Thursday, April 26, 2012

HOLDING AND EXTENSION OF ANNUAL GENERAL MEETING – HARMONISATION BETWEEN SECTION 166 AND SECTION 210 OF THE COMPANIES ACT, 1956


HOLDING AND EXTENSION OF ANNUAL GENERAL MEETING – HARMONISATION BETWEEN SECTION 166 AND SECTION 210 OF THE COMPANIES ACT, 1956

By K P C Rao.,
LLB., FCS., FICWA
                                                                Practicing Company Secretary
kpcrao.india@gmail.com


1. Provisions under section 166 and 210

As per section 166 of the Companies Act, 1956, the companies could hold its annual general meeting within fifteen months of the last annual general meeting. So long as the companies hold annual general meeting within the above specified time limit, no approval from any of the regulator is required for holding such meeting. Companies amendment Bill 2009 contains the similar provision in Sec 85[1].

Sub-section 3 (b) of section 210 specifies that the company is required to hold its annual general meeting within six months from the end of the financial year. 

2. Contradiction between the provision of section 166 and 210

Section 166 allows holding of an annual general meeting within fifteen months of the last annual general meeting of the company. While this does not need approval of the Registrar of Companies (ROC),  this may at times result in a company not being able to hold the annual general meeting within six months from the end of the financial year as envisaged in section 210(3)(b). 

3. Harmonization between section 166 and section 210

At times, there is a possibility of non-compliance emerging on this subject – while compliance would be in order for section 166 for holding the annual general meeting within nine months (taking into consideration of three month’s extended period of time by ROC) , there could be non-compliance under section 210 – for not holding the annual general meeting within six months from the end of the financial year - due to different timing specified in both these sections for holding annual general meeting.

On a combined reading of the provisions of sections 166 and 210 of the Companies  Act , it is clear that the annual general meeting should be held on the earliest of the following dates:-

a)     15 months from the date of the last annual general meeting;
b)     the last day of the calendar year;
c)     6 months from the close of the financial year.  

There may be instances where the company is able to hold its annual general meeting within 15 months of the date of the last such meeting but experiences genuine difficulty in holding the meeting within 6 months of the close of the financial year as required by Section 210.  In such cases, the Registrars have been advised to grant extension under Section 166, even in cases where the period prescribed under Section 166 is not likely to be exhausted to enable the Company to hold its annual general meeting beyond the period of six months prescribed under Section 210 but within 9 months of the close of the financial year.  Thus, the Registrar of Companies is empowered to grant extension of time by 3 months from the earliest of the dates when the company is required to hold the annual general meeting.

As per the circular issued by the then Department of Company Affairs[2] where a company holds its annual general meeting within the time prescribed under section 166, though such a meeting is held beyond the period of six months from the close of its financial year {as required under section 210(3)(b)}and the company files its annual return within 60 days of the holding of the said meeting,  no action should be taken against the company for default of section 159 or 166 nor additional fee be levied in such a case in respect of the filing of the annual return and audited accounts..

4. Power of the Central Government to call annual general meeting (Sec.167)


In case of default in holding an annual general meeting, as required by Section 166, the Central Government will exercise the power to call or direct the calling of the annual general meeting but only on the application of a member. Companies amendment Bill 2009 contains the similar provision in Sec 86 (1).

5. Penalty for default in complying with Section 166 or 167 (Sec.168)

If default is made in holding a meeting of the company in accordance with section 166, or in complying with any directions of the Tribunal or the Central Government under sub-section (1) of section 167, the company, and every officer of the company who is in default, shall be punishable with fine which may extend to fifty thousand rupees and in the case of continuing default, with a further fine which may extend to two thousand five hundred rupees for every day after the first during which such default continues. Companies amendment Bill 2009 contains the similar provision in Sec 88.

6.  Extension of time for holding annual general meeting 


At times, it is possible due to certain unforeseen reasons; the companies may not be able to hold the annual general meeting. In such circumstances, the Registrar of Companies, for any special reasons , could grant time extension to hold the annual general meeting of the company by a period not exceeding three months. 

This provision, however does not apply for the first annual general meeting of the company which is required to be held within a period of not more than eighteen months from the date of its incorporation and if the first general meeting is held within that period, the company is not require to hold any annual general meeting in the year of its incorporation or in the following year;

The Annual General Meeting should be held whether the accounts are ready or not.  The Central Government does not have the power to extend the time for holding the Annual General Meeting. This power is vested only with the Registrar.  An application before the Central Government for extension of time must not, therefore, be entertained[3] 

Application for extension before expiry of period. 

The Registrar would consider the grant of extension only in cases where the application for extension is made before the expiry of the period laid down in Section 166 (1)[4]  The application should be accompanied by a resolution of the Board of directors giving full information as to why the company is unable to comply with the statutory requirements. The application should be signed by a director or the secretary.  

Failure to get annual accounts audited, no excuse for extension of time 

The Government has decided that delay in the completion of the audit of the annual accounts of company should not ordinarily constitute a ‘special reason’ justifying the grant of extension of time for holding its annual general meeting. Companies may therefore advised to take all suitable steps to ensure that their annual accounts are audited in good time so that their annual general meetings may be called within the statutory time –limit.  

Adjourned AGM must be held within maximum time - limit

The adjourned Annual General Meeting must be held within the time limit allowed under Sec 166[5].
Holding of two AGM’s on the same day

There is no provision in the Act prohibiting the holding of two AGM’s on the same day. If the articles do not contain any provision to the contrary, AGM for the current year is also for the previous year can be held on the same day. 

Conclusion  

Though there appears to be contradiction between section 166 and section 210(3)(b) of the Companies Act on the timing of holding the annual general meeting, the department has clarified that the two sections should be read together so as to get a harmonious construction and if a breach of the provisions of one or the other of the two sections is to be avoided an annual general meeting should be held on the earlier of the three relevant dates prescribed under the said two sections as discussed above.[6]
The companies could be assured that no action would be taken against the company so long as the company holds its annual general meeting within the time prescribed under section 166, though such a meeting is held beyond the expiry of six months from the close of its financial year and the company files its annual return within 60 days of the holding of the said meeting. The department would not be collecting any additional fees in such a case for filing of the annual return and audited accounts after the annual general meeting within the above specified time limit of 60 days.

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Published in monthly magazine of ICSI 'Corporate Secretary' in the month of June, 2010]

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