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Has The Nature Of The Annual General Meetings Metamorphosised?

The COVID- 19 Pandemic has wreaked stupendous havoc, turned the world upside-down, and made the very concept of existence undergo a radical change. From how we move and travel around to how we interact and work, every facet of human life has been immensely impacted since its origin and the situation hasn’t gotten any better even after the vaccines have been developed. But thanks to the technological advancements that facilitated conducting e-commerce, online education, virtual meetings, etc.

The pandemic stimulated a lot of rethinking on the traditional methods of managing and carrying out business. Amidst the worsening conditions in India and in furtherance of ensuring adherence to social distancing norms, the Ministry of Corporate Affairs (MCA) has allowed companies to hold their Annual General Meetings (AGMs) through virtual modes on or before 31.12.2021 vide it's General Circular No. 02/2021[1], like it allowed in the calendar year of 2020 vide it's General Circular No.20/2020.[2] This article aims at discussing the COVID Era has transformed the way Annual General Meeting has always traditionally been conducted and it further investigates the scope of it becoming a permanent practice.

The Law
Compulsorily convened by all the public and private companies, AGMs are conducted for the members to review the company’s growth rate and decide future plans of improvement. The provision of AGMs is available under section 96 of the Companies Act of 2013.[3] It provides for every company, other than One Person Company, to host a general meeting in a year as its annual general meeting and the period between two such meetings shall not elapse 15 months.[4]It must be held in the Registered Office on a working day.[5]

As far as AGMs through the virtual mediums are concerned, there is no proviso within the sections that deal with the aspect of AGMs. Under section 173 that mentions meetings of the board, it is conducted either in person or through video conferencing or other audio-visual means as may be prescribed.[6] In the case of Achintya Kumar Barua v. Ranjit Barthkur[7], section 173(2) of the Companies Act 2013 read with the Companies (Meetings of Board and its Powers) Rules 2014 was held to be a progressive step by the National Company Law Appellate Tribunal (NCLAT).

This was held so because the section confers the director with the right to participate in the meeting through means other than in person, and the Rules were also passed by the Central Government in order to enforce the very right. NCLAT also observed that it would be in the public interest for the companies to comply with this provision.

Even though there is no such clause with reference to AGMs, 2020 was marked as the year in which the shareholder meetings and a few AGMs were virtually conducted for the first time. In addition to being favorable for compliance with social distancing norms and public interest, virtual meetings witness greater participation in the corporate decision-making as per their convenience and that too at a lower cost.[8]Also, in such meetings, the items, in addition to the ones related to ordinary business, of special business that can’t be avoided by the board may only be conducted.

About the voting by shareholders, section 107 of the Act a resolution put to the vote of the meeting is decided on ‘show of hands' unless the voting is done through electronic mode or is demanded under section 109.[9] But this process has become quite obsolete. In the order for conducting virtual AGMs, MCA required the listing companies to provide a remote e-voting facility so that the active participation of the shareholders could be ensured. For the companies offering e-voting facilities, all the physically present members and the ones attending the meeting on virtual platforms shall be called upon to maintain quorum for meeting the requirement of section 103 of the Act.

As mentioned under section 109 of the Act, the Chairman of the meeting shall appoint a required number of members for the task of scrutinizing the poll process, and the votes were given and then further report about the same in the manner as asked in.[10] Post the culmination of the general meeting, the appointed scrutinizer first has to count the vote, then unblock the votes cast through remote e-voting and finally, within three days make a coalesced scrutinizer’s report of the total votes to the chairperson or the authorized person who shall countersign the same.[11]

The Perpetuation Of Virtual AGMS

With the onsite attendance of meetings getting discouraged due to the pandemic, the companies have been exploring various online formats to obviate any interruption in their business. Various companies of North America have shifted to virtual-only AGMs in recent years. According to a recent study by Asian Corporate Governance Association, the number of remote AGMs has paramountly increased in Asia including the countries like Malaysia, India, Singapore, etc.[12] In Canada, online meetings have become the newly set norm and over 145 issuers chose fully virtual or hybrid formats of AGMs allowing for remote participation and voting.[13]

The COVID- 19 phases have given a kick start to AGMs being carried out through video-conferencing or audio-visual modes, but if this trend will be permanently adopted is uncertain.[14]Tata Consultancy Services (TCS) has become the first Indian company to reach out to a huge number of shareholders and host their AGM online in 2020. The TCS-AGM application was designed for addressing the questions asked by the shareholders and render real-time feedback. The application software was called safe and scalable for it has the features like biometric login, instant retrieval of content, content navigation facility, etc.

Another giant, Reliance Industries, which traditionally used to host its AGMs at Birla Matushree Sabhaghar in South Mumbai, conducted its first online AGM via a new application that taken in more than 1 Lakh shareholders from 500 locations, Indian and overseas, simultaneously.[15]Not only this, via WhatsApp, it also launched an educative Chatbot equipped to respond to the queries and accurately and immediately guide the shareholders, media, potential investors, and general public with correct information with respect to AGM.

