Company meetings are of fundamental importance in corporate governance. The members (shareholders) of the company exercise the ultimate control of the company through their participation in the company’s general meetings, including annual general meeting (AGM) and extraordinary general meeting (EGM). However, this power is limited and is constrained by the company’s constitution. The members of the company in effect exercise indirect control through voting on the composition of the board.
Some powers are normally reserved for the members by law and the articles of association. For example, the changing of company name, right to petition for voluntary winding up, and change of the constitution of the company. These powers are exercised through the passing of special resolutions in company’s meetings. Certain private companies can opt out of these meeting requirements, through written resolutions to be signed by the requisite number of members.
This article will explain the different types of company meetings (AGM, EGM and Class Meeting) and the procedures for conducting these meetings.
There are three main type of company’s meetings – annual general meeting, extraordinary general meeting and class meeting.
Companies should hold an annual general meeting every year to approve the reports of the company and the election of directors and office holders. This is in addition to other company meetings held. Private companies, companies with a sole member, or where all the members agree, may opt out of an annual general meeting and approve the relevant matters through a written resolution instead.
Extraordinary General Meetings are any meeting that is not designated to be an annual general meeting. They are usually called by the directors of the company to approve reserved matters. However, members holding 5% (or 10% in some jurisdictions) of the voting shares may requisite such a meeting. In the UK and some common law countries, extraordinary general meetings are simply known as general meetings.
If there are different classes of shares in a company, such as shares that hold particular rights like preference shares, then there is an additional type of meeting – class meeting.
Adequate and proper notice must be given to those entitled to attend any company meetings:
The notice should also contain proxy form and instructions to appoint a proxy to vote in case the recipient cannot attend the meeting. In respect of any extraordinary business, one should include the text of the resolutions be included in the notice for all members to vote on it.
For examples of notices of meetings, please see below:
Notice of Annual General Meeting - https://docpro.com/doc174/notice-of-general-meeting-annual-general-meeting-agm
Notice of Extraordinary General Meeting – https://docpro.com/doc151/notice-of-general-meeting-extraordinary-general-meeting-egm
Notice of Class Meeting - https://docpro.com/doc176/notice-of-class-meeting-preference-shares
Only members (either in person or represented by a proxy or corporate representative) and auditors are entitled to attend a general meeting of a company as of right. Directors and other officers of the company who are not also shareholders are usually allowed to attend. Other persons may attend at the discretion of the chairperson. In relation to class meetings, separate meetings must be held to transact business applying only to one class of shareholders.
Executors and trustees - executor of a deceased member or the trustee of a bankrupt member must be given notice of the meeting but is not entitled to attend a meeting or vote until his name is entered on the register of members.
Nominees - who hold shares through nominees have no right in their capacity as beneficial owner of the shares to attend and vote at general meetings.
Corporate representatives - a corporation may attend by means of a representative. A corporate representative must be appointed by a resolution of the directors.
Proxies - any member entitled to attend and vote at a meeting may appoint a proxy, who need not also be a member.
Directors and officers - directors will normally be authorised to attend a general meeting by the articles. Other officers of the company may also be authorised by the articles to attend meetings or otherwise may be permitted by the chairperson to attend the meeting. Normally the chairmen of the audit, remuneration and nomination committees to be available to answer questions at the Annual General Meeting.
Auditors - are entitled to attend any general meeting of the company and to be heard on any part of the business of the meeting which concerns them as auditors.
Advisors – the company's solicitors, accountants may be available to advise or comment on technicalities if invited by the chairperson. Members cannot insist on their solicitors or other advisers being allowed to accompany them, although a solicitor or other agent may be appointed proxy or at the chairperson's discretion.
Press and Research Analysts - attendance of anyone not entitled to be at the meeting as of right is at the discretion of the chairperson and members should be given priority if large numbers attending restrict space.
Certain documents must be made available at a meeting of the company. For listed companies, copies of all directors' service contracts must be made available for inspection by any person at the Annual General Meeting. Proposed amendments to a company's memorandum and articles of association must be circulated, or be available for inspection at the general meeting. Register of directors' interests must also be produced at the Annual General Meeting.
Directors' remuneration report - Concerning shareholders' rights to question the chairperson of the nomination, remuneration and the audit committees at an AGM. The directors are obliged to put a resolution to the AGM approving the remuneration report which they must prepare. This gives shareholders an opportunity to raise questions on the report.
Annual reports and accounts: When the chairperson moves that the company's annual report and accounts be adopted the members may comment on and criticise the report and the chairperson's speech, and may ask for further information. The requirement that the report and accounts be laid before the meeting makes them part of the business of the meeting and therefore a proper subject for debate.
The directors will normally decide the motions to put into the company’s general meeting. Members may present a resolution for the agenda when they have requisitioned a meeting and circulate a statement in support of their resolution if they are willing to bear the costs. In the UK, 5% of the voting right or 100 members can have a motion considered.
Each member prima facie has the right to speak once on each resolution, except for procedural matters. However, the chairperson should keep the discussion within reasonable bounds and may put a stop to further consideration of a particular matter once it has been sufficiently debated and a fair cross-section of views has been heard. Statements made in the course of a meeting are protected by `qualified privilege' from defamation.
