On 19 September 2024, the Ministry of Corporate Affairs (“MCA”) issued a significant circular (“Circular”) that extends the provision for companies to conduct their Annual General Meetings (“AGMs”) and Extraordinary General Meetings (“EGMs”) via video conference (“VC”) or other audio-visual means (“OAVM”) until 30 September 2025. This decision is a continuation of previous measures initiated during the COVID-19 pandemic, aimed at facilitating corporate governance while embracing digital transformation.

Background

The option to hold AGMs and EGMs virtually was first introduced in April 2020 as a temporary measure due to the pandemic's restrictions on physical gatherings. The initial circular allowed companies to conduct meetings through VC until 30 June 2020. However, recognizing the benefits of this approach, the MCA has extended these provisions multiple times over the years. The latest extension reflects an ongoing commitment to leveraging technology in corporate governance.

Aftermath Of Introducing Virtual Meetings

The MCA first permitted virtual meetings in April 2020. The facility to hold virtual Annual General Meetings and Extraordinary General Meetings has been extended on 7 occasions and the latest one being the 8^th. The extensions provided by MCA prove that the inclination toward virtual AGMs and EGMs is increasing among companies’ day by day.

This progressive approach has allowed companies to adapt to changing circumstances and maintain compliance with statutory requirements without compromising stakeholder engagement.

Key Provisions of the Circular

The Circular emphasizes a couple of important provisions regarding the conduct of AGMs and EGMs:

1. Eligibility: Companies whose AGMs are due in the years 2024 and 2025 can conduct these meetings via VC or OAVM.
2. Legal Compliance: The extension does not provide additional time for holding AGMs beyond statutory deadlines set by the Companies Act, 2013. Companies failing to meet these deadlines may face legal repercussions.

Implications on Corporate Governance

The MCA's decision underscores a shift towards more flexible and accessible corporate governance practices. By allowing virtual meetings, companies can:

1. Enhance Participation: Virtual formats remove geographical barriers, enabling broader participation from shareholders and stakeholders.
2. Cost Efficiency: Conducting meetings online reduces logistical costs associated with physical gatherings.

3. Adaptation to Digital Trends: Embracing technology aligns with global trends towards digital transformation in business operations.

Challenges and Considerations

While the extension of virtual meetings presents numerous advantages, there are also challenges that companies must navigate:

1. Technological Barriers: Not all stakeholders may have equal access to technology or familiarity with virtual meeting platforms.
2. Security Concerns: Ensuring data security and privacy during virtual meetings is crucial to maintain trust among participants.
3. Regulatory Compliance: Companies must remain vigilant about adhering to all relevant provisions of the Companies Act while conducting virtual meetings.

MHCO Comment:

The Circular marks a pivotal moment in India's corporate governance landscape by extending the facility for virtual AGMs and EGMs until 30 September 2025. This decision not only reflects a response to ongoing challenges posed by traditional meeting formats but also aligns with broader objectives of digital transformation within corporate India. As businesses continue to adapt to evolving circumstances, embracing technology in governance practices will be essential for fostering engagement and ensuring compliance with statutory requirements. The move towards virtual meetings is indicative of a more flexible approach to corporate governance that prioritizes accessibility and efficiency while maintaining legal integrity.

This update was released on 27 Sep 2024.

The views expressed in this update are personal and should not be construed as any legal advice. Please contact us directly on +91 22 40565252 or legalupdates@mhcolaw.com for any assistance.

Legal Update Team
MANSUKHLAL HIRALAL & COMPANY
Advocates, Solicitors and Notaries
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