Table of Contents
What Is an AGM?
An AGM is an annual meeting of shareholders of a company. It is organized to inform the shareholders about the company’s performance in a year and share future plans.
The shareholders are actual owners of a company. They have the right to know how the company they have invested in is performing and growing. The AGM is organized every year for all the company shareholders to deliver the company’s performance report and set forth the plan for the upcoming year.
What Is the Meaning of AGM?
AGM stands for Annual General Meeting, which is held once every year. It is an annual meet-up of all company shareholders held to solve some company matters and check on its progress.
A company’s everyday decision is taken by its Directors, CEO, or other higher-ups, who may or may not be a shareholder, but are selected by the shareholders. This is so because a company, especially a public one, can have numerous shareholders, and it is impossible to have their consent on every company matter.
The primary purpose of an AGM is to represent the company’s performance in the previous year to its shareholders. The Director of the company also proposes future plans. Certain decisions may require shareholders’ voting. Therefore, such voting also occurs during an Annual General Meeting (AGM).
What Happens at AGM?
At the Annual General Meeting, the company’s shareholders review the company’s financial reports. They also vote on crucial matters regarding the company’s business.
Shareholders are the owners of the company. Each shareholder owns a certain percentage of the company, according to the ratio of shares they hold. The company’s progress is their progress, and they have the right to know that the business is conducted in a manner that does not violate their interests.
Along with reviewing the company’s financial status, shareholders also take part in important decisions like voting for the Board of Directors. All shareholders vote for general matters, and those not present at the meeting can do so through a proxy (by mail or online). Other matters regarding the dividend distribution, compensation to the executive(s), and auditor selection are also taken up during the meeting.
During an AGM, there is an open session where the shareholders raise their opinions and questions to the director.
What Are the Features of an Annual General Meeting?
The general features of an Annual General Meeting involve financial reports reviewing, director’s and auditor’s reports being discussed, voting to elect the Board of Directors, and dividend distribution decisions.
The following are some of the common features of an Annual General Meeting.
- An AGM is held only once a year to discuss company matters and analyze the company’s progress.
- All the interested shareholders are invited to attend this meeting.
- The company’s director or chairman represents all the reports regarding the financial and business growth.
- Shareholders may have to vote for certain positions in the company, such as the board of directors. The shareholders who are not physically present at the meeting can submit their vote through mail or online, also known as a proxy.
- During the AGM, shareholders can ask questions regarding the company. They can also express their concerns if they have any.
- Every state or country has different rules regarding the conduct of an AGM. Therefore, every company must follow the rules stated in the country’s laws into which they are incorporated. These laws may be regarding the type of company, agenda for the AGM, or the quorum.
Can Non-Members attend an AGM?
A general rule of the AGM is that only shareholders or members of the company are allowed to attend an AGM.
Every incorporated company follows this rule, otherwise stated in the company laws that only shareholders and the members (that may include company officials) are allowed to attend the AGM. Members who are not physically present can select or send a proxy holder or practice their voting rights through e-voting.
A chairperson may allow a non-member or non-shareholder to attend the meeting in special situations. However, that non-member can not practice any rights of a shareholder.
How to Organize an AGM?
An AGM is organized by the company official, who is entitled to do so in the articles of incorporation. To arrange the meeting, the official has to issue a formal notice specifying the date, time, and venue of the meeting, along with the agenda of the meeting.
The organizer of the AGM, which is generally the board of directors, has to issue a notice that includes all the necessary details about the meeting. Before the session, this formal notice must be administered at least ten days, or the time mentioned in the company laws. The director may or may not include the agenda of the meeting in the notice, depending upon its severity. For example, It should include crucial matters like voting for the amendment of specific laws in the AGM notice.
The organizer (director) also has to appoint someone to note down the meeting minutes. Minutes are essential to be recorded as they are a record of the entire meeting and are to be presented at the next AGM. Other tasks of the organizer may involve creating opportunities for the shareholders to put up questions regarding the company’s financial statement and future plans.
What Should Be Discussed at AGM?
Every AGM has an agenda(s) for the meeting. This agenda includes all the matters to be discussed at the meeting and may require the shareholders’ vote.
The agenda is the prerequisite of an annual general meeting. The director may or may not mention it in the AGM notice, but it must be distributed to all the shareholders before the session begins.
The shareholders discuss the reports presented by the director and the future plans for the company that the board of directors has come up with. There are discussions regarding the dividend distribution as well. The shareholders can also raise questions or concerns about certain decisions or activities performed in the company.
What Are the Prerequisites for AGM?
The prerequisites of an AGM are generally mentioned in the company’s Memorandum and Article of Association. These may include — Previous AGM’s Minutes, Financial Statement for the Year, Quorum, and Time Period before the meeting when the notice must be issued.
Many companies mention general rules regarding the provisions of an AGM in their Article of Association. They have specified the number of days before the meeting, and formal notice, including the meeting’s date, time, and place (including the agenda of the meeting), must be issued to the shareholders.
The quorum (majority of members present) for the meeting is also necessary to be met. Other prerequisites include the previous AGM’s minutes and the company’s financial statement for the shareholders.
What Types of Functions Are Performed in the Annual General Meeting?
The functions generally performed at an AGM are voting, reviewing reports, making decisions regarding company matters, answering shareholders’ questions regarding the company business, and considering their suggestions.
A few reports are presented to the shareholders during the meeting. These include the company’s financial statement, auditor’s and director’s reports, etc. The shareholders review these reports and discuss them. Generally, they also have to vote for certain positions in the company, like the board of directors.
At an AGM, the company may also declare the distribution of dividends to the shareholders. The Director (organizer of the AGM) gives time to the shareholders to raise questions regarding any decision taken during the meeting or the reports.