If you own a company and find arranging Board meetings or your General Meetings (AGM, EGM) cumbersome because directors and shareholders are placed in different cities, or if you are a shareholder who considers going a long way to attend a general meeting to be an inconvenient task, here is some good news. You can now carry out your meeting online. Ministry of Corporate Affairs, through what it calls a green initiative, has made the process of carrying out general meeting easier. So, to carry out the general meeting using electronic mode, read on to find out about the law and regulations you need to comply with before availing this facility.
Under the notification issued by Ministry of Corporate Affairs on 20th May, 2011, shareholders of the company can participate in the general meeting through electronic mode. To ensure quick implementation of the notification and to ensure larger participation of the shareholder specially of listed company, it has been recommended to make such option available in at least five major states/ union territories keeping in mind concentration of shareholder in a place.
Meeting via electronic mode will be convenient for shareholders, hence, they would like to invest money in the company which provides for such facilities. Therefore, it is important for a company to have the provision of conducting meeting using electronic mode at least in major cities such as Delhi, Mumbai, Bangalore, Hyderabad and Kolkata.
It is mandatory for the company to notify the shareholders about the provision which allowed share holder to participate in the meeting through electronic mode.
Responsibility of ensuring audio visual facilities
The Chairman and the secretary of the meeting is supposed to ensure the availability of proper audio visual facilities, so that no technical difficulty arises during the meeting. Specific responsibility is conferred on the Chairman and Secretary for maintaining the integrity and effective participation in the Meeting.
Nonetheless, meeting via video conferencing does not do away with the requirement of Quorum as required under section 174 of the Companies Act, 1956. This denotes that at least 5 members in case of public company and 2 in case of other company have to be physically present to constitute quorum for the meeting.
However, in case of a Board meeting, Directors present online will be counted for the purpose of quorum, unlike the member meetings where quorum has to be physically present.
Conditions for online participation by directors and committee members
The notification also allows, directors and committee members to participate in the general meeting through video conferencing if :
1. Proper notices have been issued mentioning that online participation is permitted and
2. Their participation is permitted under Articles of Association of the Company.
The directors are supposed to be provided with specific notice informing them about the option of participating in the meeting through video conferencing. In absence of confirmation from the direction regarding the notice, it shall be presumed that the director will attend the meeting physically. Nevertheless, a director is bound to be physically present in at least one meeting in a financial year.
Compliance prior to the meeting
Circulation of gist of the minutes must be done within seven days of the meeting for removal of doubt.
An important concept introduced by the notification is of of roll call where a director needs to state his place and location. This provision is meant to ensure actual presence of the Directors at the meeting.
The ‘place’ of meeting in a video conference
The place where chairman or secretary will sit during the Board Meeting shall be considered as place of meeting under Section 288 of the Companies Act, 1956. Other essential documents and statutory register that needs to be placed in the meeting, in the video conference meeting, shall be placed before the chairman. The statutory register that requires to be signed by Directors shall be presumed to have been signed by them if they give their consent in the board meeting carried out in electronic form.
Procedure for conclusion of the meeting
It is necessary for the chairman to announce summary of the decisions taken in the meeting with details regarding agenda item and the names of director who have consented or dissented to those decisions.
RoC Certificates to be issued digitally
At present various certificates that are required to be issued to companies and stakeholders by Registrar of Companies are issued manually. Under the new notification, these certificates and letters will now be issued under the Digital Signature of the Registrar of Companies. This proviso has been implemented after taking into consideration Section 5 of the Information Technology Act, 2000 that gives legal recognition to digital signatures. The Digital Certificates are under process and will be available for issue by 30th June, 2011 in phased manner.
The new regulation will make the process of carrying out general meetings easier. A company by availing these provision can ensure smooth run of its business without any hassle regarding calling everyone. The provision allowing digital signature in the documents that were manually done earlier will make the process of filing documents easier and less time taking.
Issues under the Inormation Technology Act, 2000
As the meeting is carried out virtually, at least in part, it is relevant to consider the role of the Information Technology Act (IT Act). Section 4 of the Information Technology Act, 2000 which gives legal recognition to electronic records, Section 13 provides for time and place of dispatch and receipt of electronic record and Section 81 of the Act permits the Information Technology Act to have overriding effect over anything contained in any other law.