The Annual General Meeting

Introduction

The Com­pa­nies Act impos­es on every com­pa­ny the oblig­a­tion to hold a gen­er­al meet­ing year­ly, but what does a gen­er­al meet­ing real­ly entail?

The gen­er­al meet­ing of a com­pa­ny must be con­duct­ed once every year, hence why it is called the Annu­al Gen­er­al Meet­ing (“AGM”). While a com­pa­ny may call oth­er meet­ings dur­ing the year, it must still hold an AGM because the law dis­tin­guish­es between the AGM and oth­er meet­ings.

Powers of the Board of Directors and of the AGM

While the Board of Direc­tors may man­age the com­pa­ny through the pow­ers vest­ed in them, there are some oth­er pow­ers which are reserved for the share­hold­ers. The Annu­al Gen­er­al Meet­ing allows the share­hold­ers to be more involved in the deci­sions of the Com­pa­ny.

In fact, there are cer­tain mat­ters which the Com­pa­nies Act reserve to be exer­cised in the Annu­al Gen­er­al Meet­ing. Giv­en the fact that the Com­pa­nies Act reserves only a few pow­ers for the AGM, the mem­o­ran­dum and arti­cles of asso­ci­a­tion may assign oth­er pow­ers to an AGM. Hav­ing said this, it is usu­al­ly the case that the mem­o­ran­dum and arti­cles of asso­ci­a­tion do not list a lot more pow­ers which are exclu­sive­ly reserved for an AGM.

But then again, is it nec­es­sary to hold an AGM? Well, apart from the fact that the Com­pa­nies Act holds every offi­cer of the com­pa­ny liable to a penal­ty for not hold­ing an AGM, one will also be able to under­stand bet­ter from this arti­cle why an AGM is essen­tial for a com­pa­ny to func­tion prop­er­ly.

Delving deeper into the notion of an AGM

To start with, when sched­ul­ing an AGM, one must keep in mind that not more than fif­teen months shall elapse between the date of one AGM and that of the next AGM. How­ev­er, for a com­pa­ny that has just been incor­po­rat­ed, the law pro­vides that such a com­pa­ny, if it holds its first AGM with­in eigh­teen months from the date of its reg­is­tra­tion, it will not need to hold anoth­er AGM in the year of its reg­is­tra­tion or in the fol­low­ing year.

The Direc­tors of a Com­pa­ny are respon­si­ble to call the AGM and fol­low all the nec­es­sary for­mal­i­ties as per both the Com­pa­nies Act and the Mem­o­ran­dum and Arti­cles of the Com­pa­ny.

Business that may or may not be transacted at an AGM

While the Com­pa­nies Act does not pro­vide a list of busi­ness that shall be trans­act­ed at an AGM, the First Sched­ule of the Com­pa­nies Act pro­vides an indi­ca­tion of what busi­ness should be trans­act­ed at an AGM, by stat­ing that all busi­ness that is trans­act­ed at an AGM shall be deemed ‘spe­cial’, except for the fol­low­ing:

  1. Declar­ing div­i­dends;
  2. Elect or remove direc­tors;
  3. Deter­mine the remu­ner­a­tion of audi­tors; and
  4. Con­sid­er the accounts, bal­ance sheets and the reports of the direc­tors and the audi­tors.

One might imme­di­ate­ly realise that through the above-men­tioned pow­ers, which are gen­er­al­ly reserved for the AGM, the com­pa­ny is prac­ti­cal­ly con­trolled by the Annu­al Gen­er­al Meet­ing. The share­hold­ers, through the AGM, are giv­en the oppor­tu­ni­ty to scru­ti­nise the finan­cial per­for­mance and the busi­ness of the com­pa­ny.

The List­ing Rules issued in respect of list­ed com­pa­nies cater for what busi­ness must be trans­act­ed at the AGM. This goes with­out say­ing that the reg­u­la­tions for list­ed com­pa­nies are much more strin­gent.

It must be not­ed that a copy of the annu­al accounts must be pro­vid­ed to the par­ties eli­gi­ble to attend for the AGM, at least, four­teen days before the sched­uled AGM.

Notice

When the Direc­tors call an AGM, they do so by issu­ing a Notice in writ­ing to all the mem­bers of the com­pa­ny, the company’s audi­tors and the direc­tors, and it must be issued at least four­teen days pri­or to the date of the meet­ing. The Notice must con­tain the date, time and place of the AGM which are deter­mined by the Direc­tors of the com­pa­ny.