Example of Agenda of the General Meeting:
Ordinary Resolution - An ordinary resolution of the members or a class of members, is a resolution passed by a simple majority. This can simply done by a show of hands or can be conducted through a poll vote. A poll vote will count the total voting rights of members who attended the meeting in person or by proxy. Where company law requires a resolution to be passed but does not specify the type, it is defaulted to be an ordinary resolution.
The following normally constitute `ordinary business':
Special Resolution – A special resolution is passed by a majority of not less than 75% of the members or a class of members. Again this can be conducted by a show of hands or by a poll vote. It must be indicated as a special resolution in the text of the notice of meeting or in the written resolution. Special resolutions may be required for certain reserved matters under company law or articles of association, for examples:
Written Resolution – A written resolution can be an alternative to holding a general meeting for private companies, with two exceptions:
The procedures for a written resolution is similar to that of a general meeting in that the company must send or submit a copy of the resolution to every eligible member. The copy of the resolution must be accompanied by a statement informing the members on how to signify the agreement to the resolution and the date that the resolution must be passed without lapsing.
Example of Written Resolution:
The quorum for a meeting is the number of members who must be present at the meeting for its proceedings to be valid. Only persons entitled to vote count toward a quorum. A corporation present by a representative is to be treated as being present in person. If the articles do not provide otherwise, a quorum at a general meeting is two members personally present. The sole member of a private company can constitute a quorum on his or her own.
No business may be done at a meeting unless a quorum is present. The meeting will be adjourned if a quorum is not present within half an hour from the time set for the start of the meeting. The adjourned meeting is dissolved if a quorum is not present within 15 minutes. If during the course of the meeting, the number of members present falls below that required for a quorum, the meeting is inquorate and should be adjourned.
Right to vote: Each member has the prima facie right to vote at a meeting. Votes must be exercised in person or by proxy at the meeting and cannot be validly lodged by post or electronically. The company's articles may provide that a member who is in default in complying with a notice served will not be permitted to attend meetings of the company or vote at them.
Corporate representative: A corporate representative is entitled to exercise the same powers on behalf of his appointor as that corporation could exercise if it were an individual shareholder. The powers of a corporate representative therefore include the power to speak at the meeting and to vote on a show of hands and on a poll. A corporate representative need not use all his votes or cast all votes in the same way.
Show of Hands vs. Poll: The normal practice in company meetings is for a vote to be taken first on a show of hands and then, if a valid demand is made, on a poll. The procedure of which is governed by the articles of association. Every attending member has one vote on a show of hands. Each share would carry one vote in the case of a poll to reflect the interest in the company.
A poll on a resolution can be demanded by the chairperson, a director, two or more members, or one person with more than 10% of the voting rights. There are two main reasons why a poll may be demanded.
A chairperson should normally call for a poll if:
At any meeting at which an ordinary resolution or a special resolution is proposed, a declaration by the chairperson that the resolution is carried is, unless a poll is demanded, conclusive evidence of the fact without proof of the number or proportion of the votes recorded in favour of or against the resolution.
Any member who is entitled to vote in a general meeting can appoint a proxy to act as an agent to exercise his / her voting right. Every notice must state the member’s right to appoint a proxy, and the articles may require a proxy form to be included, so long as more than 48 hours of notice is given. In particular the company must send out two-way proxy forms giving members the opportunity to vote either for or against resolutions.
Proxies do not have to be members of the company and have no right to speak at meetings of public companies. They can only vote by poll, and not by a show of hands.
For examples of Proxy Forms, please go to:
No Direction to Vote - https://docpro.com/doc177/proxy-form-for-general-meeting-no-direction-to-vote
With Direction to Vote - https://docpro.com/doc129/proxy-form-for-general-meeting-direction-to-vote
Role - The chairperson acts as the representative of the members, not the board, in conducting the meeting, to ensure that order is preserved and compliance with Company Law. In fulfilling his duties, the chairperson must act impartially, having due regard to the wishes of the majority and ensuring that the minority is fairly treated. In exercising his discretion, he must act in the best interests of the company; as chairperson of the meeting, he owes a duty to the meeting not to the directors. He must not allow himself to be influenced either by the board or by his own interests in fulfilling that duty.
Powers - The chairperson's powers include the power:
Appointment - Typically, the company's articles will provide for the chairperson of the board (or another director if he is absent) to act as chairperson of the meeting. The articles will also set out the procedure to be followed if there are no directors able or willing to act as chairperson. If the articles make no provision for the election of a chairperson, any member elected by the members present at a meeting may be chairperson. If the person appointed as chairperson does not attend the meeting, those present can appoint someone else to chair the meeting in his / her place.
Election - If it is necessary for a person to be elected as chairperson, then the person nominated must be formally proposed and, if more than one person is proposed, that proposal voted on either by a show of hands or on a poll. The proposer or the company secretary generally does the actual putting of the motion for the election of a chairperson.
