeting?

For companies covered under both category A and category B, unless the articles provide for otherwise, the chairman is to be appointed in the following manner: – Where there are less than 50 members present in the meeting, as per section 104 of the Act. – In all other cases through a poll.

What if notice for meeting has been served prior to the date of the first circular that is before the 8th of April 2020?

If the company has already sent a notice for a meeting prior to the circular date then with the consent of majority members as per section 101(1) of the Act, a notice with the shorter duration with due disclosure in line with the said circular can be issued.

Is ‘show of hands’ accepted for getting votes on the resolutions passed in such meetings?

The MCA in its General circular No 14/2020, dated 8th April 2020, had permitted passing of certain resolutions through a show of hands. However given the nature of the meeting and the conflict that can arise on e-voting and show of hands, the MCA vide General Circular No 17/2020, dated 13th April 2020 has modified the same for companies under category A and fixed responsibility on the Chairman for ascertaining that e-voting facility is available during the VC or OAVM. For companies under category B, it is acceptable if the number of members is less than 50 and no demand for a poll is made.

How is remote e-voting different from the postal ballot?

Postal ballot means voting by ballot, post and now includes electronic mode. The remote e-voting makes it possible for shareholders to vote from any place securely. There is no need to post or be physically present at the meeting hence offering maximum convenience to the shareholder.