Decoding MCA Relaxation on Holding Of AGM

Decoding MCA Relaxation on Holding Of AGM

• Holding of annual general meetings by companies whose financial year has ended on 31st December, 2019.

• Overview

In view of the situation arising due to COVID-19 pandemic and extended lockdown period, Ministry of Corporate Affairs vide General Circular No. 18/2020, F. No.2/4/2020-CL-V dated 21^st day of April, 2020 has issued Clarification onHolding of annual general meetings by companies whose financial year has ended on 31st December, 2019.

Key Highlights:

• Several representations have been received from stakeholders with regard to difficulty in holding annual general meetings (AGMs) for companies whose financial year ended on 31st December, 2019 due to COVID-19

• these are related social distancing norms and consequential restrictions linked thereto.

• These representations have been examined and it is noted that the Companies Act, 2013 (Act) allows a company to hold its 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 a period of 15 months from the date of last AGM.

• Relaxation given:

If 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 9 months from the closure of the financial year (i.e. by 30th September, 2020), the same shall not be viewed as a violation. The references to due date of AGM or the date by which the AGM should have been held under the Act or the rules made thereunder shall construed accordingly.

• Decoding this MCA Circular:

• As per 2 (41) of the Companies Act, 2013:

'financial year', in relation to any company or body corporate, means the period ending on the 31st day of March every year, and where it has been incorporated on or after the 1st day of January of a year, the period ending on the 31st day of March of the following year, in respect whereof financial statement of the company or body corporate is made up:

Provided that where a company or body corporate, which is a holding company or a subsidiary or associate company of a company incorporated outside India and is required to follow a different financial year for consolidation of its accounts outside India, the Central Government may, on an application made by that company or body corporate in such form and manner as may be prescribed, allow any period as its financial year, whether or not that period is a year:

That Means Companies which is a holding company or a subsidiary or associate company of a company incorporated outside India post approval of Central Government, can decide any period as its financial year.

• As per Section 96 of the Companies Act, 2013:

Except in case of First AGM, in any other case, Company has to Convene AGM within a period of six months, from the date of closing of the financial year.

Conclusion:

Post interpretation of both the Sections 2 (41) and 96 of the Companies act, 2013, it is hereby clarified that:

• Companies whose Financial year has been changed stated above are allowed and relaxation provided to them to convene AGM till 30.09.2020 instead of 30.06.2020.
• Company whose financial year is from January to December, has to has to Convene AGM within a period of six months, from the date of closing of the financial year i.e. on or before 30.06.2020.
• The revised due date is September 30, 2020, instead of June 30, 2020.

Kindly note that: not applicable for Companies for first financial year.

About Author:

 CS Lalit Rajput (PARTNER AT Xcede Consultech LLP) AND CAN BE REACHED AT [email protected]  / +91 8802581290