Guideline for Annual General Meeting (AGM)

WHO MAY ATTEND THE MEETING?

Summary

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 by the articles of association. Other persons may attend at the discretion of the chairman.

Appointment: Although a company may appoint a proxy, proxies are subject to more restrictions than members attending in person and it is often preferable for a corporate representative to be appointed. A corporate representative is entitled to exercise the same powers on behalf of his appointor as the appointing corporation could exercise if it were an individual shareholder.

Authority: A corporate representative must be appointed by a resolution of the directors (or other governing body) of the appointor.

Proxies: Any member entitled to attend and vote at a meeting may appoint a proxy, who need not also be a member.

Board committees: The chairmen of the audit, remuneration and nomination committees to be available to answer questions at the AGM. 

Auditors: A company's auditors (and former 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:

Observers: The articles of some companies allow, or the chairman in his discretion may permit, persons who are not members of the company (e.g. a member's professional advisor) to observe the meeting either directly or in a separate room via an audio-visual link.

Press and analysts: Attendance of anyone not entitled to be at the meeting as of right is at the discretion of the chairman and members should be given priority if large numbers attending restrict space.

COMPANY SECRETARY'S ROLE

Responsibility: The company secretary is responsible to the chairman for the proper administration of meetings of the company. 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:

 

DOCUMENTS AVAILABLE AT THE MEETING

A checklist of the documents will be prepared by the company secretary for presentation at the AGM. In particular, copies of all directors' service contracts must be made available for inspection by any person at the AGM.

 

CHAIRMAN'S GENERAL POWERS AND DUTIES

Appointment 

Articles: Typically, the company's articles will provide for the chairman of the board (or another director if he is absent) to act as chairman of the meeting as long as the he / she is present at a meeting.

Chairman's role: The chairman acts as the representative of the members, not the board, in conducting the meeting. In fulfilling his duties, the chairman 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 chairman 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. The conduct of a meeting is a matter largely in the hands of the chairman with the assent of the persons properly present.

Treatment of minority shareholders: Realistically, in the case of a listed company's AGM, opposition by minority shareholders is unlikely to affect the final outcome of business as the chairman could get a resolution passed by demanding a poll and relying on proxy votes from institutional shareholders. But challenges from minority shareholders can have a significant effect both in terms of confidence in the company and attracting adverse press comment. Falling foul of shareholder groups may have a significant impact on the ongoing support a company would normally expect to receive from institutional shareholders.

Duties: The chairman's duties include:

Powers: The chairman's powers include the power:

Articles: The company's articles may give the chairman additional powers, e.g. conclusively to declare the result of a show of hands, to demand a poll or insist a poll is taken after a valid demand has been withdrawn, and a casting vote. Other articles may go further and give the chairman the power to adjourn without the consent of the meeting or rule conclusively on the validity of proposed amendments. In every case the articles should be checked. 

 

PRESERVING ORDER

Balance: One of the fundamental duties of the chairman is to preserve order at a meeting. An AGM is the means by which a company gives its shareholders direct and public access to the board. However, it is important that no one shareholder or group of shareholders are allowed to dominate the meeting or prevent the transaction of business. All shareholders have the right to attend meetings but they also have a responsibility to ensure that, in exercising their right to speak and be heard by the board, they do not preclude the exercise of the same rights by other shareholders.

Chairman's response to disruption: If the meeting is being disrupted, the chairman can address this by:

Expulsion of a non-member: Non-members have no inherent right to attend the meeting and no right to speak. Any person not having a right to attend may only remain so long as his presence is not objected to by the chairman or the meeting. If a non-member is requested to leave and refuses to do so, he is trespassing and may be ejected with such reasonable force as is necessary.

Expulsion of a member: If a member is so disorderly as to interfere unduly with the reasonable conduct of the meeting or prevent the proper transaction of business, the chairman may ask him to withdraw. If the member refuses to leave, the chairman can ask the meeting to resolve that he be asked either to resume his seat or withdraw, so that the meeting can proceed with its business. Such a resolution should protect the chairman from any subsequent allegation that the member was improperly expelled, and so is the safest course from the chairman's point of view. However, it does carry with it the disadvantage that, if the disruptive element is supported by enough shareholders, a request for a poll on the expulsion resolution may be made, which will have the effect of disrupting the meeting still further. Accordingly, the chairman will have to weigh the risk of asking the member to withdraw without a resolution of the meeting against the risk of that a poll will be demanded if such a resolution is proposed. If a member refuses to comply with a request to leave the meeting, he may be ejected with such reasonable force as is necessary.

