Annual General Meeting (AGM)

What is an Annual General Meeting (AGM)?

AGM is the abbreviation for the Annual General Meeting, also known as the Annual Shareholder Meeting. It is held annually, and directors present the company's financial performance and strategies to interested stakeholders/shareholders.

Shareholders utilize their rights to vote for key macro decisions such as the appointment of the board of director(s), compensation to the executives, selection of the auditor, and dividend payments.

They are significant in maintaining transparency in business, the ability to include shareholders' interests, and bringing management to accountability.

The one-point agenda of these meetings ensures that the interests of the shareholders/stakeholders—even other types of institutions—are taken care of.

For example, universities, schools, charities, and unions can also hold an AGM to discuss the organization's or institution's plans and goals.

For example, refer:

When is an Annual General Meeting conducted?

It usually needs to be conducted at a time specified by the state regulating authorities. Hence, the answer to the question "when" is subjective to the jurisdiction where the company essentially falls.

Here are some examples of when AGMs are typically conducted in different countries:

1. United States: In the U.S., AGMs are typically held within a few months after the end of the company's fiscal year. For many companies whose fiscal year ends on December 31st, the AGM is often held in the first few months of the following year, typically between March and June.
2. United Kingdom: In the UK, public limited companies (PLCs) are required to hold an AGM within six months after the end of their financial year. Private limited companies are not required to hold AGMs unless their articles of association specifically require it. AGMs are often held between April and September.
3. Canada: Canadian firms must normally hold AGMs no later than six months following the conclusion of their fiscal year but no later than fifteen months following the preceding AGM. As a result, AGMs are frequently conducted during the first half of the fiscal year.
4. Australia: AGMs in Australia are to be held no later than five months following the conclusion of the fiscal year of the corporation. AGMs are typically held in July or November since many Australian businesses have a June 30th fiscal year.
5. India: Indian corporations are obliged to hold AGMs within six months of the conclusion of their fiscal year. Usually, these take place from September through December.

How an Annual General Meeting (AGM) Works

An important forum for communication between businesses and their shareholders is the Annual General Meeting (AGM), which offers accountability, transparency, and a platform for making decisions.

The general operation of an AGM is as follows:

1. Announcement & Notification

In accordance with legal and regulatory obligations, the firm provides ample notice of the date, time, and location of the AGM. Notifications to shareholders are sent via official correspondence, regulatory filings, the company's website, and occasionally newsletters.

For example, in India, stakeholders must be sent a notice of invitation at least 21 days before the meeting. And the notice period can be shortened if 95% of shareholders agree to the same.

Notice for invitations is supposed to have certain items different for different jurisdictions.

2. Agenda Setting

The business drafts a schedule for the AGM that includes the motions to be voted on and the subjects to be discussed. Items, including the approval of the financial statements, the election of directors, the appointment of auditors, and any other matters pertinent to shareholders, are frequently on this agenda.

3. Participation of Shareholders

If allowed, shareholders are urged to attend the AGM virtually in addition to in person. Based on business rules and regulatory constraints, attendance may be limited to shareholders on file as of a given date.

4. Meeting Procedures

The company chairperson or another appointed person usually chairs the AGM. The meeting starts with opening remarks, followed by presentations by directors, executives, and auditors.

5. Voting

Through a formal voting procedure, shareholders exercise their right to vote on a number of agenda items. The adoption of executive compensation schemes, the election of directors, the appointment of auditors, and any other proposals put up during the meeting may all be up for vote.

A shareholder may vote in person, by proxy, or electronically, subject to the business's rules and any applicable legislation.

6. Resolutions and Decision-Making

Shareholders vote on resolutions that are proposed for approval, and the results are ascertained by the majority or other predetermined thresholds. The meeting minutes contain a record of the vote results.

7. Conclusion and Adjournment

The chairperson calls the meeting to a close after discussing and voting on every item on the agenda.

8. Post-AGM Procedures

Following the AGM, the business maintains its corporate records and prepares and files the necessary regulatory disclosures, including meeting minutes. Following the meeting, major decisions and outcomes may also be summarised in messages sent to shareholders.

Annual General Meeting Agenda

The primary agendas are as follows:

1. Election of a board member(s)

Since a company, especially a public company, has many shareholders, it becomes practically impossible for the company owners to consider the issues and strategies from a nuanced and diverse perspective.

Hence, representatives of the shareholders are elected by the eligible shareholders (the ones having voting rights) to keep their best interests.

2. Compensation to the executives

Discussions on executive compensation essentially refer to the rewards that are to be received by the C-Suite, i.e., the company's Core team, which includes the CEO, CFO, CTO, CMO, CIO, etc.

3. Appointment of the auditor

For business transparency, stringent audits of accounts are essential, for which the management, along with the shareholders, try to appoint top-notch auditors for the company.

