Virtual General Meetings: Time to Legislate or Let It Be?

Introduction

Shareholder meetings form the foundation of corporate democracy, offering a vital platform for investors to participate in a company’s decision-making process. In India, shareholder meetings primarily take two forms:

• Annual General Meetings (AGMs): Mandated under Section 96 of the Companies Act, 2013 (CA 2013), every company is required to hold an AGM each year within six months of the financial year’s end. Traditionally, these meetings must occur at the company’s registered office or another location within the city.

• Extraordinary General Meetings (EGMs): Governed by Section 100 of CA 2013, EGMs are convened to address urgent matters not dealt with at the AGM. These meetings can also be requisitioned by shareholders.

Since the COVID-19 pandemic, virtual AGMs and EGMs have gained traction. This article examines the legality of continuing such meetings via MCA circulars and whether a legislative amendment would provide more robust legal footing. We also weigh the benefits and limitations of virtual meetings.

Rise of Virtual Meetings and MCA Circulars

With lockdowns and social distancing norms disrupting physical gatherings, companies faced logistical and legal hurdles in holding mandatory shareholder meetings. Responding to industry concerns, the Ministry of Corporate Affairs (MCA) issued a series of circulars starting with:

• Circular No. 14/2020 (April 8, 2020)

• Circular No. 17/2020 (April 13, 2020)

• Circular No. 20/2020 (May 5, 2020)

• Circular No. 22/2020 and subsequent extensions, including the most recent Circular No. 9/2024

These circulars permitted companies to conduct AGMs and EGMs via video conferencing (VC) or other audio-visual means (OAVM). While this was a necessary innovation at the time, its legal standing in the post-pandemic world raises important questions.

Legality and Constitutional Concerns

The Companies Act, 2013 does not explicitly empower the MCA to override statutory provisions through circulars. Moreover, the circulars do not cite specific provisions under which they are issued, raising concerns about their legislative backing.

However, Article 77 of the Constitution allows the President to make rules for the efficient functioning of government ministries. The Government of India (Allocation of Business) Rules, 1961, accordingly empower the MCA to issue such circulars. During the pandemic, the Disaster Management Act, 2005 provided legal support, as Section 72 gives it overriding effect over other laws.

But with the pandemic now over, continuing to rely on such circulars becomes problematic. Judicial precedent holds that executive circulars cannot contradict or override primary legislation. For instance, the Supreme Court in Palaru Ramkrishnaiah v. Union of India (AIR 1990 SC 166) ruled that any circular repugnant to statutory provisions is unenforceable.

Thus, while MCA circulars may supplement the law, they cannot override Sections 96 and 100 of CA 2013, which still require physical shareholder meetings.

Alternatives the MCA Could Have Adopted

Rather than continuing reliance on circulars, the MCA had three viable legislative options:

1. Amending the Companies Act, 2013 to expressly permit virtual AGMs and EGMs.

2. Modifying the Companies (Management and Administration) Rules, 2014 through a notification under Section 469 of CA 2013.

3. Issuing an exemption notification under Section 462, allowing certain classes of companies to hold virtual meetings.

By sidestepping these options and extending temporary relaxations indefinitely, the MCA risks undermining the legislative intent of CA 2013.

Pros and Cons of Virtual General Meetings

Advantages:

• Increased accessibility: Shareholders across geographies can attend without travel hassles.

• Cost efficiency: Companies, especially those with large shareholder bases, save on venue and logistics costs.

• Higher participation: Technology facilitates wider shareholder engagement, even from remote areas.

Disadvantages:

• Reduced accountability: Management may avoid answering difficult questions or mute dissenting voices in a virtual setting.

• Lack of physical cues: Shareholders lose the opportunity to observe body language or confer with fellow shareholders in person.

• Control imbalance: Companies may selectively screen questions, limiting genuine interaction.

Conclusion: Need for Balanced Reform

The digital transformation of corporate governance is here to stay. However, continued reliance on legally shaky circulars is not a sustainable solution. It is imperative for the legislature to amend CA 2013 to explicitly authorize virtual shareholder meetings, while also introducing safeguards to ensure transparency, minority shareholder protection, and corporate accountability.

The road ahead should combine legislative clarity with technological innovation—paving the way for hybrid models that retain the inclusivity of virtual platforms without compromising the democratic ethos of shareholder participation.

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Disclaimer: Every effort has been made to avoid errors or omissions in this material in spite of this, errors may creep in. Any mistake, error or discrepancy noted may be brought to our notice which shall be taken care of in the next edition In no event the author shall be liable for any direct indirect, special or incidental damage resulting from or arising out of or in connection with the use of this information Many sources have been considered including Newspapers, Journals, Bare Acts, Case Materials , Charted Secretary, Research Papers etc