AGMs Go Virtual, Shareholders Miss Face-to-Face Connect

However, at RIL's 48th AGM, where shareholders will join through video link, there will be much to listen to as Mukesh Ambani speaks about the company's progress and future plans — timelines for the mega IPOs of Reliance Jio and Reliance Retail, and updates on the new energy business.

The AGMs of BPCL, Hindustan Zinc, and Vodafone Idea on August 25 are also being held through video conferencing.

Annual general meetings have been held virtually since May 2020, when Covid-19 necessitated physical distancing. But the shift has also taken away the fun, laughter, poetic expressions, and hard questions for promoters and chief executives of blue-chip companies.

Ashalata Maheswari, a diehard AGM attendee and a regular at all physical AGMs before May 2020, held shares in around 1,500 companies worth crores. Possessing detailed knowledge about companies, she would often charm the management with shayari in their praise.

It was the Ministry of Corporate Affairs (MCA) that allowed companies to hold AGMs virtually or through other audio-visual means (OAVM) during the Covid-19 pandemic in 2020 to comply with social distancing norms and lockdowns. Initially permitted only for that year, the MCA has since extended these provisions to allow for virtual meetings more generally.

Virtual AGMs are becoming popular across the world as they make it easier to connect with more shareholders in a democratic way. Some corporates abroad are also adopting a hybrid model, allowing both physical and online attendance.

Critics argue that shareholder rights must be safeguarded and companies must ensure virtual platforms provide interactive Q&A, voting capabilities, and transparent moderation.

There are both advantages and disadvantages to virtual AGMs in an increasingly digital corporate world. Physical AGMs had become inefficient and cumbersome, with declining attendance rates and changing participation preferences, notes a paper by Bharat Vasani, senior advisor – Corporate Laws, Cyril Amarchand Mangaldas.

From a company’s perspective, unwanted gatherings of minority shareholders with ulterior motives are no longer possible in virtual AGMs. Minority shareholders with just one share can no longer embarrass or blackmail management in front of a large gathering. However, genuine voices can still reach management through alternate channels.

"By hosting such meetings via VC or OAVM, it has become easier for shareholders and investors to attend at the click of a button, without the hassle of travel. Companies can also avoid the cost of hosting such meetings, since those with large public shareholding would otherwise require booking an alternate venue," the paper noted.

"However, a physical AGM allows shareholders to collaborate with one another on issues, ensuring the management listens to their concerns. Further, shareholders can judge the body language of management in response to sensitive queries. In physical AGMs, there is also a way of forcing management to respond to questions, which is not possible in virtual formats."

"Companies have more control over engagement in virtual AGMs, as they can muzzle dissent by muting or ignoring more vocal shareholders, and also have the opportunity to screen difficult questions."

The Ministry of Corporate Affairs needs to strike a balance between the rights of minority shareholders and the desirability of permitting virtual AGMs and EGMs, especially given large-scale digitisation and widespread access to the internet. Virtual AGMs can certainly enable wider participation from shareholders across the country. However, safeguards are needed to ensure that company managements do not abuse the facility to silence minority shareholders," Vasani said.

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