Annual General Meeting Defined – What is it & Who Needs to Participate!
What is an Annual General Meeting (AGM) you may ask?
Simply put: an annual general meeting is a gathering of invested shareholders in a company that occurs every year.
An annual general meeting is held to allow the directors of the company to showcase the strategy and the performance of the company through the information contained in the company’s annual report.
Shareholders that possess the right to vote can take polls to decide on the course of action the company should take on the issues it is facing currently.
Examples of polls that shareholders vote on include the selection of auditors, how dividend payments are distributed, the compensation of executives and the election of who the company’s board of directors would consist of.
Annual General Meeting Key Takeaways:
- An annual general meeting (AGM) is a gathering of interested shareholders in a company that occurs every year.
- The annual general meeting is an avenue where directors showcase the strategy and performance of the company which shareholders can take polls on to decide the course of action on issues the company is currently facing.
- Shareholders who cannot be physically present at the annual general meeting can typically opt to have their votes casted by proxy which can be done by mail or done online.
- Annual general meetings frequently have an open forum or a timeslot dedicated to shareholders that have questions they would like the directors of the company to answer.
- Shareholders that have an activist kind of nature can use the annual general meeting as an avenue to express their opinions or their concerns.
How an Annual General Meeting (AGM) Works
An annual general meeting, also referred to as an annual shareholder meeting, is held principally to permit invested shareholders to decide on the way their company should move forward by voting on both the appointments to the board of directors and the issues the company is facing at hand.
For companies that are already considered as a large scale business, it is customary for annual general meetings to be the only time in a year when executives interact with the shareholders.
The regulations that administer the annual general meeting can differ according to the jurisdiction of the company.
Several states have laws of incorporation for both private and public companies that have provisions that mandate the holding of annual general meetings although these laws are inclined to be stricter towards companies that are being publicly traded.
Public companies are mandated to file proxy statements that are known as the Form DEF 14A with the Securities and Exchange Commission (SEC) on a yearly basis.
The filing of Form DEF 14A with the SEC will be what specifies the time, date and location where the annual general meeting will be held.
The filing also specifies how the executives are compensated along with other important company matters that would involve the votes of the shareholders and the company’s directors that were nominated.
Annual general meetings are vital in making management accountable, having shareholders be part of the operations of the company and providing transparency to the shareholders involved.
It should be taken note of that a company in need of a resolution to a problem that occurs between the annual general meetings, can call on an extraordinary general meeting.
Qualifications for an Annual General Meeting (AGM)
The rules that govern annual general meetings can be found in the company’s corporate bylaws in addition to its jurisdiction, articles of association and its memorandum.
An example of the provisions you can find on annual general meetings include the details on the length of time required to have shareholders notified of when an AGM will be held and where it will be located.
Instructions of how to vote even via proxy is also part of the annual general meeting provisions you can expect.
In most cases, jurisdictions are mandated by law to discuss the following matters at every annual general meeting:
- Minutes of the previous meeting – the details, summary, and overall minutes of the meeting prior to the one being held must be presented and have approval.
- Financial statements – the financial statements of the company for the year have to be presented to the company’s shareholders and have their approval.
- Ratification of the director’s actions – the shareholders are given the option to ratify or not to ratify the decisions that were made by the board of the directors during the previous year. The shareholders also have to approve the decisions the board of directors made along with their ratifications if any and typically, payments of stockholder dividends are distributed as part of the ratification of the director’s actions.
- Election of the board of directors – the shareholders cast an election of the upcoming year’s board of directors.
Additional Topics Covered on an Annual General Meeting (AGM)
There are cases when a company will not be performing well and an annual general meeting is where the shareholders can interact with the management and board of directors to clarify why the company has been performing poorly and to raise any of their other concerns.
The shareholders have the right to demand answers that satisfy their concerns in addition to knowing the strategies that will be implemented by management to increase the performance of the company.
The annual general meeting can also be when shareholders exercise their rights to vote on matters that concern the company outside of the usual election of the board of directors.
An example that illustrates this is when management is deliberating over the move to make an acquisition or a merge.
The management can present the proposal to the company’s shareholders who will vote on whether or whether not they approve of the proposal which will determine if the company will proceed with the proposal or not.
A number of different aspects can be added to the agenda of an annual general meeting.
It is customary to have the directors and the executives of the company use an annual general meeting as a chance to share their vision of where the company’s future is headed with its shareholders. An example to illustrate this is during the annual general meeting of Berkshire Hathaway where Warren Buffett would deliver lengthy speeches composed of his views on the company in conjunction with the economy as a whole.
The annual general meetings of Berkshire Hathaway have become so iconic and popular that tens of thousands of people choose to attend it on a yearly basis and have been nicknamed in the industry as the “Woodstock for Capitalists.”
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Securities and Exchange Commission "Proxy Statement" Page 1 . July 6, 2021