Annual General Meeting

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21 Aug, 2024

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The annual general meeting (AGM) is a yearly event in which all directors and shareholders gather to interact and discuss the annual performance or vote on certain important matters. Organizations conduct this meeting per the rules mentioned in the Companies Act 2013, where directors present the annual report.

In the meeting, directors present the company's yearly performance and future strategies, and shareholders ask questions and express their concerns. Then, shareholders cast votes on important matters like the appointment of directors, auditors, etc., either in person or through a proxy which can be by email or online. In most countries, public companies are to hold this meeting.

What Is Annual General Meeting?

The AGM gathers directors and shareholders to present and discuss the company’s annual performance.
It also allows the shareholders to voice their concerns, ask questions, and vote on important matters like appointing directors, auditors, etc.
Voting occurs during the meeting either in person or through a proxy that may be online or through emails.
Most countries are legally required to hold this meeting annually according to the annual general meeting guidelines mentioned in the Companies Act 2013.

Annual General Meeting Explained

The AGM is an event where the shareholders and directors of a company come together to discuss the yearly performance and plans. The shareholders clear their concerns and vote on crucial matters.

The annual general meeting guidelines are mentioned in the Companies Act 2013. It is a chance for shareholders to clarify their concerns or any issues related to company performance or management. AGM also gives an insight into the company’s future business strategies.

The rules may vary according to territorial jurisdiction. But in general, all public and private companies are legally required to hold AGMs, but it is compulsory for public companies. The procedure of an annual general meeting is such that the entity should file a proxy statement with the Securities And Exchange Commission (SEC), which will mention the location, date, and time of the meeting along with brief details on matters that require voting.

The AGMs are a way to evaluate the company’s health and prospects. It creates transparency and makes the management accountable to shareholders. It is an opportunity to appreciate excellent work, challenge negative performance, and get involved in the company's decision-making process.

Objectives

The AGM gives an insight into the company’s performance and an opportunity to participate actively in management procedures. The main objectives are as follows:

Presentation of financial statements – The directors present the yearly financial statements of the company to the shareholders to give an idea about the achievements.
Approving the actions of directors – The shareholders get a chance to ask questions regarding any action taken by the directors which may not be transparent or productive enough for the company.
Approval of previous meeting minutes – The board takes approval for the earlier annual general meeting minutes in this meeting.
Election of directors/auditors – The election of the directors and auditors takes place through shareholders' voting at the AGM.
Voting for company actions – An organization might decide to go for a merger or acquisition for which the shareholders may vote for or against the decision.
Vote for management compensation – Shareholders can vote for or against the decisions taken regarding the compensation of the company’s CEO, CTO, CIO, or CFOs.
Opportunity to share plans – The management can present future visions, goals, and programs before the shareholders.
Dividend decision – Directors and shareholders, should reach a joint decision regarding the dividend amount if it is a profit-making company.

Requirements

Let us look at the various requirements for the procedure of the annual general meeting:

President/Chairman conducts AGM – The company president or the Chairman presides over the discussion and gives an insight into the organization’s status.
Role of Secretary – The secretary is responsible for preparing the annual general meeting minutes and may read some essential documents for everyone.
Role of treasurer – The company treasurer presents the organization’s financial report.
Presentation of other officers/committees – The other officers or committees may present their reports per the requirement.
Notice of the meeting – The company announces the meeting's location, date, and time to shareholders, auditors, and all other concerned parties, which is done a minimum of 21 days before the AGM.
Meeting quorum – Quorum is the least number of members needed to hold a meeting. It varies according to the number of members and type of company.
Time and location – The meeting is held at the registered office between 9 am to 6 pm on any day, excluding national holidays.
Preparation of agenda – Formulating the annual general meeting agenda is essential because this document helps track whether the discussion includes all crucial points.
Proper understanding of topics – Members attending the meeting should have a good understanding of the topics to participate in the discussion actively.
Obey the meeting rules – Every meeting has rules that every member must abide by so that there is proper order and everyone can participate equally.
First meeting - The first meeting is to be held before the end of the first financial year.