With the positive turnouts of the virtual AGMs, many have shown the preference for AGMs becoming permanently of a virtual nature. This is mainly driven by the fact that surpassing all the geographical barriers and other costs of attendance, online AGMs have a wider scope for making an unlimited number of shareholders more accessible for both institutional and retail investors. However, there is some criticism as well to this virtual setting.

A short meeting is likely to impact the active interaction between the directors and shareholders, even during the Q&A session. Furthermore, due to various cost or logistical problems, most companies can hold AGM through audio conference call only which is not a good experience for the shareholders. Another observed problem has been inherent proxy plumbing.

Considering both sides, hybrid meetings seem to be a better option, even for the future times to come once the pandemic is over. The Singapore Exchange Resolution and the Monetary Authority of Singapore have stated that they are accepting of permitting hybrid or completely virtual shareholders meetings even post-pandemic.[16] A hybrid AGM puts up the flexible offer of choosing between in-person AGM and on-ground AGM to the shareholders and is thus quite inclusive and has a wide reach.

Since it is organized at a physical location with virtual AGM provision in place, it is quite a seamless event, and selecting the right technology is the key to a secure and reliable meeting platform. Given the relatively narrow digital penetration and bandwidth issues in India, hosting hybrid AGMs can be considered as a more optimal option so that the shareholders who can’t travel can be at ease. This is a viable option to be incorporated within the system post-pandemic too.

Regarding its execution, for example, the division of questions between the two sets of attendees can be done through breakout sessions and handled by the moderator. Infosys, without any regulatory diktat, ran almost a hybrid kind of AGM in 2020, and in long term, it envisages a hybrid model where one would have the flexibleness to work from office or home.[17]

Conclusion
Even with the initial incertitude, the companies have been able to successfully conduct virtual AGMs.The experiment of testing the efficacy of virtual meetings has shown both, the benefits and the concerns. If the government of India, like other countries, decides to incorporate the provision of virtual or hybrid meetings within the system, it will have to amend the Companies Act 2013 and related rules and regulations. Hosting hybrid AGMs can be expensive, however, the costs will be worthwhile if these will positively impact shareholders’ participation and facilitate shareholder democracy truly take wing in the long run.

End-Notes:
  1. GeneralCircularNo.02_14012021.pdf, , http://www.mca.gov.in/Ministry/pdf/GeneralCircularNo.02_14012021.pdf (last visited May 6, 2021
  2. Circular20_05052020.pdf, , https://www.mca.gov.in/Ministry/pdf/Circular20_05052020.pdf (last visited May 6, 2021).
  3. Guest, The Future of Virtual Meetings under the Companies Act, IndiaCorpLaw (2020), https://indiacorplaw.in/2020/08/the-future-of-virtual-meetings-under-the-companies-act.html (last visited May 6, 2021).
  4. Id. 2, Sec. 96, Cl. 1
  5. Supra Note 2, Sec. 96, Cl. 2
  6. Supra Note 2, Sec. 173, Cl. 2
  7. Achintya Kumar Barua v. Ranjit Barthkur, (2018) 91 taxmann.com 123
  8. Guest, The Future of Virtual Meetings under the Companies Act, IndiaCorpLaw (2020), https://indiacorplaw.in/2020/08/the-future-of-virtual-meetings-under-the-companies-act.html (last visited May 6, 2021).
  9. Supra Note 2, Sec. 107
  10. Supra Note 2, Sec. 109
  11. Supra Note 3.
  12. 2021-01-11_BT_The future of AGMs: physical or virtual, , https://sid.org.sg/Web/News/News_2021/2021-01-11_BT_The_future_of_AGMs_physical_or_virtual.aspx (last visited May 7, 2021).
  13. The Future of Annual General Meetings, , ICGN (2020), https://www.icgn.org/future-annual-general-meetings (last visited May 7, 2021
  14. First Virtual AGM: TCS Taps Digital Transformation Opportunity, , https://www.tcs.com/tcs-way/tcs-virtual-annual-general-meeting (last visited May 7, 2021).
  15. Reliance 1st online AGM to feature brand-new virtual platform, Chatbot - The Economic Times, , https://economictimes.indiatimes.com/news/company/corporate-trends/reliance-1st-online-agm-to-feature-brand-new-virtual-platform-chatbot/articleshow/76939664.cms?from=mdr (last visited May 7, 2021).
  16. ADRIAN CHAN, The future of virtual AGMs, The Business Times (2021), https://www.businesstimes.com.sg/hub/boardroom-matters/the-future-of-virtual-agms (last visited May 7, 2021).
  17. Nandan Nilekani et al., CORPORATE PARTICIPANTS: 40.
Written By:
  1. Navin Kumar Jaggi
  2. Vanshika Mehra

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