Understanding Extraordinary General Meetings: What They Are and How They Differ from Annual General Meetings

Discover the definition, examples, and importance of Extraordinary General Meetings (EGMs) in the world of finance. Gain insights into how EGMs differ from Annual General Meetings (AGMs) and their significance for financial decision-making. Dive seamlessly integrates with popular video conferencing platforms, revolutionizing your meeting experience. CFI is the official provider of the Commercial Banking & Credit Analyst (CBCA)™ certification program, designed to transform anyone into a world-class financial analyst.

As crucial forums for addressing urgent matters, EGMs allow shareholders to vote on resolutions that can shape the company’s trajectory. These decisions may include strategic shifts, changes to the company’s structure, mergers, acquisitions, or amendments to key policies. Voting rights and resolutions are integral components of an Extraordinary General Meeting (EGM), providing shareholders with a platform to express their opinions on critical matters affecting the company. Shareholders exercise their voting rights to decide on resolutions, which can range from changes to the company’s structure, amendments to the articles of association, or other significant decisions. Conducting an Extraordinary General Meeting (EGM) involves adhering to specific procedures and implementing best practices to ensure efficiency and compliance. The process typically begins with a requisition by shareholders or the board’s decision to call an EGM.

The Role of an Extraordinary General Meeting

Recording and reporting Extraordinary General Meeting (EGM) proceedings is a critical aspect of corporate governance and transparency. Companies are often required by law to maintain accurate records of EGM discussions, resolutions, and voting outcomes. The minutes of an EGM serve as an official record, detailing the agenda, discussions, decisions, and any dissenting opinions. Key decisions may include authorizing new share issuances, altering share classes, or approving capital restructuring initiatives.

• Key decisions may include authorizing new share issuances, altering share classes, or approving capital restructuring initiatives.
• Businesses should stay informed about legal updates and promptly adjust their practices to align with any changes in company laws.
• In relation to class meetings, separate meetings must be held to transact business applying only to one class of shareholders.
• During the meeting, a chairperson, often appointed by the board, guides proceedings, ensuring adherence to the agenda, facilitating discussions, and overseeing voting on resolutions.

The outcomes can reshape the company’s direction, financial standing, and competitiveness in the market, underscoring the pivotal role of EGMs in steering the course of corporate operations. Legal formalities and documentation play a crucial role in the Extraordinary General Meeting (EGM) process, ensuring transparency and compliance with regulatory requirements. Overall, a well-organized EGM, guided by legal compliance and best practices, fosters shareholder engagement and contributes to effective corporate governance. Votes are cast by the members in the interest of the shareholders and the company, and the result is declared.

Who may Attend the Meeting?

The procedures for a written resolution are 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 sign the agreement to the resolution and the date that the resolution must be passed without lapsing. At an extraordinary general meeting, the quorum and majority rules are the same for public limited companies and limited liability companies in France. And the proposed decisions will only be taken if the necessary majority of votes are reached.

However, it’s essential for shareholders to approach EGMs with diligence and awareness of their rights and obligations. An example highlighting the relevance of extraordinary general meetings is the London Stock Exchange’s (LSE) removal of its chair, Donald Brydon, in December 2017. Activist investor The Children’s Investment Fund Management (TCI), which held a significant stake of 20.9%, called for an EGM to challenge the decision to push out former CEO Xavier Rolet.

An extraordinary general meeting (EGM) represents a crucial aspect of corporate governance. It refers to a shareholder meeting that deviates from the routine annual general meeting (AGM). Instead, it is convened when pressing business issues arise and require immediate attention between scheduled AGMs.

How to Conduct a Company Meeting? Annual General Meeting (AGM) vs Extraordinary General Meeting (EGM)

Members who are unable to attend the EGM may delegate their voting power to another member, known as a “proxy.” The rules regarding proxy votes vary from one organization to another. Before the EGM the board of the organisation will have agreed upon one or more resolutions that will be put to the shareholders or members for approval at the EGM. The wording of the resolution is sent to the shareholders with a note about its importance.

Key Takeaways

Nominees – who hold shares through nominees have no right in their capacity as the beneficial owners of the shares to attend and vote at 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 – a class meeting. An Extraordinary General Meeting (EGM) is an exceptional meeting of the shareholders and managers of the company to take important decisions. The two main requirements of an extraordinary general meeting are a written notice and a quorum. For instance, when Microsoft announced its intent to issue an extraordinary $60 billion share buyback program in February 2019, it was approved through an EGM held later that year.

• The outcomes can reshape the company’s direction, financial standing, and competitiveness in the market, underscoring the pivotal role of EGMs in steering the course of corporate operations.
• These minutes serve as an official record and are often required for regulatory compliance and auditing purposes.
• The agenda typically includes matters requiring immediate attention, such as changes to the company’s articles of association or resolutions proposed for urgent consideration.
• As mandated by the Companies Act, a notice period of at least 21 days is typically required, ensuring shareholders have adequate time to prepare and participate.
• Clear communication and transparency regarding the implications of EGM decisions are essential to maintain stakeholder trust.
• The combination of a well-defined agenda and a reasonable notice period enhances the effectiveness of an EGM, promoting engagement and adherence to legal procedures.

Agm Meeting

The motion was sparked by activist investor, The Children’s Investment Fund Management (TCI), which had gotten 20.9% votes in favor of removing Brydon. Since it is a meeting that goes beyond the normal framework and which will address essential subjects in the life of the company, the convocation to the EGM must respect certain rules. The legal framework governing Extraordinary General Meetings (EGMs) is primarily outlined in the Companies Act. This legislation provides a comprehensive set of rules and regulations that companies must adhere to when convening an EGM. The board, expected to possess a thorough knowledge of the situation, appraises the members of the benefits of the resolution and addresses their questions.

In the absence of an EGM, it would have been challenging to facilitate a swift resolution to this matter. Shareholders holding a specified percentage of the company’s share capital can also requisition an what is extraordinary general meeting EGM. According to the Companies Act, 2013, shareholders holding at least 10% of the paid-up share capital can demand an EGM. Clear communication and transparency regarding the implications of EGM decisions are essential to maintain stakeholder trust.

Shareholders’ influence is particularly pronounced in EGMs called to discuss urgent matters requiring immediate attention. Their votes on resolutions can result in substantial changes to the company’s operations, governance, or financial structure. This participatory process ensures that shareholders play an active role in steering the company, fostering a sense of ownership and alignment of interests. The influence shareholders exert through EGMs underscores the importance of their role in shaping corporate decisions and reinforces the principles of corporate democracy and governance.

Ensuring proper preparation will ensure a smooth and successful extraordinary general meeting process. Shareholders exercise their voting rights to cast ballots on proposed resolutions, determining the outcome of key decisions impacting the company. This democratic approach ensures that the collective voice of shareholders influences crucial determinations, ranging from amendments to the company’s bylaws to significant corporate actions. Conducting an EGM requires careful documentation of discussions, resolutions, and voting outcomes.

In summary, understanding the role and process of an extraordinary general meeting is essential for investors, directors, and company stakeholders alike. As a platform for addressing pressing matters between annual meetings, EGMs ensure that companies remain responsive to their shareholders and maintain effective corporate governance. The resolutions passed during Extraordinary General Meetings (EGMs) hold the board of directors accountable for implementing decisions that may significantly impact the company’s direction. EGMs are a forum where shareholders exercise their voting rights to address urgent matters, propose changes, or challenge existing strategies. Once resolutions are passed, the board is duty-bound to implement them in line with the shareholders’ collective will.