The Differences between Annual General Meetings and General Meetings
Most people will be familiar with the concept of company AGMs – the AGMs of high-profile public companies have often featured in the news, particularly in recent years - but not everyone will be aware of what exactly goes on at an AGM and why, when and how these company meetings are held, or indeed, what distinguishes an AGM from any other shareholder meeting held by a company. Leanne Davidson discusses the requirements for, and the type of business typically conducted at, different types of general meetings.
Why hold a general meeting?
General meetings are a vital tool in the effective running of many companies. Although the day-to-day business of a company will be conducted by its directors at board meetings or otherwise, certain actions cannot be carried out by the directors without the approval of shareholders. In the case of a public company, this can only be achieved at a general meeting: a meeting attended and voted at by the company's shareholders acting either in person or by proxy. In the case of a private company, members may also pass resolutions at general meetings, although increasingly this will be done by way of written resolution, as permitted under the Companies Act 2006 (CA).
AGM or GM?
There are two types of shareholder meetings: annual general meetings (AGMs) and general meetings (previously EGMs, which are broadly any meeting other than the AGM) (GMs). Both are simply a meeting of a company's shareholders held for the purpose of transacting specific business reserved by legislation to the members rather than the directors. AGMs must be held annually by all public companies (and publicly traded private companies) but are optional for private companies. GMs are not compulsory but may be held voluntarily by both private and public companies as and when the need arises.
Legal duty to hold a meeting
A public company is legally required by the Companies Act to hold an AGM within six months of its financial year end. There is no equivalent requirement for a (non-traded) private company, unless prescribed by its articles of association. There are no legal requirements for any company to hold a GM.
Calling a GM
GMs may be called at any time by the directors. They can also be called by the directors at the request of members who hold at least 5% of the paid-up voting share capital (or by court order or a resigning auditor, the detailed requirements for which are set out in the Companies Act). A GM requested by members must be called by the directors within 21 days and held within 28 days of the date of the notice convening the meeting.
What goes on at GMs and AGMs?
GMs can be called for any genuine reason and are often arranged to deal with ad hoc matters which arise outside of the period when the company's AGM is being held.
While there are no specific legal requirements for the matters which must be dealt with at an AGM, they are generally used to cover standard, procedural business of the company which is routinely conducted every year, including receiving the annual accounts and directors' reports, giving shareholders an updated overview of the company's performance, and also approving dividends and the election/rotation of directors and auditors.
Shareholders have a number of additional statutory rights in relation to GMs and AGMs, including the right to have a resolution put before the meeting and the right to require the company to circulate a statement to members. Listed companies will also need to consider guidance issued by investor associations and the listing rules of their relevant stock market (whether AIM or the Official List) in addition to the provisions of the Companies Act and their articles of association.
The Companies Act sets out the notice periods required for company meetings.
A private company must give at least 14 days' notice of a GM and also (if it chooses to hold one) of an AGM to its shareholders, unless a longer period is required by its articles. A shorter notice period will be allowed if members together holding at least 90% (or up to a maximum of 95% if required by the articles) of the nominal value of the shares in issue agree to a shorter period. (Note that, as before, different requirements apply to private companies whose shares are publicly traded).
A public company must give at least 14 days' notice of a GM to its shareholders and 21 days' notice of an AGM. As with private companies, a company's articles may extend the notice period and so will always need to be checked. A non-traded public company's AGM may be called on shorter notice only if it receives unanimous consent from all its members entitled to attend and vote at the meeting.
When certain matters relating to the non-ordinary course removal or replacement of directors or auditors are proposed for consideration at an AGM, special notice, giving shareholders 28 clear days' notice of the meeting, will be required.
Contents of notices
General meeting notices must be clear and concise and contain certain prescribed information including the general nature of the business to be dealt with at the meeting and the full text of any special resolutions proposed to be passed at the meeting. Note also that although there is no legal requirement to set out the full text of ordinary resolutions, it is considered best practice to do so.
The procedures and requirements for convening and holding valid GMs and AGMs are set out in the Companies Act and the individual company's articles of association. The starting point can be found in the Companies Act, but a company's articles should always be carefully considered as well. In addition, requirements vary for non-traded private companies, for listed companies and for public companies with a premium stock exchange listing. As noted above, listed companies may also need to take into account guidance from investor groups.
When planning shareholders' meetings, various practical considerations also come into play, such as the fact that the notice requirement relates to 'clear days', meaning that the notice period excludes both the day on which notice is given (or received) and the day of the meeting itself. Larger companies with a wide shareholder base may also need to factor in sufficient time for printing of the notice and, for AGMs, its annual report, when setting the timetable for the meeting. In addition to the strict legal requirements, best practice should be followed where possible.
The full legislative requirements contained within the Companies Act 2006 can be viewed in full here. further, various guidance and AGM checklists can be found through the ICSA (Institute of Chartered Secretaries and Administrators) website.
Blake Morgan's Company Secretarial team can assist with any questions concerning either of these meetings. Please email: firstname.lastname@example.org.