Despite being the most regulated sector, commercial banks behind on conducting AGM; What can investors expect?

~Rishab Agrawal

As per the regulation of the authorities, all the companies listed on NEPSE have to compulsorily convene their Annual General Meeting (AGM) with 6 months of completion of the fiscal year. The main purpose of the AGM is to endorse audited financial highlights of the fiscal year and to get approval for the proposed dividend (if any) for the shareholders. Other aspects of the AGM include the appointment of statutory auditor for the upcoming fiscal year and presentation of other important decisions regarding the operation of the company. These aspects makes the AGM an important event for the company as well as its stakeholders. But like we have seen in previous years, some companies are yet to convene their AGM while the authorities have turned a blind eye towards the situation.

Talking about the most popular sector among investors- commercial banks, most of the banks haven’t even proposed their AGM’s for the FY 74/75 while some have not yet convened AGM for FY 73/74, let alone the AGM for the previous fiscal year. A list containing the dates of AGM for FY 73/74 and FY 74/75 proposed by all the commercial banks have been prepared to get clarity about the carelessness of commercial banks towards stated rules and to highlight the authorities’ ignorance by being silent about the situation.

From the above mentioned data, some commercial banks have delayed their AGM till a period of August for the previous fiscal year while three commercial banks namely, Nepal Credit and Commerce Bank (NCCB), Civil Bank Limited (CBL) and Kumari Bank Limited (KBL) have not yet convened the AGM for FY 73/74. Similarly, 9 commercial banks including the three mentioned above have not even proposed the date of AGM for FY 74/75.

As per the stated regulations, the commercial banks can apply for an extension of deadline to convene the AGM after presenting a valid reason. If the reason is acceptable, the Nepal Rashtra Bank (NRB) approves the extension. However, if the reason is unacceptable or if the bank fails to apply for the extension, the NRB has the authority to force the bank to convene the AGM. Although this happens under very rare cases.

The major disadvantage of not convening the AGM on time is that it weakens the trust of the stakeholders in the company. Since, they are deprived of the information required to make important decisions, their belief and trust is hampered. This can take a heavy toll on the market performance of a particular company. It also defeats the purpose of a public company as those companies are established with the motive of being completely transparent about their operations and activities.

Such occurrences are a small reflection of the condition of the securities market in Nepal where there is a huge scope but due to ignorance of authorities and careless attitude of the companies, the growth prospect is curbed. This situation cannot change until this type of mindset is changed. The growth prospects will always be bleak until the concerned people and authorities start being more responsible towards their duties and expectations of the stakeholders.