Adjournment: In an extreme case, the chairman would be justified in adjourning the meeting for a short period to allow order to be restored: for example, if the police are to being called to remove the offenders. The police have no power to enter private premises without a warrant, except by leave of the occupiers of the premises or the promoters of the meeting, unless a breach of the peace is being committed or they have reasonable grounds for believing that a breach of the peace is likely to be committed. G1.3 art 79 gives the chairman power to adjourn without the consent of the meeting in these circumstances.

 

SCOPE OF DISCUSSION AND SHAREHOLDERS' QUESTIONS

The chairman is responsible for regulating discussion at the meeting and in doing so must act impartially. He must give shareholders a reasonable opportunity to discuss, and ask questions on, matters covered by resolutions to be proposed at the meeting. Each member prima facie has the right to speak once on each resolution, except for procedural matters. However, the chairman 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.

In order to keep discussions under control, the chairman might consider limiting the number of questions on a single topic and preventing a return to that topic once it has been discussed. Alternatively, he might consider limiting the number of points raised by individual shareholders.

Answering questions

Wherever possible, the chairman should reply to questions which relate to matters covered by a resolution being proposed at the meeting. However, he is not bound to do so if he does not consider it in the company's best interests. The chairman can defer his response and promise a written reply at a later date. He can also legitimately refer any question to a colleague. If the chairman fails satisfactorily to answer any question, a member has no legal means of compelling him to do so and the failure will not invalidate the resolution provided that nothing material has been omitted from the notice. However, refusal to answer questions or an inadequate response is likely to alienate the meeting. 

Defamatory statements/qualified privilege: Statements made in the course of a meeting are protected by `qualified privilege', i.e. the maker has a good defence to an action for defamation provided certain conditions are met. The statement must be made in good faith, without malice and must be on a subject in which the members have a legitimate interest. 

Directors' remuneration report: The directors are obliged to put a resolution to the AGM approving the remuneration report which they must now prepare. This gives shareholders an opportunity to raise questions on the report.

Annual reports and accounts: When the chairman moves that the company's annual report and accounts be adopted the members may comment on and criticise the report and the chairman'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.

 

PROCEDURE AT THE MEETING

Opening the meeting

Start time: As a rule, subject to the chairman's duty to act impartially and to allow the meeting to proceed in an orderly manner, if a quorum is present, the chairman should attempt to start the meeting on time. In practice, he may want to wait until all those in the queue at the appointed start time have been admitted or, alternatively, open the meeting and delay any formal business until all the members have been admitted. The mood of those members present will normally determine the length of delay the chairman can sensibly allow before starting the business of the meeting.

New information emerging since notice dispatched: If new information has emerged since the notice of meeting was dispatched, the chairman should draw it to the meeting's attention.

Quorum

Meaning: 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 and so counts toward the quorum

Quorum ceasing to be present: Where, 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, since it can no longer validly conduct business (unless the articles provide otherwise

Who may speak?

Unless otherwise provided by the articles, the following have the right to speak at a meeting:

Neither analysts nor members of the press have the right to raise questions or to speak at meetings; they are present (if at all) as observers only. A proxy does not have the right to speak at a meeting of a public company except to demand or join in demanding a poll.

Types of resolution - ordinary and special business

If a distinction is drawn, the articles will define what constitutes `ordinary business'. This usually comprises:

Proposing and seconding resolutions

The chairman usually proposes the resolutions to be put to the AGM. Before each resolution is put to the vote, it is recommended best practice for the chairman 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 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. If notice has been given by a member of a resolution, the chairman should call upon the giver of the notice to put the resolution.

Proposing amendments to resolutions

An amendment to a special or extraordinary 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 even in this case, unless the articles provide otherwise, the chairman should only allow a substantive amendment to be considered by the meeting if:

Rejecting a valid amendment

Invalidates the resolution: The chairman is able to reject any proposed amendment, but must do so with extreme caution since a failure to submit a valid amendment to the meeting invalidates any subsequent resolution (if challenged in court) even though the chairman may have acted in good faith. Most articles now contain a provision, designed to ward off the drastic consequences of rejecting a valid amendment, stating that the chairman ruling a proposed amendment out of order will not invalidate the resolution passed.

Voting on proposed amendments

Procedure: 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 chairman should then put the original resolution to the vote. If an amendment is carried, it is the amended resolution that is put to the meeting. Amendments that 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.

