The Extraordinary General Meeting

Every com­pa­ny duly reg­is­tered under the Com­pa­nies Act shall con­vene an Annu­al Gen­er­al Meet­ing (AGM) once per year. We have already dealt with the require­ment of call­ing an AGM and the for­mal­i­ties that are required for the call­ing and hold­ing of such meet­ing, how­ev­er, what does a com­pa­ny do if it holds its AGM and then lat­er dur­ing the year has oth­er busi­ness to dis­cuss?

The Com­pa­nies Act, Chap­ter 386 of the Laws of Mal­ta (the Act) does not include a def­i­n­i­tion of the term “Extra­or­di­nary Gen­er­al Meet­ing” (EGM), how­ev­er, Arti­cle 128(2) states that: “Every gen­er­al meet­ing oth­er than an annu­al gen­er­al meet­ing shall be an extra­or­di­nary gen­er­al meet­ing”.

This means that the Act itself is stat­ing that com­pa­nies may have oth­er meet­ings through­out the year over and above the AGM. The leg­is­la­tor does not include any list of mat­ters which may be trans­act­ed at an EGM and, there­fore, it is at the dis­cre­tion of the com­pa­ny to decide which mat­ters are to be trans­act­ed at an EGM, with regard being tak­en to those mat­ters that are specif­i­cal­ly to be trans­act­ed at an AGM.

The similarity between the AGM and the EGM

One might notice that the leg­is­la­tor men­tions two instances which are to be trans­act­ed at an EGM, how­ev­er, the leg­is­la­tor does not in any way stip­u­late that such mat­ters can­not be trans­act­ed at an AGM. The rea­son for the leg­is­la­tor not stat­ing that such mat­ters need to be explic­it­ly trans­act­ed at an EGM is the fact that there is no intrin­sic dif­fer­ence between the AGM and the EGM.

Amongst the mat­ters that require a deci­sion to be tak­en at an AGM or an EGM are the fol­low­ing:

  1. Alter­ations to the Mem­o­ran­dum and Arti­cles of Asso­ci­a­tion;
  2. Dis­so­lu­tion of the com­pa­ny;
  3. The com­pa­ny recov­ery appli­ca­tion;
  4. The merge, divi­sion or con­ver­sion of the com­pa­ny.

The EGM is in sev­er­al ways sim­i­lar to the AGM. For exam­ple, suf­fi­cient notice must be giv­en to the par­ties who are enti­tled to attend, and such notice should include details of the meet­ing such as the time, loca­tion and detail on the busi­ness to be trans­act­ed.

Convening of EGM

Whilst the AGM can only be con­vened by the Direc­tors of a com­pa­ny, the EGM may be con­vened, either by the direc­tors them­selves, by the Court, at the request of the resign­ing audi­tor and on req­ui­si­tion by the mem­bers of the com­pa­ny.

Although the above-men­tioned per­sons may con­vene or req­ui­si­tion an EGM, there are both lim­i­ta­tions and oblig­a­tions that may be imposed on the per­sons who may con­vene or req­ui­si­tion an EGM.

EGM convened by the Directors

To start with, the direc­tors of a com­pa­ny may con­vene an EGM on their own voli­tion, this may be lim­it­ed through claus­es in the Arti­cles of Asso­ci­a­tion stip­u­lat­ing that the direc­tors may only con­vene an EGM for spe­cif­ic mat­ters.

Hav­ing said this, the direc­tors are oblig­ed under the Act to con­vene an EGM if the com­pa­ny becomes unable to pay its debts or is like­ly to become unable to pay its debts. The Act stip­u­lates that the direc­tors must con­vene an EGM by not lat­er than thir­ty days from the day that they became aware of such fact. The leg­is­la­tor goes on to state that the direc­tors must con­vene the meet­ing for a date which is not lat­er than forty days from the date of the notice call­ing the EGM.

The leg­is­la­tor also impos­es an oblig­a­tion on the direc­tors of pub­lic com­pa­nies to con­vene an EGM in cas­es where the company’s net assets become half or less than half of its’ called-up issued share cap­i­tal.

More often than not, one finds a clause in the Arti­cles of Asso­ci­a­tion stat­ing that the direc­tors have the pow­er to con­vene an EGM. It must also be not­ed that it is an inher­ent right of the direc­tors to duly call an EGM which emanates from the wide-rang­ing pow­ers con­ferred on the direc­tors.

