Section 96. Annual general meeting (AGM) under the companies act 2013

Strong corporate governance and unwavering compliance are the bedrock upon which successful and legally sound Indian companies are built. For any company aiming for longevity and stakeholder trust, understanding and adhering to statutory requirements is not just advisable, it’s essential. One such fundamental requirement is the Annual General Meeting, commonly known as the AGM. This is a mandatory yearly gathering where the company’s directors engage with shareholders, present the company’s performance, and discuss crucial matters concerning its operations and future.

The framework for this vital meeting is laid out in the Companies Act, 2013, with Section 96 specifically detailing the mandate and procedures. Understanding the nuances of the annual general meeting (AGM) under the companies act 2013 is crucial for every company registered in India, with the exception of One Person Companies (OPCs). Failing to comply can lead to significant penalties and undermine the company’s credibility. Whether you are a small business owner responsible for ensuring compliance or a salaried individual who might be a shareholder or director, knowing the AGM rules is vital for navigating the corporate landscape effectively.

Understanding Section 96: The Core of the Annual General Meeting (AGM) under the Companies Act 2013

Section 96 serves as the cornerstone for AGMs in India, outlining the fundamental requirements and purpose of this annual gathering. It establishes the legal obligation for companies to convene these meetings, ensuring a regular channel for communication and accountability between the management and the shareholders.

What is the Mandate of Section 96?

Section 96 of the Companies Act, 2013, unequivocally mandates that every company, other than a One Person Company (OPC), must hold a general meeting each year, officially designated as its Annual General Meeting. The notice calling the meeting must explicitly state it is an “Annual General Meeting.” The primary purpose of this mandate is multifaceted: it provides a formal platform for the company’s directors and management to interact directly with the shareholders, present the audited financial statements reflecting the company’s financial health, report on the company’s overall performance during the preceding financial year, and discuss key strategic and operational matters. These AGM requirements under companies act India ensure that shareholders are kept informed and have an opportunity to question the management, thereby upholding principles of corporate democracy.

Why is the AGM So Important for Indian Companies?

The significance of the Annual General Meeting extends far beyond mere legal compliance. AGMs play a critical role in fostering transparency and accountability within the corporate structure. By presenting audited financial statements, the Board’s report, and the Auditor’s report for shareholder consideration, companies open their performance and governance practices to scrutiny. This process holds the management accountable to the owners of the company – the shareholders. Furthermore, the AGM is a cornerstone of shareholder democracy, providing a forum for shareholders to voice opinions, ask questions, vote on crucial resolutions (like the appointment of directors and auditors, declaration of dividends), and thereby participate actively in the company’s governance. It ensures that the management remains answerable to the shareholders. Finally, conducting the AGM correctly helps companies fulfil essential statutory requirements, preventing penalties and maintaining a clean compliance record, which is vital for the company’s reputation and smooth functioning. The importance of AGM for Indian companies cannot be overstated; it’s a fundamental aspect of good corporate governance.

For more on good governance practices for companies, refer to our guide on Company Registration in India.

Key Timelines and Requirements for Holding an AGM in India

Adhering to the prescribed timelines and procedural requirements is critical for ensuring the validity of an AGM. The Companies Act, 2013 lays down specific rules regarding when the first and subsequent AGMs must be held, the notice period required, the contents of the notice, and the permissible location, day, and time for the meeting. Understanding these companies act 2013 AGM guidelines is essential for compliance.

Time Limit for the First AGM

For a newly incorporated company, the first Annual General Meeting holds special significance. The Companies Act mandates that the first AGM must be conducted within nine months from the date of closing of the company’s first financial year. It’s important to note that the first financial year could be longer or shorter than 12 months depending on the date of incorporation. For instance, if a company is incorporated on January 1st, 2024, its first financial year will close on March 31st, 2025, and the first AGM must be held by December 31st, 2025. Crucially, the law does not permit any extension of time for holding the first AGM. Therefore, companies must meticulously plan to meet this deadline without fail.

Note: Find detailed information about initial corporate setups, including the cost and capital requirements, in our guide to private limited company capital.