Multiple amendments: Sometimes several amendments are proposed to one resolution, in which case the chairman will have to exercise his discretion in arranging their order. Ideally, he should ask that all amendments are put into writing, so as to see how far they are consistent one with another. Usually, amendments should be put in the order in which they are proposed, unless overlapping or inconsistency suggests a more efficient ordering.

Additional resolutions

The chairman should not allow additional resolutions to be proposed which are not covered by the notice of the meeting, unless the necessary notice has been given or any other special requirements of the articles or under Company Law have been fulfilled. So, an additional ordinary resolution may be proposed at the meeting as long as it is within the scope of the business of the meeting, as set out in the notice. But additional special or extraordinary resolutions, or resolutions of which special notice is required, may not be put forward.

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 chairman (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). The chairman may wish to assure the member that his concern has been noted and ask him to withdraw the motion (to avoid wasting time, given that the motion will achieve nothing). As with a proposal not to accept the annual report and accounts, or the directors' remuneration report, such a resolution should be viewed as a vote of censure against the board and should not be dismissed by them.

Directions to the board

Articles: Articles of Association provides for the business of the company to be managed by the directors subject to directions given by special resolution. If articles follow this the standard form, 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 chairman 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 meetings

Minutes of all proceedings at general meetings must be entered in books kept for that purpose. The books must be kept at the company's registered office and must be open to inspection by members free of charge during business hours for at least two hours each day. However it is worth noting that minutes of general meetings normally record only the outcome and not the discussions themselves.

Manuscript notes, recordings, photographs

Whether or not the company allows members to make manuscript notes or use video or other recorders or take photographs falls within the chairman's discretion (unless provided for in the articles). There is probably little point in preventing manuscript notes being made as minutes of the meeting must be kept. However the chairman should consider whether recordings or photographs of the meeting ought to be permitted. As well as the possibility that they may be used to create a negative or incomplete view of the meeting, they may be used in an effort to disrupt the meeting. The chairman is able to take steps to ensure this does not happen by preventing recorders and cameras being brought in to the meeting. If trouble is anticipated, it might be prudent to advise members, in the notice of the meeting and on proxy forms, that they will not be admitted with recorders and cameras, and that they will be required to submit to a security inspection before being admitted to the meeting venue.

There is no suggestion that those attending a meeting are bound by a duty of confidentiality. The fact that minutes must be taken and made available to members seems to indicate that members are able to use information obtained at a meeting as they see fit.

Filing resolutions etc.

After the meeting the company has 15 days in which to file a copy of all special and extraordinary resolutions passed at the meeting, together with any other resolution with the registrar of companies. A listed company may also be required to forward copies of all resolutions passed at a general meeting to the stock exchange and / or regulator.

 

ADJOURNMENT OF MEETING

Postponement or cancellation before the meeting is opened

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. 

Reasons for adjournment

Reason needed: The chairman 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 chairman and proceed with the business. Good reasons may include:

Effect of adjournment

Continuation of meeting: An adjourned meeting, when resumed, is treated as a continuation 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

 

VOTING

Who may vote?

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.

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

Articles: Articles of association usually specify who is entitled to vote at meetings and whether members have either weighted or restricted voting rights. If they contain no provision, every member has, in the case of a company originally having a share capital, one vote in respect of each share

Methods of voting

The chairman's duty to elicit the true sense of a meeting is carried out by formally putting business to a vote. 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. In the absence of an article allowing it, postal voting is not permissible.

Show of hands

This is the basic common law method of taking a vote and will apply in the first instance unless the articles exclude it. It has the advantage of being quick and simple and is a satisfactory way of determining a resolution where the matter is uncontroversial. 

Articles: Provided that a resolution put to the vote of a meeting must be decided on a show of hands unless before, or on the declaration of the result of, the show of hands, a poll is duly demanded. It provide that the chairman's declaration of the result of a show of hands and an entry to that effect in the minutes of the meeting shall be conclusive, although the court will investigate the result if there is evidence of fraud or manifest error.

Procedure: At any meeting at which an extraordinary resolution or a special resolution is proposed, a declaration by the chairman 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. If the chairman fails to put a resolution to the vote in the mistaken belief that there is no real opposition to it, the result of the resolution will not stand.

Poll

Demanding a poll: The right to demand a poll is a common law right and, although the articles usually specify the conditions subject to which a poll may be requested. A company's articles may not exclude the right to demand a poll at a general meeting on any question other than the election of the chairman or the adjournment of the meeting. That section also invalidates articles which would have the effect of making ineffective demands for a poll:

Articles: It state that a poll may be demanded by the chairman, by at least two members having the right to vote at the meeting, by a member or members representing not less than one-tenth of the total voting rights of all the members having the right to vote at the meeting or by a member or members holding shares conferring a right to vote at the meeting being shares on which an aggregate sum has been paid up equal to not less than one-tenth of the total sum paid up on all the shares conferring that right.

