Summary
- An AGM is a mandatory annual meeting for public companies under the Companies Act 2006 (private companies may opt out by unanimous member agreement), requiring at least 21 days’ notice and covering routine governance matters such as approval of financial statements, director elections, auditor appointments, and dividend declarations.
- An EGM is convened on an ad hoc basis to address urgent matters requiring shareholder approval before the next AGM, such as mergers, amendments to the articles of association, share issuances, or director removals, with a minimum notice period of 14 days and the flexibility to convene on shorter notice with majority shareholder agreement.
- Both meetings require a quorum as defined in the company’s articles of association, with most resolutions passed by a simple majority, though certain resolutions such as changes to the articles of association require a special resolution passed by a 75% majority.
- This article is a guide to AGMs and EGMs for company directors and shareholders in the UK, explaining the key differences between the two meeting types, their procedural requirements, and their roles in corporate governance under the Companies Act 2006.
- LegalVision is a commercial law firm that specialises in advising clients on corporate governance and company law.
Tips for Businesses
Ensure AGM notices are issued at least 21 days in advance and include all required agenda items to avoid procedural challenges that could invalidate resolutions passed at the meeting. Review your company’s articles of association carefully before convening an EGM to confirm quorum requirements and whether a longer notice period than the statutory 14-day minimum applies. Identify in advance whether any proposed resolutions require a special 75% majority rather than a simple majority to ensure the correct voting threshold is applied.
Maintaining effective communication and decision-making processes within a company is paramount. Two pivotal meetings that facilitate these processes are the Annual General Meeting (AGM) and the Extraordinary General Meeting (EGM). While both meetings are crucial in a company’s governance and operational framework, they have distinct purposes, regulations, and implications for shareholders. This article explores the critical differences between an AGM and EGM and aims to assist anyone involved in corporate governance in the UK.
Annual General Meeting (AGM)
The AGM is a mandatory annual gathering of a company’s shareholders. Its primary purpose is to provide a forum for directors to present the company’s annual financial statements and reports, allowing shareholders to ask questions and discuss its performance and future direction.
Essential agenda items typically include:
- approval of the annual financial statements;
- election or re-election of directors;
- appointment or reappointment of auditors;
- declaration of dividends; and
- discussion of any significant business changes or proposals.
The AGM is a cornerstone of corporate transparency and accountability. It informs shareholders about the company’s financial health and strategic decisions.
Extraordinary General Meeting (EGM)
An EGM, on the other hand, is convened to address urgent or significant matters that the business must resolve before the next AGM. These meetings occur ad hoc, often in response to specific issues that require immediate shareholder approval.
Common reasons for calling an EGM include:
- major corporate restructurings, such as mergers or acquisitions;
- amendments to the company’s articles of association;
- issuance of new shares or significant changes in share capital;
- removal of directors before their term expires; or
- any other critical matters requiring shareholder consent.
An EGM gives companies flexibility to respond quickly to urgent issues. It allows them to make significant decisions without delay. This flexibility is crucial for companies operating in fast-paced industries or facing unforeseen challenges, enabling them to adapt quickly to changing circumstances.
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AGM Requirements
Under the Companies Act 2006, UK companies are generally required to hold an AGM within six months of the end of their financial year.
However, private companies can opt out of holding AGMs if all members agree to dispense with this requirement. Public companies, in contrast, must have an AGM regardless of their articles of association.
Key Procedural Requirements
Key procedural requirements for an AGM include:
- Notice: Shareholders must be given at least 21 clear days’ notice of the AGM. The notice must include details of the meeting’s date, time, venue and agenda;
- Quorum: A quorum must be present for the meeting to proceed, typically as defined in the company’s articles of association. For public companies, the quorum is usually two members; and
- Voting: Resolutions are generally passed by a simple majority, but some resolutions, such as changes to the articles of association, may require a special resolution with a 75% majority.
The AGM’s structured approval ensures that all shareholders have adequate time to prepare for the meeting and participate in decision-making. This formalised procedure helps maintain order and fairness in the company’s governance practices.
EGM Requirements
The procedural requirements for an EGM are similar to those of an AGM but with greater flexibility to accommodate the urgency of the matters at hand.
Key Procedural Requirements
Key procedural requirements for an EGM include:
- Notice: The minimum notice period for an EGM is 14 clear days unless a more extended period is stipulated in the company’s articles of association. In certain urgent cases, shorter notice can be given if agreed upon by a majority of shareholders;
- Quorum: As with AGMs, a quorum must be present. The specific quorum requirement is usually outlined in the company’s articles of association; and
- Voting: Shareholders can pass EGM resolutions by a simple or special majority. The required majority depends on the type of resolution.
The EGM’s flexibility allows companies to convene meetings on short notice, essential for addressing time-sensitive issues. This adaptability ensures that companies can act swiftly to protect their interests and those of their shareholders.
Who Can Call an EGM?
Under the Companies Act 2006, an EGM can be called by several parties, not just the board of directors. Shareholders holding at least 5% of the paid-up voting share capital can formally request that the directors convene an EGM. This is known as a members’ requisition. Once directors receive a valid requisition, they must call the meeting within 21 days. The company must then hold the meeting within 28 days after issuing the notice.
If the directors fail to call the meeting within the required timeframe, the requisitioning shareholders can call the meeting themselves. The company must then reimburse any reasonable expenses the shareholders incur in doing so. This right is an important protection for minority shareholders. It ensures that significant concerns cannot simply be ignored by the board.
Directors can also call an EGM at any time if they consider it necessary. In practice, companies most commonly convene EGMs this way. This is especially common when urgent decisions need shareholder approval before the next AGM.
This template refers to the minutes of the first meeting of the directors of a Company.
Key Takeaways
AGMs and EGMs play crucial roles in the corporate governance framework of UK companies. While AGMs focus on routine governance and accountability, EGMs provide a mechanism for addressing urgent or significant issues that arise between annual meetings.
Understanding the difference between these two types of meetings is essential for effective corporate governance, enabling companies to maintain transparency and accountability.
If you need legal assistance with the requirements for AGMs and EGMs, LegalVision provides ongoing legal support for all businesses through our fixed-fee legal membership. Our experienced corporate lawyers help businesses manage contracts, employment law, disputes, intellectual property, and more, with unlimited access to specialist lawyers for a fixed monthly fee. To learn more about LegalVision’s legal membership, call 0808 196 8584 or visit our membership page.
Frequently Asked Questions
Does a charity have to hold an AGM?
Holding an AGM used to be a legal requirement for charitable companies under the Companies Act, but no longer. However, organisations with old constitutions may still record this requirement and be required to hold AGMs.
What are typical examples of EGMs?
Common examples include disputes between directors, senior-level employees, or third-party suppliers. An EGM allows company shareholders to voice their opinions and help resolve disputes.
Can a private company avoid holding an AGM?
Yes. Private companies can opt out of holding an AGM if all members agree to dispense with the requirement. Public companies do not typically have this option and must hold an AGM every year, regardless of what their articles of association say.
How much notice is needed for an AGM?
Shareholders must receive at least 21 clear days’ notice before an AGM. The notice must include the date, time, location, and agenda for the meeting. For an EGM, the minimum notice period is 14 clear days, although this can be shortened in urgent circumstances if the majority of shareholders agree.
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