Time Limit for Subsequent AGMs

After the first AGM, subsequent Annual General Meetings must adhere to a stricter dual timeline framework. Each subsequent AGM must be held:

Within six months from the closing date of the relevant financial year (which typically closes on March 31st, meaning the AGM must be held by September 30th of the same calendar year).
The gap between one AGM and the next AGM should not exceed fifteen months.

Both these conditions must be satisfied simultaneously. For example, if a company held its last AGM on September 15th, 2023, its next AGM must be held by September 30th, 2024 (within 6 months of the financial year ending March 31st, 2024) AND also ensure the gap doesn’t exceed 15 months (meaning it must be held by December 15th, 2024). Therefore, the effective deadline is September 30th, 2024. Unlike the first AGM, companies facing genuine difficulties in holding subsequent AGMs within the stipulated time can apply to the Registrar of Companies (RoC) for an extension. The RoC has the power to grant an extension for a period not exceeding three months, provided the application is made before the due date. However, such extensions are granted only for special reasons and are not a matter of right.

Notice Requirements for Calling an AGM

Proper notice is fundamental to a validly convened AGM. Section 101 of the Companies Act, 2013, mandates that an AGM must be called by giving not less than 21 clear days’ notice. ‘Clear days’ means that the date on which the notice is sent and the date of the meeting itself are excluded from the calculation. For instance, if the AGM is scheduled for the 25th of a month, the notice must be dispatched on or before the 3rd of that month.

However, the Act provides flexibility. An AGM can be called on shorter notice if consent is obtained beforehand from not less than 95% of the members entitled to vote at the meeting. This consent can be given in writing or through electronic mode.

The notice must be sent to the following individuals:

Every Member of the company (shareholder).
The Legal Representative of any deceased member.
The Assignee of any insolvent member.
Every Director of the company.
The Statutory Auditor(s) of the company.

Failure to give proper notice to even one entitled person can potentially invalidate the meeting, highlighting the importance of meticulous record-keeping during dispatch.

Contents of the AGM Notice

The notice serves as the formal invitation and agenda for the meeting. It must clearly specify:

The Place where the AGM will be held.
The Date of the AGM.
The Day of the week for the AGM.
The Hour (time) at which the AGM will commence.

Furthermore, the notice must contain a statement of the business to be transacted at the meeting. This business is categorized into Ordinary Business and Special Business. For any item classified as Special Business, the notice must be accompanied by an Explanatory Statement as required under Section 102. This statement should set out all material facts concerning each item of special business, including the nature of concern or interest, financial or otherwise, if any, of every director, manager, key managerial personnel, and their relatives. This ensures members have sufficient information to make informed decisions.

For comprehensive insights into the governance and compliance aspects, explore our post on Related Party Transactions Compliance.

Location, Day, and Time for Conducting the AGM

The Companies Act also prescribes specific rules regarding the logistics of conducting AGM in India:

Location: The AGM must be held either at the registered office of the company or at some other place within the city, town, or village in which the registered office is situated. Holding it outside these limits generally requires specific permissions or falls under exceptions for certain company types (like government companies, if approved).
Day: The AGM must be held on any day that is not a National Holiday. A ‘National Holiday’ is defined as a day declared as such by the Central Government (currently Republic Day – January 26th, Independence Day – August 15th, and Gandhi Jayanti – October 2nd). AGMs can be held on other public holidays or Sundays unless the company’s Articles of Association prohibit it.
Time: The meeting must be held during business hours, defined as the time between 9 a.m. and 6 p.m. The meeting can continue beyond 6 p.m. if it commenced within business hours.

Flexibility via VC/OAVM: In response to practical challenges, especially highlighted during the pandemic, the Ministry of Corporate Affairs (MCA) has periodically issued circulars allowing companies to hold AGMs through Video Conferencing (VC) or Other Audio-Visual Means (OAVM), subject to compliance with specific procedures laid out in those circulars. Companies should always refer to the latest MCA Circulars for current guidelines on conducting virtual or hybrid AGMs.

The Annual General Meeting Process in India: A Practical Overview

Conducting an AGM involves a series of steps, starting from preparatory actions well before the meeting date to post-meeting compliance filings. Following the correct annual general meeting process India ensures the meeting is legally valid and achieves its objectives.

