Shareholders are the real owners of the company. They exercise their ownership rights by actively engaging in the affairs of the company through meeting of the members.
It can therefore be understood that conducting the members meeting at regular intervals is of vital importance: to protect the interest of the shareholders, allow them to exercise their rights as the rightful owners of the company and participate as such in the functioning of the company.
Importance of AGM
Section 96 of the companies Act, 2013 makes it mandatory for every company other than one Person Company to hold an Annual General Meeting (AGM) of its members by giving notice of 21 clear days.
None the less, AGM can also be conducted at shorter notice with the prior written consent of not less than 95% of members entitled to vote at the meeting. This consent may be given in writing or electronically.
AGM is to be held within a period of 6 months from the date of closing of financial year and gap between two AGM shall not exceed 15 months. It is to be noted that the first AGM of the company post incorporation shall be held within a period of 9 months from the date of closing of financial year.
Every AGM is conducted during business hours i.e. 9 a.m. to 6 p.m. on any day that is not a national holiday at the registered office of the company or at a place within the jurisdiction of the city, town or village in which the registered office of the company is situated.
However, the AGM of unlisted company may be held at any other place with the written consent of all of its members.
The Notice of AGM is always given in writing. This notice is served either by speed post, registered post, hand-delivery or via electronic medium on the registered address or e-mail id of the member. The notice shall contain the agenda of items to be discussed at the meeting of the company.
An AGM shall commence only when the required minimum quorum is present. In case of private company the quorum shall comprise of minimum 2 members. In case of Public company the quorum shall be as follows:
- If the total number of members is 1000, quorum shall be minimum 5 members;
- If the total number of members is between 1000 and 5000, quorum shall be minimum 15 members;
- If the total number of members is more 5000, quorum shall be minimum 30 members;
The quorum is required to be present within 30 minutes from the scheduled time of AGM. In case the quorum is not present then the AGM shall be adjourned to the following week at same day same time and same place.
No company incorporated under The Companies Act, 2013 can function without conducting AGM.
Contravention of section 96 amounts to an offence compoundable in nature. The Act levies a penalty of upto Rs. 1 Lakh for default in conducting the AGM, and in case of continuing default a fine of Rs. 5,000/- per day is levied for each day during which the default continues.
That being so one can conclude that the Annual General Meeting is focal point for all companies.