Giv­en that in this day and age every­thing revolves around the use of tech­nol­o­gy, cer­tain com­pa­nies are includ­ing a clause in the Arti­cles of Asso­ci­a­tion which states that the Notice can be sent by email rather than by mail. If a Com­pa­ny that is already incor­po­rat­ed wants to start issu­ing the Notice through email, and its’ Arti­cles of Asso­ci­a­tion do not pro­vide for such issu­ing, the Com­pa­ny may intro­duce this method through a res­o­lu­tion of all the Share­hold­ers of the Com­pa­ny.

It is of utmost impor­tance that the Notice of an AGM defines the meet­ing as an AGM. This is due to the fact that, as afore­said, a Com­pa­ny may hold oth­er meet­ings through­out the year. Any oth­er meet­ing held apart from the AGM is an Extra­or­di­nary Gen­er­al Meet­ing, we shall be deal­ing with Extra­or­di­nary Gen­er­al Meet­ings in anoth­er Arti­cle.

Ordinary and Extraordinary Business

When­ev­er there is the need to trans­act any busi­ness dur­ing the AGM which is not con­sid­ered to be ‘ordi­nary busi­ness’ – as list­ed in the First Sched­ule of the Com­pa­nies Act and/or the Arti­cles of Asso­ci­a­tion of the Com­pa­ny – such busi­ness shall be defined on the Notice of the AGM as ‘spe­cial busi­ness’.

In cas­es where the AGM will deal with spe­cial busi­ness, the Notice must also include the gen­er­al nature of such spe­cial busi­ness and set out in ver­ba­tim the pro­posed extra­or­di­nary res­o­lu­tion. When only ordi­nary busi­ness will be trans­act­ed at an AGM, there is no need for details on the kind of ordi­nary busi­ness that is to be trans­act­ed. How­ev­er, in prac­tice, it is the norm that the Notice would include what kind of busi­ness is going to be trans­act­ed.

Mem­bers will be giv­en time to dis­cuss the res­o­lu­tion and once there is an under­stand­ing of such res­o­lu­tion, the meet­ing will resolve to bring the dis­cus­sion to an end and take a vote on the pro­posed res­o­lu­tion.

Proxies

The Notice must also advise the mem­bers of their right to appoint a Proxy. A mem­ber may appoint a Proxy if unavail­able to attend the meet­ing in per­son. A proxy is a per­son who will attend the meet­ing and vote instead of the mem­ber who appoint him/her as the proxy.

Directors failing to convene an AGM

Up to this day, if the Direc­tors fail to con­vene an AGM, it seems that the mem­bers of the com­pa­ny are unable to con­vene an AGM them­selves. How­ev­er, the Com­pa­nies Act pro­vides that any mem­ber may file a request to the Court to order the AGM to be held.

Quorum

Two mem­bers present in per­son at an AGM shall form a quo­rum, how­ev­er, the arti­cles of asso­ci­a­tion may pre­scribe a high­er or low­er num­ber of per­sons that form a quo­rum. A quo­rum of mem­bers must be present at an AGM for the meet­ing to pro­ceed to busi­ness.

Chairman

The Mod­el Arti­cles which are found in the Com­pa­nies Act state that the Chair­man of the Board of Direc­tors shall also pre­side as Chair­man for the gen­er­al meet­ings. How­ev­er, the Direc­tors may elect one of their num­bers to act as Chair­man of the meet­ing.

Voting

Vot­ing at an AGM may take place through a show of hands, how­ev­er, this means that each mem­ber is giv­en one vote, and, there­fore, if a vote is tak­en it would be, for exam­ple ‘2’ against ‘3’. Anoth­er pos­si­ble way in which votes are tak­en is through a poll. A poll will reflect bet­ter the num­ber of shares which are in favour and which are against. This is why after a vote through a show of hands is declared or even before the result of such vote is declared, any mem­ber who is present at the meet­ing in per­son and any proxy may demand that a poll be tak­en.

Conclusion

Hold­ing an AGM is not only done to abide by the law, but, as can be under­stood bet­ter from the above sec­tions, hold­ing an AGM enables a com­pa­ny to func­tion prop­er­ly. It is through an AGM that any dis­putes that may arise with regards to the man­age­ment or busi­ness of the com­pa­ny may be resolved through dis­cus­sions.

There­fore, one must com­mit to hold­ing a prop­er AGM which will help the com­pa­ny and not mere­ly hold­ing an AGM to get it over and done with. A prop­er AGM will enable the share­hold­ers to have a wider par­tic­i­pa­tion with­in the com­pa­ny and the deci­sion mak­ing and will, undoubt­ed­ly, improve the company’s foun­da­tions.

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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