Pre-AGM Preparations

The groundwork for a successful AGM begins much earlier than the notice dispatch date. Key preparatory steps include:

Board Meeting: A Board of Directors meeting must be convened to:
- Approve the annual Financial Statements (Balance Sheet, Profit & Loss Account, Cash Flow Statement).
- Approve the Board’s Report (including annexures like the Corporate Social Responsibility report, if applicable).
- Take note of the Auditor’s Report on the financial statements.
- Recommend the declaration of dividend, if any.
- Decide the date, time, and venue (or mode, like VC/OAVM) for the AGM.
- Approve the draft Notice convening the AGM, including the agenda (Ordinary and Special Business) and the Explanatory Statement for special business.
- Authorize the Company Secretary or a Director to issue the notice.
Finalizing Documents: Ensure that the Annual Report, containing the approved Financial Statements, Board’s Report, Auditor’s Report, and the AGM Notice, is compiled and ready for circulation to the members within the statutory timelines.

Issuing the AGM Notice

Once the Board approves the notice and associated documents, the next step is its formal issuance to all entitled persons.

Modes of Sending: The notice can be sent via:
- Physical modes: By hand delivery, ordinary post, speed post, registered post, or courier.
- Electronic mode: Via email, to the registered email addresses of the members, provided the company complies with the rules prescribed under Section 101 and relevant MCA regulations regarding electronic communication.
Record Keeping: It is crucial to maintain robust proof of dispatch for all notices sent, whether physical (dispatch registers, postal receipts, courier acknowledgments) or electronic (email delivery logs). This documentation is vital in case of any dispute regarding the validity of the notice.

Business Transacted During the AGM

The core of the AGM involves transacting the business listed in the notice. This business typically falls into two categories as defined by Section 102:

Ordinary Business (Section 102(2)(a)): These are the standard items transacted at every AGM. No Explanatory Statement is required for these items unless specific circumstances necessitate it (e.g., appointment of an auditor other than the retiring one). The four items constituting Ordinary Business are:
1. Consideration of the Financial Statements, the Board’s Report, and the Auditor’s Report, leading to their adoption by the members.
2. Declaration of any dividend recommended by the Board.
3. Appointment of directors in place of those retiring by rotation or otherwise.
4. Appointment of the statutory auditors and fixing their remuneration.
Special Business (Section 102(2)(b)): Any business transacted at an AGM other than the four items of Ordinary Business is classified as Special Business. Examples include alteration of the Memorandum or Articles of Association, appointment of a Managing Director, approval of related party transactions above certain thresholds, etc. As mentioned earlier, every item of Special Business requires an Explanatory Statement to be annexed to the notice, providing all material facts to enable members to understand the implications of the proposed resolution.
Quorum (Section 103): For any business to be transacted at the AGM, a quorum must be present. Quorum refers to the minimum number of members required to be present throughout the meeting. As per Section 103, unless the Articles of Association provide for a larger number, the quorum for a public company is:
- 5 members personally present if the total number of members is not more than 1000.
- 15 members personally present if the total number of members is more than 1000 but not more than 5000.
- 30 members personally present if the total number of members exceeds 5000.
For a private company, the quorum is 2 members personally present. If the quorum is not present within half an hour of the scheduled time, the meeting generally stands adjourned (as detailed in the FAQs).

For a deeper dive into quorum requirements, check out our article Quorum Requirements for General Meetings: Section 103 Demystified.

Post-AGM Compliance Requirements

The company’s obligations don’t end when the meeting concludes. Several crucial post-AGM formalities must be completed:

Minutes: Prepare minutes of the AGM proceedings, ensuring they contain a fair and correct summary of the business transacted. The minutes must be entered in the Minutes Book maintained for general meetings and signed by the Chairman of the meeting within 30 days of the AGM conclusion.
Filings with RoC: Several forms and documents need to be filed with the Registrar of Companies via the Ministry of Corporate Affairs (MCA) portal within specified deadlines:
- Form MGT-14: Filed within 30 days of passing any Special Resolutions. Certain Ordinary Resolutions may also require MGT-14 filing as specified under Section 117.
- Form AOC-4: Filed within 30 days of the AGM, containing the adopted financial statements (including consolidated financial statements, if applicable), Board’s Report, and Auditor’s Report. Different versions of AOC-4 exist based on the type of company and statements (e.g., AOC-4 CFS for consolidated, AOC-4 XBRL for certain classes of companies).
- Form MGT-7/MGT-7A: The Annual Return must be filed within 60 days of the AGM. Form MGT-7A is applicable for OPCs and Small Companies, while MGT-7 is for other companies.
- Other filings might be required depending on specific resolutions passed (e.g., related to changes in directorships, share capital, etc.).

