Monday, August 8, 2011

Distinguish between AGM and EGM

Annual general meetings (AGMs) are a part of the normal financial calendar for all limited companies and take place on the occasion of the year-end results presentation and the publication of the annual report.

Extraordinary general meetings are called to discuss strategic and other issues with shareholders outside the normal financial calendar.


Both types of meetings are formal meetings between company directors and the shareholders of the company. They typically involve presentations by the board (typically the chairman and/or CEO) and a chance for shareholders to question the board.

The AGM is a formal part of a company financial year. Its purpose is to allow the board to present the year’s results, discuss the outlook for the coming year, present the formal, audited accounts and to have the final dividend and directors’ emoluments approved by shareholders. Shareholder approval is signalled by the passing of resolutions in which shareholders vote in proportion to their holdings. It is usual for the board to make a recommendation and then seek approval of that recommendation by shareholders. The dividend per share, for example, is recommended by the board but only paid after approval by the shareholders at the AGM. Institutional shareholders may employ proxy voting if they are unable to attend in person.

Extraordinary meetings are called when issues need to be discussed and approved that cannot wait until the next AGM. A full year can be a very long time. In some business environments when events necessitate substantial change or a major threat, an EGM is sometimes called. Management may want a shareholder mandate for a particular strategic move, such as for a merger or acquisition. Other major issues that might threaten shareholder value may also lead to an EGM such as a ‘whistleblower’ disclosing information that might undermine shareholders’ confidence in the board of directors.