EGM convened by the Court

The Court may con­vene an EGM either on its own motion or through a request by a direc­tor or a mem­ber of a com­pa­ny in cas­es where for any rea­son it is imprac­ti­ca­ble to:

  1. Call a meet­ing of a com­pa­ny in any man­ner in which meet­ings of the com­pa­ny may be called; or
  2. Con­duct the meet­ings of the com­pa­ny in the man­ner pre­scribed by the Arti­cles or by the Act.

EGM requisitioned by a resigning auditor

The Act states that when a resign­ing audi­tor con­sid­ers that the cir­cum­stances of his res­ig­na­tion should be brought to the atten­tion of the mem­bers and / or cred­i­tors of the com­pa­ny, the resign­ing audi­tor has the right to req­ui­si­tion an EGM.

The resign­ing audi­tor must deposit, togeth­er with the notice of his res­ig­na­tion, a signed req­ui­si­tion. The pur­pose of such req­ui­si­tion should be that of receiv­ing and con­sid­er­ing the expla­na­tion of the cir­cum­stances linked with the res­ig­na­tion of the audi­tor. The Act states that the resign­ing audi­tor may also request that the com­pa­ny cir­cu­lates to its mem­bers a state­ment of the cir­cum­stances linked with his res­ig­na­tion.

Once again, the leg­is­la­tor impos­es an oblig­a­tion on the direc­tors to con­vene an EGM with­in twen­ty-one days from the deposit of the request by the resign­ing audi­tor, for a date which is not lat­er than twen­ty-eight days from the date of the notice call­ing such EGM.

EGM requisitioned by members of the company

Any mem­ber of the com­pa­ny hold­ing not less than one-tenth of the paid-up share cap­i­tal of the com­pa­ny may req­ui­si­tion an EGM.

The leg­is­la­tor states the for­mal­i­ties that mem­bers must fol­low when req­ui­si­tion­ing an EGM, such as:

  1. As stat­ed above, the req­ui­si­tion­ing member/s must be a holder/s of at least one tenth of he paid up share cap­i­tal of the com­pa­ny car­ry­ing vot­ing rights.
  2. In the req­ui­si­tion, the member/s must state the objects of the meet­ing and the req­ui­si­tion must be signed by the member/s.

The leg­is­la­tor also laid down the oblig­a­tions of the direc­tors for when a req­ui­si­tion is deposit­ed by mem­bers of the com­pa­ny:

  1. The direc­tors are oblig­ed, upon the deposit of a req­ui­si­tion, to pro­ceed with con­ven­ing an EGM with­in twen­ty-one days from the date of the deposit of the req­ui­si­tion;
  2. If the direc­tors do not con­vene an EGM with­in the pre­scribed peri­od, the leg­is­la­tor shifts the pow­er to the mem­bers to con­vene the EGM them­selves;
  3. The mem­bers then have three months from the date of the deposit to con­vene the meet­ing;
  4. Although the Act pre­scribes a twen­ty-one-day peri­od with­in which the direc­tors should call the EGM, there is noth­ing in the Act pre­clud­ing the direc­tors from call­ing a meet­ing with­in the twen­ty-one-day peri­od and con­ven­ing it for a date in the dis­tant future.

Conclusion

The Extraordinary General Meeting

As explained afore, there is no intrin­sic dif­fer­ence between the AGM and the EGM, how­ev­er, whilst the AGM is manda­to­ry, the EGM is only con­vened for spe­cif­ic pur­pos­es.

There­fore, if a com­pa­ny needs to dis­cuss, approve or trans­act any kind of busi­ness which requires the con­sent of the mem­bers of the com­pa­ny, and the com­pa­ny had already held its AGM for that year, it may con­vene an EGM to trans­act the nec­es­sary busi­ness.

It is of utmost impor­tance that when an EGM is con­vened, all the nec­es­sary for­mal­i­ties and require­ments are duly fol­lowed by both the person/s req­ui­si­tion­ing the EGM and the direc­tors who ulti­mate­ly con­vene the EGM accord­ing­ly.

Disclaimer*

The above-men­tioned arti­cle is sim­ply based on inde­pen­dent research car­ried out by Dr. Wern­er and Part­ner and can­not con­sti­tute any form of legal advice. If you would like to meet with up with any of our rep­re­sen­ta­tives to seek fur­ther infor­ma­tion, please con­tact us for an appoint­ment.

 

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