In a massive relief to the Companies, the Ministry of Corporate Affairs (MCA) via general circular No. 18/2020 allows relaxation for holding Annual General Meeting (AGM) to fight against COVID-19 to the Companies whose financial year ended on December 2019.
Under Companies Act, every Company requires to hold AGM within a period of six months (Nine months in case of first AGM) from the closure of the financial year and not later than 15 months period from the last AGM.
Due to COVID-19 related social distancing norms and consequential restrictions, MCA announces relaxation to the Companies whose financial year ended on 31 December 2019 to hold AGM within nine months i.e. 30 September 2020, without it being viewed as a violation under the Companies Act.
The relaxation was given on account of requests made by many companies seeking leniency on the AGM rules owing to the social distancing norms and the lockdown resulting from the Covid-19 outbreak across the country.
Highlight of the general circular issued by MCA
– On account of the problems faced by the Companies as highlighted above, it is hereby clarified that the Companies whose financial year (other than first financial year) has ended on 31st December, 2019, hold their AGM for such financial year within a period of nine months from the closure of the financial year (i.e. by 30th September, 2020).
– Holding such AGM as per relaxation granted by MCA shall not be viewed as a violation of the law under the Act.
As per Section 96 of the Companies Act, 2013, Companies must hold an AGM within six months from the closure of the previous financial year and not beyond 15 month of the last AGM.
Earlier this month, the MCA allowed companies to hold AGMs and extra general meetings (EGMs) through video conference or other audio visual means given the impact of Covid-19 on travel and difficulties in holding physical meetings.
Considering the way things have unfolded in the last one month due to the Covid-19 pandemic, the relaxations in the AGM rules were entirely necessary, and the Government took cognizance of the seriousness of the matter and eased the rules.