To AGM or not
Every company has an obligation to hold an annual general meeting (AGM) once in each calendar year under the Companies Act 1993 (the Act). This article will explain the purpose of an AGM and a few workarounds to this obligation.
When/How do I hold an AGM?
Generally, the meeting must be held no later than 6 months after the company's balance date and no later than 15 months after the previous annual meeting. Assuming your company has 31 March financial year end, the AGM needs to be called and held by 30 September each year. However, if your company was registered this calendar year, it only has to hold the meeting within 18 months after its registration.
The process for calling an AGM is set out in the Act and its constitution, usually involving sending out a notice of meeting at least 10 working days in advance. You should check and follow any process set out in the company’s constitution. Otherwise, Schedule 1 of the Act governs the proceedings at meetings of shareholders of a company.
What is the purpose of an AGM?
AGMs are yearly meetings that ensure your company remains on track. At an AGM, the board usually presents the annual report and shares other key information with the shareholders. There may be businesses to be put to the shareholders in the AGM, such as new director appointments, approving a major transaction or amalgamation proposals and other matters relating to financial reporting obligations. For example, if your company wishes to opt out of any one or more of its financial reporting obligations (e.g. audit requirement and the requirement to prepare an annual report), this will be a business to be resolved in the AGM. These resolutions may be called under “extraordinary” shareholders’ meeting at any time, but in good governance and where the timing is convenient they are called and resolved in AGMs. AGMs can also be used as a forum to share company updates, invite shareholder feedback and engagement. However, these should be weighed against the cost of calling an AGM such as the management/board time and the legal cost of preparing the formalities.
Written resolutions in lieu of AGM
And there are workarounds to calling an AGM. These include:
Written resolutions in lieu: It is not necessary for the board of a company to call, or for a company to hold, an AGM if everything required to be done at that meeting is done by written resolution. A company can pass a written shareholders’ resolution(s) in lieu of an AGM if not less than 75% of shareholders who, together hold not less than 75% of the voting shares, vote in favour of the relevant resolution(s). However, a higher voting threshold may be required depending on the relevant context – for example, a resolution to opt out of the financial reporting obligations requires a 95% voting threshold instead of 75%.
Board decision if there is nothing required to be done: It is not necessary for the board of a company to call, or for a company to hold, an AGM if there is nothing required to be done at the meeting, and the board has resolved that it is in the interests of the company to rely on subsection 120(5) of the Act (having regard to whether there is any particular issue that the shareholders should be given an opportunity to discuss, comment on, or ask questions about), and the constitution of the company does not require the meeting to be called or held.
The board will need to decide whether to call for and hold an AGM or rely on one of the two methods to sidestep the AGM requirement. Unless there are any extraordinary / convincing reasons to hold one, a company can arrange for written resolutions in lieu of holding an actual AGM for matters that need swift resolution, saving time and cost. Your company can also include key shareholder updates on company affairs in the comms that are shared with shareholders with the written resolutions in lieu.
If your company decides to pass the resolution in lieu of AGM, you must within 5 working days of the resolution being passed, send a copy of the resolution to every shareholder who did not sign the resolution or on whose behalf the resolution was not signed.
What next
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Disclaimer
This publication should not be construed as legal advice. It is necessarily brief and general in nature. Please seek professional advice before taking any action in relation to the matters discussed in this publication.