4. Dividend payments

Discussion on the dividend is needed for the management and shareholders to come to a rapport on how much dividend should be paid out, considering if the company is in profit.

Lastly, any other discussion or debate the shareholders bring forward is usually considered a special business.

Consequences and Penalty for Default in Holding AGM

The meeting is an obligatory part of business, especially for a public company in almost all world regions. However, consequences and penalties are different for different regions.

For example, in India, if a company fails to hold an AGM even after the last eligibility date, the shareholders can contact the tribunal.

As a consequence, the tribunal itself or on an application made by any director or member orders an AGM to be conducted as per its directions.

However, suppose the default persists for some impractical reason or deliberate reason. In that case, the tribunal can punish the company and every officer of the company who commits the default with a fine of up to Rs 1 lakh.

In case of persisting default, a fine of Rs 5,000 per day is levied for each day during which the default continues.

In Singapore, Directors who fail to follow the general meeting requirements can be prosecuted in court and may also face disqualification or debarment from being a director.

In addition, Singapore's regulating authorities can impose composition fines on companies that do not hold the required AGMs. Separately, a late lodgement penalty will be imposed for each late annual return. For more, please click the provided link. 

Annual General Meeting Ancillary Benefits

Annual General Meetings (AGMs) have a big impact on the businesses and stakeholders who are involved, but they also have a big impact on observers who might have been indifferent or ignorant before.

The following are additional advantages of going to AGMs:

1. Knowledge Enrichment

Attendees of AGMs have a great chance to learn important information about business operations, economics, and industry trends. Attending these sessions can help people gain a deeper grasp of a variety of economic and business management topics.

2. Learning from field Leaders

AGMs presented by well-known businesses, including Berkshire Hathaway, provide unrivaled access to visionaries and leaders in the field.

For instance, Mr. Warren Buffet and Mr. Charlie Munger, as the hosts of Berkshire Hathaway's AGM, offer guests professional viewpoints on business-related issues, geopolitical influences on firms, and other relevant subjects.

3. Technical Innovations

Even the largest tech companies, such as Apple, Samsung, and Google, use AGMs as exhibit spaces to present their most recent technical breakthroughs.

4. Possibilities for Networking

AGMs frequently draw a wide spectrum of participants, such as investors, business leaders, and journalists. This fosters the perfect atmosphere for networking and building relationships with people who share your enthusiasm for innovation and business.

5. Accountability and Transparency

Shareholders and observers can directly observe the accountability and transparency displayed by businesses when they present their financial results, strategic plans, and governance procedures by attending AGMs.

This promotes confidence and trust within the society at large as well as among stakeholders.

Annual General Meeting Limitations

Annual general meetings, or AGMs, have many advantages, but there are drawbacks as well. Some of them are:

1. Limited Participation

The inclusion and democratic aspects of the AGM process are hampered when shareholders are unable to attend owing to a variety of reasons. Every shareholder needs to have an equal chance to participate and voice their opinions.

2. Selective Information

AGMs ought to give shareholders clear, thorough information. A company's ability to hold management accountable and enable shareholders to make informed decisions is compromised when it provides biased or inadequate information.

3. Time Restrictions

During AGMs, sufficient time is required for insightful conversations and decisions. Time constraints might cause significant subjects to be hurried through or ignored, which reduces the depth of involvement and insight.

4. Limited Ability to Influence Corporate Decision-Making

The efficacy of AGMs as governance instruments depends on their capacity to do so. The AGM's importance in maintaining management responsibility and responsiveness diminishes when shareholders' feedback has little effect on real decisions.

5. Accessibility Concerns

All shareholders, irrespective of their resources or location, should be able to attend AGMs. The efficacy of the AGM as a forum for shareholder oversight and engagement is undermined when geographical or logistical obstacles prohibit certain shareholders from attending.

Conclusion

Annual General Meetings (AGMs) are essential platforms for promoting accountability, transparency, and shareholder involvement in organizations.

At these meetings, shareholders can exercise their voting rights, participate in decision-making, and hold management responsible for their activities.

However, in addition to their many advantages, which include exposure to industry insights, networking opportunities, and knowledge development, AGMs have several drawbacks.

These encompass obstacles associated with restricted involvement, selective disclosure of information, temporal limitations, and accessibility considerations.

Notwithstanding these drawbacks, it is imperative to resolve them in order to optimize the advantages of AGMs and to advance efficient corporate governance while guaranteeing the protection of shareholders' interests. 

Through proactive measures to tackle these obstacles and augment the inclusiveness and efficacy of AGMs, entities can fortify the confidence of their stakeholders, foster enduring viability, and generate favorable consequences for all constituents.

In the end, AGMs are crucial in determining how businesses develop and in promoting responsibility and openness in the corporate environment.

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