Chairman's right to demand a poll:

A chairman should normally call for a poll if:

The chairman may decide to hold the poll at a future date if there is an important question to be decided in which case notice should be given to all members of the appointed place and time. It requires seven clear days' notice of the date and place of the poll to be given if this is not announced at the meeting. The chairman should specify the hours during which members can lodge their votes on a poll. If this is not done, the poll cannot be closed as long as votes are coming in. If after a reasonable time no more voters present themselves, the chairman may declare the poll closed. The poll will be invalidated if a voter is improperly excluded.

Scrutineers: Scrutineers may be appointed to collect proxy forms (if not already lodged) and voting papers and organise the counting of votes. Where the articles do not provide for the appointment of scrutineers, they may be appointed (or not) at the discretion of the chairman. In disputed situations, scrutineers representing both sides at the meeting may be appointed jointly, or each side may appoint its own scrutineers.

Chairman's casting vote

The chairman does not have either a casting vote or a second vote in the event of an equality of voting unless the articles provide for this. The articles may allow the chairman a contingent casting vote to come into effect if, in the course of subsequent proceedings, it appears that there has been an equality of votes.

Result

Ordinary resolutions: An ordinary resolution is passed if it is supported by a simple majority of those present and voting (on a show of hands) or a simple majority of the votes cast (on a poll). Members who do not attend the meeting or who abstain from voting are not counted for the purpose of that calculation. Similarly, a proposed amendment to an ordinary resolution is passed if it has the support of a simple majority.

Extraordinary and special resolutions: An extraordinary or special resolution is passed if it is supported by at least 75% of those present and voting (on a show of hands) or at least 75% of the votes cast (on a poll). As with an ordinary resolution, members who do not attend the meeting or who abstain from voting are not counted for the purpose of that calculation and a proposed amendment to an extraordinary or special resolution is passed if it has the support of at least 75% of the votes cast.

On a show of hands: A declaration by the chairman that a 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. Articles provide that the chairman's declaration of the result of a show of hands and an entry to that effect in the minutes of the meeting shall be conclusive evidence of the result without proof of the number or proportion of the votes recorded in favour of or against the resolution.

On a poll: The chairman must declare the result of a poll when this is known.

 

PROXIES

Authority of proxy

Although there is no common law right to vote by proxy. Company law and articles allow any member of a company entitled to attend and vote at a meeting to appoint another person (whether or not a member) to attend and vote in his place. A proxy must act within the limits of the authority given by the member

Method of appointment

Form: Always check the company's articles. The articles normally prescribe the form a proxy appointment must take. In the case of most public listed companies, the articles do not specify the form but state that it must be "in any usual form or any other form that the board may approve.

Execution: Most companies' articles allow the proxy form to be signed on behalf of the holder, but will in some cases require any written authority to be lodged with the proxy form

Deposit of appointment and authority: A provision in a company's articles requiring instruments appointing proxies or any other document necessary to show the validity of, or otherwise relating to the appointment of a proxy, to be received by the company or any other person more than 48 hours before a meeting or adjourned meeting is void

Invalid appointment: If the appointment does not comply with the mandatory requirements in the articles it is invalid and the chairman must not allow the proxy to vote. However, a misprint or other palpable mistake on the face of the proxy form does not entitle the company to reject it.

By the chairman: It appears that, where proxy votes are exercisable (for example, when a poll has been demanded), the chairman is under a duty to exercise proxies held by him (in accordance with the instructions they contain):

Use of proxies at adjourned meetings

Proxies deposited before the original meeting may be used at an adjournment since, in the absence of any provisions to the contrary, an adjourned meeting is treated as a continuation of the original meeting.

Irrevocable proxies

The appointor may revoke the proxy's authority to act at any time. Even where a proxy is expressed to be irrevocable, it appears that it will be revoked if the member attends the relevant meeting and votes in person

Confidentiality of proxies

Members are not generally entitled to see proxy forms after they have been submitted to the scrutineers unless the chairman permits this. Members are not obliged to disclose to other members the substance of their instructions to their proxies. It is not clear, however, what the position would be if the chairman refused a member's request to see the proxy forms; in the light of his duties to act in the best interests of the company as a whole, it would seem that if the chairman refused, he would need to demonstrate legitimate grounds for doing so.