Removal - Usually the articles of association will provide that as long as the chairperson is present at a meeting he will preside as chairperson. `
Responsibility - The company secretary is responsible to the chairperson for the proper administration of meetings of the company. There is a list of the tasks the secretary needs to attend to before, during and after a meeting. These tasks include compiling a list of the proxies received and checking them against the members present, ensuring a quorum is present, ensuring those who speak have the right to do so and assisting with the voting process (particularly if a poll is demanded).
Other practical matters the company secretary should consider in preparation for the AGM are:
Opening the meeting: As a rule, subject to the chairperson's duty to act impartially and to allow the meeting to proceed in an orderly manner, if a quorum is present, the chairperson should attempt to start the meeting on time.
New information emerging since notice dispatched: If new information has emerged since the notice of meeting was dispatched, the chairperson should draw it to the meeting's attention. He / she must also consider its significance, and decide whether, in the light of the new information, he should adjourn the meeting: whether he should do so will depend on the nature of the resolution to be passed at the meeting and the significance of the information.
Proposing and seconding resolutions: The chairperson usually proposes the resolutions to be put to the AGM. It is best practice for the chairperson to explain again its effect and purpose (elaborating, if necessary, on the information provided in the notice) and invite shareholders to ask relevant questions.
Requisitioned resolutions: Shareholders holding at least 5% of the voting rights of the company or numbering 100 (with each member having an average of not less than £100 of paid up share capital) can require the company to give notice of a proposed resolution to shareholders. The requisitionists must bear the cost of issuing the notices in relation to the resolution.
Proposing amendments to resolutions: An amendment to a special resolution cannot be proposed at the meeting itself, except to correct grammatical or clerical errors. In relation to ordinary resolutions, the position is more flexible, but the chairperson should only allow a substantive amendment to be considered by the meeting if:
Voting on proposed amendments: A resolution seeking support for the proposed amendment to be made to the substantive resolution must first be put to the meeting for a vote on a show of hands and a poll if one is demanded, before the substantive resolution is put to the meeting. If the amendment is defeated on a show of hands and there is no demand for a poll the chairperson should then put the original resolution to the vote. If an amendment is carried, it is the amended resolution which is put to the meeting. Amendments which are in order may be moved before or after the discussion of the original resolution is over but may not be moved after the resolution is put to the vote.
Procedural motions: In addition to the resolutions set out in the notice and a motion to amend, the following procedural motions can be moved by a member or the chairperson (as part of his duty to regulate the meeting and ensure business is dealt with efficiently; no notice is required of these procedural motions):
Vote of `no confidence': Occasionally a member proposes a vote of `no confidence' in the board. A `vote of no confidence' arguably comes within the scope of the notice of the meeting and, if the member insists, should be formally put to the meeting. However the member proposing the resolution should be told that a vote of no confidence is symbolic only and has no legal effect (i.e. is not effective to remove the directors from office or force them to resign).
Directions to the board: The members cannot give directions to the board in the course of a meeting unless 21 days' notice of the proposed resolution has been given.
Closing the meeting: The chairperson should formally declare the meeting closed. If he fails to do so, it may be possible for a member to allege that all the business of the meeting was not properly completed.
Minutes of all proceedings and resolutions passed at general meetings must be entered in books kept for at least 10 years and signed by the chairperson as evidence of proceedings.
Filing resolutions etc: After the meeting the company has 15 days in which to file a copy of all special resolutions passed at the meeting, together with any other resolution required by law, with the registrar of companies.
Examples of Minutes of the General Meeting:
Print Extract of Resolutions / Minutes:
Once a general meeting has been convened upon due notice, subject to the articles, it cannot be postponed or cancelled. The correct procedure, where the purpose for which the meeting has been convened has ceased to exist, is to hold the meeting as convened and adjourn it without putting any resolutions to the members.
At common law, the basic rule is that the chairperson has no inherent power to adjourn the meeting unless circumstances are such the it is no longer possible for business to be properly transacted. However, most articles of association give the chairperson power to adjourn the meeting with the consent of the members. Where they do so, it appears that the chairperson may refuse to adjourn, so long as he acts in good faith, even though a majority of members present demand an adjournment.
Reasons for adjournment: The chairperson must have good reason to do so if he adjourns a meeting before the business has been transacted. If he purports to do so without good reason, the meeting may appoint another chairperson and proceed with the business.
Effect of adjournment: An adjourned meeting, when resumed, is treated as a continuation of the original meeting. All the requirements of the original meeting must be complied with for an adjourned meeting to be valid: the same quorum as for the original meeting is required at the adjourned meeting and no business may be conducted at the adjourned meeting which could not have been dealt with at the original meeting. Resolutions passed at an adjourned meeting are treated as passed at the date they are actually passed and not on the date of the original meeting.
Notice: Subject to contrary provision in the articles, no notice of an adjourned meeting is necessary. The adjourned meeting is simply a continuation of the original meeting which all members have had notice of and the opportunity to be present at and those present have been able to agree to the time and place of the adjournment. At least seven days' notice to be given of the adjourned meeting if the meeting is adjourned for 14 days or more.
Please note that this is a general summary of the position under common law and does not constitute legal advice. As the laws of each jurisdiction may be different, you may wish to consult your lawyer.
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