Meeting these AGM compliance requirements in India is essential to avoid penalties and maintain the company’s good standing.

Consequences of Non-Compliance with Section 96 (AGM Rules)

Failure to comply with the provisions related to holding an Annual General Meeting under Section 96 and associated rules can lead to serious repercussions for the company and its officers. The Companies Act, 2013, imposes specific penalties and provides mechanisms for intervention if defaults occur.

Penalties Under the Companies Act, 2013

Section 99 of the Act directly addresses the consequences of defaulting on AGM requirements. If a company fails to hold an AGM in accordance with Section 96, or fails to comply with any directions given by the National Company Law Tribunal (NCLT) regarding the calling, holding, and conducting of the meeting, the company and every officer of the company who is in default shall be punishable.

The penalty prescribed under Section 99 is a fine which may extend to one lakh rupees (₹1,00,000). Additionally, in the case of a continuing default, there is a further fine which may extend to five thousand rupees (₹5,000) for every day during which such default continues. This highlights the financial burden that non-compliance can impose. “Officer in default” typically includes directors and key managerial personnel responsible for ensuring compliance.

Power of the National Company Law Tribunal (NCLT)

The Act empowers the National Company Law Tribunal (NCLT) to intervene if a company defaults in holding its AGM. As per Section 97, if such a default occurs, any member of the company can make an application to the NCLT. Upon receiving such an application, the NCLT may:

Call or direct the calling of an Annual General Meeting of the company.
Give such ancillary or consequential directions as it deems expedient, including a direction that one member present in person or by proxy shall be deemed to constitute a valid meeting.

This power ensures that shareholders’ rights to have an AGM convened are protected, even if the company management fails in its duty. An AGM called under the direction of the NCLT is deemed to be an AGM of the company duly called, held, and conducted.

Other Repercussions

Beyond the specific penalties and NCLT intervention mandated by the Act, non-compliance with AGM requirements can have broader negative consequences:

Loss of Credibility: Consistent failure to hold AGMs or comply with statutory requirements severely damages the company’s reputation and credibility among stakeholders, including investors, lenders, suppliers, and customers. It signals poor corporate governance.
Investor Confidence: Potential investors are likely to be wary of investing in a company with a poor compliance track record. Failure to hold AGMs raises red flags during due diligence processes.
Lender Concerns: Banks and financial institutions may view non-compliance negatively when assessing loan applications or reviewing existing credit facilities.
Operational Hurdles: Non-compliance can create hurdles during strategic initiatives like mergers, acquisitions, fundraising rounds, or entering into significant partnerships, as compliance records are often scrutinized.
Shareholder Disputes: Failure to provide a forum for shareholder interaction and approval can lead to dissatisfaction and potential disputes or litigation initiated by shareholders.

Therefore, ensuring timely and proper conduct of AGMs is not just about avoiding fines but about maintaining the overall health, reputation, and trustworthiness of the company.

Conclusion: Ensuring Compliance with the Annual General Meeting (AGM) under the Companies Act 2013

In conclusion, the Annual General Meeting is a cornerstone of corporate governance in India, mandated by Section 96 of the Companies Act, 2013. It serves as a vital platform for transparency, accountability, and shareholder engagement. Holding an AGM is not merely a procedural formality but a fundamental duty of every Indian company (except OPCs). Adherence involves meeting specific timelines for both the first and subsequent AGMs, following meticulous procedures for issuing notices with complete information (including explanatory statements for special business), ensuring the presence of a quorum, correctly categorizing and transacting business, and fulfilling all post-meeting compliance requirements like minute preparation and timely RoC filings (AOC-4, MGT-7/7A, MGT-14 etc.).

