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:
- Alterations to the Memorandum and Articles of Association;
- Dissolution of the company;
- The company recovery application;
- 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:
- Call a meeting of a company in any manner in which meetings of the company may be called; or
- 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:
- 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.
- 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:
- 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;
- 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;
- The members then have three months from the date of the deposit to convene the meeting;
- 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.
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.
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.