A company’s annual general meeting (‘AGM’) is a meeting of its members that is held after the company’s year end to vote on various resolutions including:
- Receipt of the accounts
- Appointment/re-appointment of directors
- Appointment/re-appointment of auditors
- Approving any final dividend.
Public limited companies (‘PLCs’) must hold an AGM every year within six months of the company’s year end.
Private companies that hold AGMs must do this within nine months of the company’s year end. However, private companies, unless they have voting shares traded on a regulated market or the company’s articles of association require them, do not need to hold AGMs.
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Shareholders with at least 5% of the voting rights can, however, request that a private company holds an AGM.
Where a private company has a large number of shareholders (in the rest of this article this term includes members of companies limited by guarantee) it should, however, consider holding an AGM. Holding an AGM:
- allows the directors to explain the company’s performance and let shareholders of their future plans; and
- gives shareholders the opportunity to meet the directors, question the company’s performance and discuss the company’s plans.
An AGM if well planned can, therefore, be a good PR exercise for the directors.
A private company that does not hold an AGM or other general meetings will pass resolutions by written resolution. PLCs cannot use written resolutions and must hold general meetings to pass resolutions.
The only time that a private company, that is not a traded company or is not required to hold AGMs by its articles, must hold a general meeting of its shareholders is to remove a director before the end of their term of appointment or the auditors before the end of their term of appointment.
A single shareholder company does not need to hold general meetings or complete written resolutions provided that where the sole shareholder makes a decision that would normally require a shareholder resolution the shareholder informs the company of that decision.
Annual versus extraordinary general meetings
An extraordinary general meeting (‘EGM’) is any general meeting of the shareholders other than an AGM. EGMs are often used where shareholder approval is needed before the next AGM, for example to approve:
- a takeover;
- a change to the company’s articles of association;
- a change to the company’s name; or
- to dissolve the company.
To reduce the costs and the administrative work required companies will try to include all the necessary resolutions needed for the year ahead at their AGMs.
Notice of AGM
For private companies at least 14 days’ notice is required for any general meeting of the shareholders unless the articles of association require a longer period, although this can be reduced if 90% of the shareholders consent to the short notice.
For PLCs at least 21 days’ notice should be given for AGMs, unless the articles of association require a longer period. This can be reduced to 14 days by passing a special resolution of the holders of 95% of the voting rights (excluding shares held by the company in treasury). For other general meetings only 14 days’ notice is required as for private companies. This can also be reduced if agreed by the holders of 95% of the voting rights (excluding shares held by the company in treasury).
What to include in the notice of the AGM
- Date and time of the meeting;
- Place of the meeting; and
- General nature of the business to be dealt with at the meeting
For quoted companies it must also include:
- the address of the website on which the following information required by section 311A of the Companies Act 2006 is published:
- the matters set out in the notice of the meeting;
- the total number of shares of each class which have voting rights;
- the voting rights of each class; and
- any shareholders’ statements, shareholders’ resolutions and shareholders’ matters of business received by the company after the first date on which notice of the meeting is given;
- the date and time of the entries in the register of shareholders that the voting rights are to be determined by;
- the procedures to follow for shareholders to attend and vote at the meeting (including the deadline date for confirmation of attendance);
- the forms to be used for the appointment of proxies;
- where the company offers the facility for shareholders to vote in advance or by electronic means, the procedure for doing so (including the deadline and the forms to be used); and
- a statement of the right of shareholders to ask questions in accordance with section 319A of the Companies Act 2006 (traded companies: questions at meetings).
Notice can be in writing, in electronic form or by means of a website. Where the notice is by means of a website the company must inform the shareholders that there is a notice of a meeting on its website and tell them the place, date and time of the meeting and if it is an AGM.
Matters to include at an AGM
In addition to the receipt of the accounts, appointment of directors and approving any final dividend the AGMs of PLCs and large private limited companies often include the following ordinary and special resolutions:
- Approving the directors’ remuneration report and remuneration policy
- To appoint the company’s auditors and approve that the directors / audit and risk committee fix their remuneration
- Granting authority for the directors to allot new shares
- Disapplying pre-emption rights on shares
- Buying back the company’s own shares
- Approving political donations and expenditure
- Consenting to short notice of general meetings other than AGMs
It is generally the directors that decide on the matters to include. However, shareholders with at least 5% of the total voting rights can require the company to circulate a resolution to be voted on at the company’s AGM. For PLCs the shareholders do not have to hold 5% of the voting shares provided that there are at 100 shareholders with voting rights where the shares have an average of at least £100 paid up per shareholder.
To include a resolution that needs to be passed as a special resolution 28 days’ notice is needed to be given to the company and the company must then give shareholders at least 14 days’ notice.
Attendance at AGM
All shareholders can attend and vote at the AGM in person
Shareholders unable to attend can appoint one or more proxies to attend the AGM and vote for them. Where a shareholder appoints more than one proxy this must be on different shares. The proxies can either be instructed how to vote on each resolution, including to abstain, or allowed to vote as they want. To do this a form of proxy needs to be completed. The proxy often appointed is the chairman of the meeting but does not have to be.
Shareholders can decide to neither attend nor appoint a proxy to vote an the AGM.
An AGM can be held electronically or a mixture of in person and electronically provided that all attendees can hear and participate fully in the meeting.
All directors, including those that are not shareholders can attend and speak at an AGM.
Chairing of meetings
The chair of general meetings will normally be any person appointed as chair of the board of directors and is often set out in the articles of association. If there is no provision set out in the articles the chair is elected by a resolution of the company passed at the meeting and can be any director or shareholder of the company or a duly appointed proxy of a shareholder.
The chair controls the meeting and decides if a resolution has or has not been passed or has been passed with a particular majority. The chair can often decide if a vote should be by a poll rather than a show of hands.
Voting at AGM – quorum
Voting at an AGM will either be on show of hands or by poll – the company’s articles of association will state how voting is carried out and who can request a poll. In any event at least five shareholders or holders of 10% of the voting shares can request a poll.
When the voting is by show of hands each person attending has one vote however many shares they hold, whereas on a poll each shareholder has one vote for each voting share held.
A quorum for an AGM or any other general meeting of the shareholders is two (provided that the two persons are not acting as proxy or corporate representative of the same shareholder) unless the company’s articles of association require a higher number or the company is a single shareholder company.
For companies limited by guarantee each member with voting rights has one vote regardless of the amount of their guarantee.
Where there are joint shareholders it is the vote of the most senior shareholder who votes (or any proxy appointed by this person) that is counted – the senior holder is determined by the order recorded in the register of shareholders.
Voting by joint shareholders
If the shares are owned jointly by Joan Smith, John Smith and Steve Smith and this is the order recorded in the register then Joan is the most senior followed by John and lastly Steve. Therefore, if Joan or her proxy votes it is her vote that counts whether or not John and Steve vote. However, it could be John’s vote that counts if Joan does not vote even if Steve votes. If only Steve votes then it is his vote that counts.
Records of general meetings and shareholder decisions
Every company must keep records of all general meetings and the decisions of shareholders. These will include:
- copies of all resolutions of shareholders passed otherwise than at general meetings,
- minutes of all proceedings of general meetings, and
- details provided to the company of the decisions made by the single shareholder of companies that only have one shareholderer (section 357 of the Companies Act 2006) where those decisions are shareholder resolutions having the effect as if agreed by the company in general meeting (unless that decision is taken by way of a written resolution).
The records must be kept for at least ten years from the date of the resolution, meeting or decision (as appropriate).