What is the Difference Between an AGM and an EGM?

As a company director or shareholder, you might face the challenge of understanding the differences between Annual General Meetings (AGMs) and Extraordinary General Meetings (EGMs). Effective company management requires following complex legal and governance rules that cannot be overlooked. Failure to comply with these obligations could result in serious consequences for the company or its directors. This article clearly explains the key distinctions between AGMs and EGMs and the procedure you should follow, enabling you to confidently handle these important corporate events.

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What is an AGM?

An AGM is a meeting of a company’s members, scheduled and held annually. It allows shareholders to obtain the company’s annual financial statements and decide on matters such as choosing or re-electing directors and auditors.

What is an EGM?

An EGM is any meeting of the company’s members that is not an AGM. You may notice that solicitors nowadays refer to EGMs as General Meetings (GMs). This is because ‘Extraordinary GMs’ is a historical term that was abolished with the implementation of the Companies Act 2006. Companies call GMs to gain shareholders’ approval for important corporate actions requiring a special resolution. Examples include alterations to the share capital, approving major acquisitions or disposals, and amendments to the company’s articles of association.

What are the Key Differences?

The law outlines distinct requirements for public and private companies. Holding AGMs is no different in that respect. Additionally, AGMs and GMs differ in their purpose, frequency, and the types of resolutions that shareholders can pass.

Are Companies Required to Hold an AGM or GM?

Under the Companies Act 2006, which came into force in 2009, private companies are no longer required to hold AGMs. This is the case, provided the company in question either adopted Model Articles of Association or has bespoke articles which do not contain a requirement for a private company to hold an AGM. There is one more instance in which the law requires a private company to hold an AGM, namely, if it’s a traded company, i.e. “a company any of whose shares were, at any time during the confirmation period concerned, shares admitted to trading on a relevant market”.

As a director or shareholder, you should be aware that companies are not required to hold GMs unless specifically required by the company’s articles. Model articles do not contain a provision to that effect. A GM is only compulsory if the following occurs:

• if the company plans to remove an auditor;
• if shareholders like yourself wish to remove a director; or 
• if shareholders holding more than 5% of the voting shares exercise their right to call a meeting under section 303 of the Companies Act 2006. 

Additionally, an AGM must be held during business hours on a working day, excluding national holidays. In contrast, a GM can occur on any day, including holidays.

What Is the Purpose of AGMs and GMs, and Who Can Attend?

As a shareholder of a public company, you may attend the AGM every year. It is a key event where the directors and auditors present the company’s financial statements for your approval. It’s also an opportunity for you to interact directly with the management team and other shareholders.

Occasionally, you may also need to attend a General Meeting (GM). Unlike the regular AGM, a company convenes a GM to address specific extraordinary matters that cannot wait until the next annual meeting and require shareholders’ approval. The agenda of a GM is tailored to the particular extraordinary issue at hand. For example, the issue could involve approving a major transaction, amending the company’s articles, or voting on a special resolution.

So, while the AGM follows a standard agenda year after year, the GM’s agenda is focused solely on the extraordinary matter that brought on the meeting in the first place. It allows shareholders to convene, discuss, and vote on these significant one-off issues outside the regular AGM schedule.

What Are the Key Steps to Follow When Calling an AGM or GM?

As a director or shareholder, you should know the key steps to follow if you need to call a GM. Unlike an AGM, which the board of directors of a public company must call every year, a GM of a public or private company can be called by the board or by shareholders representing at least 5% of the voting rights.

For both private and public companies, a GM typically requires a notice period of at least 14 days. Specifically, a private company must provide at least 14 days’ notice for a GM, while a public company must provide at least 21 days’ notice for an AGM and at least 14 days’ notice for any other type of meeting. A company’s articles of association may stipulate a longer notice period. 

Exceptions to the 14-day notice requirement for private companies exist when: 

• the meeting is held to consider actions that might frustrate a takeover bid as outlined in section 307(A1); or 
• if the meeting is called under section 969 of the Companies Act 2006. 

Shorter Notice Period

A shorter notice period may be permitted if the members entitled to attend and vote agree to it. This includes the requirement that the majority of voting rights in a private company be at least 90%. While for a public company, the requisite percentage is 95%.

However, this shorter notice agreement does not apply to AGMs of public companies.

The notice must clearly state the meeting’s time, date, location and agenda items. To remove a director or auditor, you must provide 28 days’ special notice. Notices can be sent in hard copy, by email, or posted on the company’s website, provided they follow specific rules.

When calling an AGM of a public company, the notice must state that the meeting is an AGM. However, all members entitled to attend and vote at the meeting can agree to call it on shorter notice than the 21 days required by law or set out in the company’s articles.

What Happens if a Company Does Not Hold an AGM or GM When Required?

Holding valid AGMs and GMs when required is an essential legal compliance obligation for public and private companies. Failing to do so properly exposes the company and its officers to potential legal issues and liabilities.

As mentioned previously, a GM can be called by either the board of directors or the company’s members. If the directors fail to call a GM when validly required to do so by members, the members who requested the meeting can call it themselves at the company’s expense.

Failing to comply with the legal requirements for providing proper notice and holding mandatory shareholder meetings, such as AGMs or GMs when validly called, can expose the company and its officers to penalties and legal consequences.

Key Takeaways

In summary, Annual General Meetings (AGMs) and General Meetings (GMs) are important events where company shareholders can exercise their rights and powers. The key difference is that AGMs are yearly mandatory meetings, while GMs are special one-off meetings. While the detailed requirements vary for private and public companies, all companies must follow proper legal procedures when calling and holding AGMs or GMs. This includes sending out valid meeting notices and covering all agenda items properly.

If you have any difficulties navigating the complexities of governance requirements, our experienced company 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. So call us today on 0808 196 8584 or visit our membership page.

Frequently Asked Questions

Do all shareholders need to be in the same room for a GM to go ahead?

You do not have to be physically present in the same room as others to participate in a GM validly. The law allows companies to hold GMs virtually through electronic means like video conferencing. This means that as a shareholder or director, you can attend and participate in a GM from any remote location using online technologies rather than having to be there in person. 

How many shareholders must be present at the meeting for it to be considered valid?

For a company with only one shareholder, the presence of that single shareholder is sufficient for a valid quorum. If this is not the case, then you will need at least two different shareholders or their properly appointed representatives or proxies present to have a valid quorum. This requirement, however, may be increased by amending the company’s articles of association. Therefore, it is essential to review the company’s articles to understand any differing quorum requirements.