An annual general meeting is a meeting of the shareholders or members of a company which is held on a yearly basis.
A company is required by legislation to obtain the approval of its shareholders by either ordinary or special resolutions in order to carry out certain actions. The shareholders can pass these resolutions at general meetings of the company, or by way of a written resolution, or at annual general meetings.
The annual general meeting will usually cover business such as
- the declaration of a dividend and will look at the company’s accounts and records and go over these with shareholders;
- It may also look at the position of directors, whether directors may be retired or appointed, and it will consider the appointment of the company’s auditors and their remuneration for the next year.
Shareholders may also request that the company include any matter in the business to be dealt with at an AGM, other than a proposed resolution. This means that shareholders can raise matters (as long as they aren’t defamatory or frivolous or vexatious or against the company’s constitution) for members to consider at an AGM, even if they don’t require a resolution. A company is required to put these matters to an AGM once it has received a request from members representing at least 5% of the total voting rights or at least 100 members with a right to vote at the AGM.
The requirement for an annual general meeting has changed in recent years.
- previously a private company was required always to hold an annual general meeting;
- since legislation changed in 2006 however, a private company can choose whether or not to hold AGMs depending on the terms of its Articles of Association (its constitutional documents);
- if there is no requirement for the company to hold an AGM under its articles, then this will not be required by law.
Note that a public company must still hold an AGM each year, within the period of 6 months beginning with the date following its accounting reference date. Members of a public company have a right to put certain resolutions to the meeting if required.
Shareholders may lose out of there isn’t an annual general meeting held. Often this is the only opportunity that they have to see the accounts, and ask questions of the directors.
However, an annual general meeting is not required for shareholders to put forward resolutions to be assessed and voted on. A general meeting (previously referred to as an extraordinary general meeting) of the shareholders can be called and held at any time during the year to allow members to vote on resolutions.
The company, via the directors call the general meetings.
- directors are required to call a general meeting if the company has received a request to do so from members holding at least 5% of the paid up capital of the company; or
- if the company doesn’t have paid share capital, of members who represent at least 5% of the total voting rights of the company.
A request from a member should state the nature of the business that they want to be discussed at the meeting and ideally should include the text of any resolution that they wish to be voted on.
If the directors fail to call a meeting having received a request from the requisite percentage of membership, then the member requesting the meeting can call this meeting themselves. They should send out the requisite notice to all members, which includes the proposed resolutions. There are specific rules on notice and calling of the meetings which the members (or directors) must follow.
Who has the right to speak at general meetings?
Unless the articles expressly state otherwise, then every shareholder who is allowed to attend and vote at a general meeting has the right to speak at the meeting. There is a chair appointed to all general meetings and they will control the discussions and ensure that everyone has a right to speak within reasonable parameters so that matters put forward are fairly debated.
This may cause practical considerations, particularly at meetings of public companies where there may be a lot of members. There may be restrictions on the time given to speak or there may be limits on the amount that a particular matter can be discussed before being voted on. This would be down to the chair, who must keep the meeting in good order but be fair to all of the members.
Coronavirus – holding general meetings and AGMs
During the Coronavirus crisis compulsory measures were put in place prohibiting public gatherings of more than two people. As a result, the business secretary brought in legislation to ensure that those companies required by law to hold AGMs will be able to do so safely. This included temporary flexible measures including the ability to hold AGMs on-line, or to postpone the meetings. Virtual meetings have previously been unpopular with institutional organisations but during the Coronavirus pandemic these emergency measures are allowed.
There are obviously issues with holding a virtual meeting in that it may restrict certain members from being able to attend. It is likely that a lot of companies will take the option of being able to postpone or adjourn the AGM during this crisis. For more information on how the Covid 19 crisis affects companies.
At Francis Wilks & Jones our corporate team has many years’ experience in advising companies and shareholders on their rights and duties in holding both AGMs and general meetings and all information around the quorum, the chair, and the correct voting rights. If you are a company and would like assistance in ensuring that you meet your general meeting obligations, then please don’t hesitate to call us for advice. If you are a shareholder that is concerned that you have been excluded from a general meeting or that a proposal is being deliberately avoided, then contact us to discuss your options as soon as possible.