Once every year, shareholders of a public company are invited to attend an Annual General Meeting (‘AGM’). An AGM’s purpose is to update members on the company’s activities and finances from the previous year. It is also an opportunity for members to ask questions, and elect the company’s governing body.
The rules governing an AGM are provided in a number of legal sources, and it is essential to ensure they are complied with. Some of these sources include:
- Corporations Act 2001 (Cth); and
- Common Law; and
- The Company’s Constitution.
Timing
Upon registration, a public company must hold an AGM within 18 months. Following this, the company must hold one annually between four and six months after the financial year. The timing here depends on the state you are residing in.
Documentation
At least one week prior to the AGM, it is necessary to prepare the annual report and financial accounts summary. This is so they can be distributed to members for review, allowing them to prepare any questions they may have. It will also be necessary to have an agenda, as well as election material if there are nominations occurring.
Who Runs an Annual General Meeting (AGM)?
The Board Chair (President) usually runs the AGM and makes rulings on any procedural issues that are not covered within the company constitution. They can exercise considerable power, autonomy and also flexibility to ensure the meeting flows freely.
Who Can Attend?
Public companies with more than one member must hold an AGM at least once per calendar year, and any member can attend the AGM. Although this may sound simple, poor constitutional drafting can cause difficulties in defining membership. Thus, you should consider whether membership runs for the financial year or calendar year, or to and from specific dates.
Notice and Attendance
The company constitution dictates the amount of notice that must be given to members for an AGM, unless a special resolution is being put up. Special resolutions require 21 days of notice. How notice is provided depends on the company constitution, but many public companies now use email.
Quorum
Quorum is how many people must be in attendance for a decision to be valid. The quorum of a meeting is specified by the company’s constitution.
Proxies
If a member cannot attend the AGM, they may be able to delegate their power to vote to another member in their absence through a proxy vote. This will depend on the company constitution.
Discussions at an AGM
Report
At an AGM, the Board of Directors will provide financial, director and auditor reports to update members on the company’s finances and performance. They will also discuss its future strategy and answer questions that shareholders may have for the Board.
Votes
An AGM may hold a vote to allow shareholders to vote to fill any vacant positions on the Board of Directors or pass resolutions to make company decisions.
Recording Minutes
The minutes must record every decision that is made and must include financial statements. After the meeting, all members are entitled to consult the minutes and the attached financial reports.
Unable to Hold an AGM this Year?
If you are unable to hold you AGM in a given calendar year, you may apply to ASIC to have an extension to hold off your AGM. Extensions are usually granted where there are circumstances out of the company’s control that make an extension necessary, or the extension is in the best interests of the company’s members.
Conclusion
In conclusion, an annual general meeting is a yearly meeting which updates members of a company on its activities and finances for the previous year, and allows members to elect the company’s governing body. Compliance with the procedural requirements of an AGM are necessary to fulfil company obligations under the Corporations Act.
If you require assistance in understanding your legal obligations, consult a Company Lawyer.
