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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.
The EGM is a flexible tool that allows companies to respond swiftly to urgent issues, ensuring that significant decisions can be made 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 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.
This template refers to the minutes of the first meeting of the directors of a Company.
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 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: Resolutions at an EGM can also be passed by a simple or special majority, depending on the nature of the 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.
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’s experienced corporate lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0808 196 8584 or visit our membership page.
Frequently Asked Questions
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.
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.
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