Extension of AGM – Procedures & Consequences
As per section 96 of the Companies Act, every company other than the OPC or One Person Company is required to hold AGM for transacting on items of ordinary or special business. AGM shall be held once in every financial year.
In the case of a company, the first AGM shall be held within 9 months from the closing of the first financial year, so we can say that the company need not hold AGM in its first year of incorporation. Say a company is starting their operation on 1st of January 2021, then the ending of the financial year with respect to this company can be taken as 31st March of next year, which is 2022. Then the due date for holding of AGM in the case of this company will be 31st December of 2022. But if the company decides to close its financial year during 31st March of 2021, then the due date shall be 31st of December 2021, as it is a new company.
But any subsequent AGM shall be held by a company within 6 months from the closing of the relevant financial year. Say, the FY in question is 2020-21, then the due date for holding AGM shall be 30th September 2021, which is 6 months from 31st March 2021.
It is to be further noted that the time period between two AGMs held by the company shall not exceed 15 months and this shall be considered between the date of one AGM and that of the next.
Extension of AGM
Proviso 3 to Section 96 states that, if a company is of the opinion that they cannot hold AGM within 6 months from the end of the relevant financial year, then such company shall apply for an extension of the date of AGM. The registrar shall for such special and specific reason extend the time for holding such AGM, other than the first AGM for a period no further than 3 months.
Certain reasons due to which the company certification may request for extension of the date for holding AGM would be as follows:
- Non-availability of Auditors for the signing of financial statements due to resignation, death, incapacity to sign, or such other reason.
- The non-availability of financial statements due to certain valid reasons and difficulty pertaining to the Auditors or the company itself.
iii. non-signing of the financial statements by the Managing Director as he or she was not available for signing the same.
- Non-availability of Director of the company.
- Death or disqualification or such other reasons caused a casual vacancy in the office of directors resulting in the availability of directors going below the statutory limit.
- Or such other reasons which might be accounted as valid or justified.
Procedure for Extension of AGM
In case of a company that would want to get the extension for holding AGM pertaining to a particular financial year, they should follow the below-specified procedures:
Calling a Board Meeting:
- The company shall call a meeting of the board as per section 173 for discussing the reasons due to which it is not possible to hold AGM within the due date pertaining to the relevant financial year in question.
- The Board of Directors shall then pass a Board Resolution for filing of application with ROC for extension of AGM and the authorization of any director to sign such application.
Preparation of Application:
Once the Board Resolution has been passed, an application for approval of ROC for extension of AGM shall be prepared by the company, which would cover the following points:
- Details about the company,
- Reason for non-possibility of holding AGM within due date specified by the Companies Act,
- Attach the Memorandum of Association (MOA) and Articles of Association (AOA) of the company along with such application made for the extension of AGM.
Preparation & Filing of e-form:
Form GNL-1 should be prepared by the company for filing of application with Registrar of Company or ROC, by
- Mentioning the name of the company,
- Selecting reason for application,
- Affixing DSC of the authorized director,
- And filing it with the ROC.
Once the filing is done with, the ROC will check the facts and details furnished by the company status through the prescribed form and ensure the validity of the same. And on the basis of this, a decision regarding the extension shall be granted by ROC for any period but not more than a period of 3 months.
Penalty in case of Default
Company and every officer of the company, who is in default shall be held liable and would be charged with the fine which may extend to INR 1,00,000 and in case of continuing of the default there shall be a charging of a further fine which may extend to INR 5,000 for every day during which such default is committed by the company and its officers.