Examples

Here are some examples related to the AGM:

Example #1

Skytech Industries is headquartered in Los Angeles, California, and is in the software business. It is into buying and selling software and provides installation services at the individual and corporate levels. It also gives software development consultations.

The company held its 10^th AGM at its registered office. More than 300 shareholders and investors attended the meeting physically, and 100 more attended it virtually. The agenda was as follows:

Appointment of auditor.
Vote for a resolution regarding the merger with Starlight Industries, which is also in the software business.
Presentation of financial reports.
Plan for expansion into the hardware business.
Discussion regarding dividend issue.

The meeting was a grand affair, which included discussions, a new software launch party, a dinner, and a cultural event. The shareholders were satisfied and happy after addressing all issues successfully.

Example #2

In the US, contrary to the rest of the world, the trend for virtual AGMs has decreased. Even hybrid formats of meetings have drastically come down, unlike other regions where it has increased.

However, in-person meetings have the significant advantage of showcasing products and services, especially high-cost household equipment or agricultural equipment. Only Canada showed a reverse trend, suggesting a rise in virtual meetings. Thus, Canada will set a new direction for how to conduct AGMs in the future.

Example #3

Currently, Environmental, Social, and Governance (ESG) play a very vital role in the growth and development of any company. Moreover, the ongoing concern regarding climate change has taken center stage for quite some time, with the target of reducing emissions to zero. Thus, even shareholders at the AGMs are stressing the need to include ESG in the annual general meeting agenda so that companies address these issues actively and the Board takes their accountability seriously.

Importance

Let us understand the importance of an AGM in the corporate world:

Involvement in corporate decisions – This meeting allows shareholders to participate actively in a company's decision-making process.
Management accountability – Shareholders can question the management about their decisions and plans, making them more accountable for their actions.
Transparency – Since various vital matters are discussed, like financial performance, plans, and corporate actions, the company’s workings are more transparent.
Help in making investment decisions – The AGMs provide greater insight into the performance and financial condition of the business. It helps investors to make an investment decision.
Insight into corporate working style – AGMs give an idea about how the management works and channel each resource towards productive use.
Collective ownership – It gives all concerned parties a sense of joint ownership, which inspires them to contribute and make the company more productive and profitable.

Difference Between Annual General Meeting And Extraordinary General Meeting

The AGM is the gathering held by a company every year to present financial performance and discuss significant shareholder concerns. In contrast, an extraordinary general meeting (EGM) is held in exceptional cases, either during a crisis or to address any particular situation. The following points highlight some differences between them.

AGM	EGM
Once a year, the meeting is done.	It is held only on special occasions.
It is a legal requirement.	It is not a legal requirement.
The agenda is mainly financial report presentation, voting, clearing shareholder concerns, etc.	The agenda is mainly to address some crisis or unforeseen contingency.
The first meeting must be held within nine months before the financial year ends.	No hard-and-fast rule regarding time.
It cannot take place on a national holiday.	It can take place on any day, including a national holiday.
The Board summons the meeting.	The Board, shareholders, tribunals, etc., summon the meeting.
There is a penalty if there is no meeting within the stipulated months of the financial year.	If it does not happen, there is no penalty.

Frequently Asked Questions (FAQs)

1. How statutory meeting is different from annual general meeting?

AGM is a compulsory yearly meeting for public and private companies to update stakeholders regarding company performance and address their concerns. In contrast, a statutory meeting is held once in a lifetime within six months but after one month of commencement of business. It only applies to public companies with limited share capital or guarantee.

2. Can annual general meeting be held through video conferencing?

Yes, an AGM can be held through video conferencing also. However, it requires specific arrangements like a piece of proper and well-functioning equipment for a presentation, document security, and software with voting features integrated with the conferencing requirements, which should be adequately secured and encrypted.

3. How often is an annual general meeting held?

An AGM is always held only once a financial year for any company. Therefore, a company cannot conduct it more than once.