An Annual General Meeting (AGM) is a mandatory once-a-year meeting between shareholders of a company and its board of directors. During the AGM, the Annual Report is presented which includes details about the company’s performance and its future strategy.
In the United Kingdom, thousands of companies and other bodies are mandated to hold an Annual General Meeting (AGM) that can be attended by their members. Organisations could face potential legal consequences if they don’t hold an AGM.
Private companies don’t need to hold an AGM unless their articles of association (the rules that govern a company) say so, or unless their shares are admitted to trading on a UK Regulated Market or on an EU Regulated Market.
Standard (‘model’) articles for a private company limited by shares don’t say it must have an AGM.
What happens at an AGM?
The following activities take place at an AGM:
Analysis & discussion – the company’s performance is analysed and its future strategy is discussed.
Shareholder questions – shareholders can question the board, get answers for unsatisfactory performance and challenge them on the direction of the company.
Shareholder voting – Resolutions proposed by directors need shareholder approval
Jobs filled – vacant positions on the board of directors can be filled
Proxy voting – shareholders who choose not to attend the meeting can normally vote by proxy, which can be done by post or by giving permission for another shareholder to vote on their behalf.
Although an AGM is a formal meeting, it doesn’t have to be boring! It’s also a great opportunity to communicate with clients, members, partners and other interested parties. In fact, Brewdog’s AGM is back IRL with a bang this year – and includes beer tastings, music and street food alongside a business update from their co-founders.
And over the pond in 2019, Warren Buffet’s Berkshire Hathaway AGM, an extravaganza dubbed “Woodstock for Capitalists” added $21.3 million to Omaha’s economy! It was back on April 30th of this year but attendance was below recent years.
Who can attend an AGM?
The annual general meeting of shareholders is open to member of the company including shareholders, company directors, company auditors, representatives if the shareholder or member of a company is another company plus proxies.
How does voting work in an AGM?
All shareholders are eligible to vote. The vote is linked to the share. Hence, an individual can have more than one vote. Common shareholders have one vote per share. However, preferred shareholders don’t have any voting rights.
Voting gives shareholders a say in how the company is run and in some way helps safeguard their investments.
If shareholders cannot attend they are able to vote by proxy (via mail or by authorising someone or some agency to vote on their behalf.)
As per AGM voting rules, shareholders have no say in the day-to-day operations or management issues. However, they can use their voting rights to steer the organisation’s direction on important corporate matters, such as voting in or out members of the board of directors.
When are AGMs held in the UK?
AGMs must be held every year in the UK by public companies.. The first one should be held within 6 months of its accounting reference date. On the other hand, a private company is not required by law to hold an AGM each year.
The business conducted at an AGM usually includes the declaration of a dividend, discussions on the company’s accounts and reports, the appointment of new directors or company auditors.
The procedures of conducting an AGM vary from company to company. However, as per the minimum statutory period, the office-bearers need to give notice of at least 14 days (a meeting can be organised more quickly if a majority, such as 90-95%), give written consent.
Who can convene an AGM and when?
Under various circumstances, companies or their stakeholders will have to call for an AGM where consultation or the company’s members’ approval is required.
An annual general meeting can be convened by:
- The company’s directors after an AGM request by the company’s auditors to discuss the state of affairs following those auditors’ resignation
- The company’s directors after the board have passed a resolution to call for an AGM
- The company’s directors after a request to convene an Extraordinary General Meeting (EGM) by at least 5% of the company’s shareholders with fully paid-up voting shares. These shareholders also have the right to request for a specific resolution to be considered at a general meeting or the annual general meeting
- The court, in limited circumstances in the event that an eligible shareholder applies to the court
How are AGM members notified?
A notice of meeting is required within the financial year. Company Directors are responsible for informing their shareholders, directors and auditors that they are eligible to attend and vote at the AGM.
Under the Companies Act 2006, the required notice period is as follows:
Public companies which are traded companies: at least 21 clear days. In the event the company has owns a premium listing of equity shares on the London Stock Exchange, at least 20 working days
Public companies which are non-traded companies: at least 21 clear days
AGMs requested by company’s members: within 21 days from request date and should be convened no later than 28 days from the issuance of meeting notice
Private companies: at least 14 clear days
What’s on the Agenda of an AGM?
The initial notification sent out to members about the meeting must also include the agenda for the meeting along with information on voting procedures and more. This ensures that shareholders are well-prepared to discuss and vote during the AGM.
An AGM agenda in the UK usually includes the following details:
1. Approval of the minutes of the last AGM
2. Presentation of the most recent financial reports
3. Presentation of the company’s activities for the previous year
4. Appointment of the auditor/examiner for the next year’s accounts
5. Any pending appointment of the CEO or Management Committee and Officers
6. Approving the Directors’ remuneration and renumeration policy
7. Any changes to the organisation’s constitution
8. Any resolution that might be put forward in the AGM.
9. Giving authority for the directors to allot new shares
10. Disapplying pre-emption rights on shares
11. Details of share buybacks
What should be included in Minutes of an Annual General Meeting?
Under the Companies Act for limited companies, it’s mandatory for companies to keep minutes of all general meetings and copies of all ordinary resolutions or special resolutions of members passed at a general meeting.
The Minutes of an AGM should include the following:
· Company name and registered office address
· Date, time, and place of the general meeting
· Names of all the attendees
· Details of any proxies and who they represent
· Names of absentees
· Proposed resolution(s)
· Result of resolution(s)
· List of members for and against the resolution(s)
· Objections and/or queries raised
· Any other business discussed plus closing remarks
What is the difference between a General Meeting and an Annual General Meeting?
The directors may call general meetings whenever they wish and are often held in response to urgent issues which arise.
An AGM is mandatory for a public listed company and must be held annually.
However, private companies have a choice. They can decide whether it is appropriate for them to hold an AGM, depending on their circumstances. There is now no statutory requirement for a private company to hold any general meetings or an AGM. When Part 13 (sec281 – sec361) of the Companies Act 2006 came into effect on 1st. October 2007 this change was introduced.
Annual General Meeting: impact of Covid-19
During the pandemic in the UK, many AGMs were held behind close doors with shareholders shut out. And even now, despite the lifting of Covid-19 restrictions, a survey has found that the AGMs of only a quarter of FTSE 100 companies will be held in-person during 2022.
Three of the UK’s best-known companies, M&S, BT and Sainsburys held their AGMs over the Summer – M&S’s AGM was a digital affair while Sainsburys and BT held theirs in person.
As an aside, AGMs provide a way for shareholders to talk with the board informally and ask questions in person. Despite this, almost all of the AGMs I attend have no other shareholders there.