Compliance with the rules governing the annual general meeting (AGM) under the companies act 2013 is non-negotiable. Failure to do so can attract significant monetary penalties, NCLT intervention, and severely damage the company’s reputation and stakeholder confidence. For small business owners and directors, ensuring compliance is paramount for sustainable growth and legal standing.

Navigating the complexities of corporate law, including understanding all AGM compliance requirements in India, can be challenging. If you require clarification or assistance with conducting your AGM, ensuring proper documentation, or managing RoC filings, seeking professional help is advisable.

Need expert guidance on company law compliance? Contact TaxRobo today for reliable assistance with AGM procedures, statutory filings, and comprehensive financial and legal services tailored for your business. Visit TaxRobo Services or Contact Us for a consultation.

Frequently Asked Questions (FAQs) about AGMs in India

Q1. Can an AGM be held outside India?

Answer: Generally, no. Section 96(2) mandates that the AGM must be held either at the company’s registered office or at some other place within the city, town, or village where the registered office is located. There are very limited exceptions, such as for Government companies where the Central Government might approve a different location, or potentially under specific, rare circumstances permitted by law. For most private and public limited companies, the AGM location is restricted to the vicinity of the registered office in India. However, recent MCA circulars have allowed holding AGMs via VC/OAVM, which provides location flexibility for participation, but the deemed venue might still be linked to the registered office as per specific circular guidelines.

Q2. What happens if the quorum is not present at the AGM?

Answer: As per Section 103, if the required quorum (minimum number of members) is not present within half an hour from the time appointed for holding the meeting:

The meeting shall stand adjourned to the same day in the next week, at the same time and place, or to such other date, time, and place as the Board may determine.
If the meeting was called by requisitionists (under Section 100), it shall stand cancelled if the quorum is not present.
At the adjourned meeting, if the quorum is still not present within half an hour, the members present (irrespective of their number, provided it’s at least one for the NCLT directed meeting under S.97/98, otherwise potentially as few as required by Articles or default provisions, often taken as the members present constituting quorum) shall be considered the quorum, and they can proceed to transact the business for which the meeting was originally called.

Q3. Is holding an AGM mandatory for a One Person Company (OPC)?

Answer: No. Section 96(1) explicitly states that the provisions regarding holding an Annual General Meeting apply to “every company other than a One Person Company”. Therefore, OPCs are exempt from the requirement of holding an AGM. Their compliance requirements regarding annual filings (like financial statements and annual return) still apply, but the formal AGM process is not needed.

Q4. Can the time limit for holding an AGM be extended?

Answer: It depends on whether it’s the first or a subsequent AGM:

First AGM: No extension is possible. It must be held within 9 months from the end of the first financial year.
Subsequent AGMs: Yes, an extension up to 3 months can be granted by the Registrar of Companies (RoC). The company must apply to the RoC before the original due date (within 6 months from the financial year end / 15 months from the last AGM, whichever is earlier), providing specific and valid reasons for seeking the extension. The RoC has the discretion to grant or deny the extension. An extension cannot be sought simply because the financial statements are not ready.

Q5. What constitutes ‘Ordinary Business’ versus ‘Special Business’ at an AGM?

Answer: The distinction is clearly defined in Section 102:

Ordinary Business: These are the four routine matters transacted at every AGM:
1. Consideration and adoption of the annual financial statements, the Board’s report, and the Auditor’s report.
2. Declaration of any dividend.
3. Appointment of directors in place of those retiring.
4. Appointment of, and fixing the remuneration of, the statutory auditors.
Special Business: All other business transacted at an AGM, apart from the four items above, is considered Special Business. Examples include altering the company’s Articles or Memorandum, approving significant related party transactions, appointing key managerial personnel under certain contracts, etc. Every item of Special Business requires an Explanatory Statement to be included in the AGM notice, detailing material facts and the interests of directors/KMPs.

Recommended External Links:

Ministry of Corporate Affairs (MCA): https://www.mca.gov.in
Companies Act, 2013 (e-Gazette/Bare Act): https://www.mca.gov.in/content/mca/global/en/acts-rules/ebooks/acts.html?act=NTk2MQ==#Companies_Act_2013 (Link to MCA’s e-book section for the Act)

Section 96.Annual general meeting (AGM) under the companies act 2013