An annual general meeting (AGM) is an annual gathering of a company’s shareholders and board of directors. Usually, the directors and shareholders get to meet each other at an AGM. At an AGM, the directors of the company present the company’s annual report containing the company’s performance and strategy for the shareholders.
The Companies Act (2013) and its tenets mandate that every Private Limited Company or a Limited Company must hold an Annual General Meeting to ensure that their shareholders are updated about the management’s performance, administration, and decision-making processes.
In most private limited entities, the general public holds a majority of the stock. They are de facto owners of the company. The Acts ensure that all shareholders get a say in the proceedings of their company.
An AGM has a one-point agenda – to ensure that shareholder’s interests are taken due care of.
Over the years, there have been numerous changes in how an AGM is conducted. The SEBI, for example, issued a notification in 2018 which came into effect on April 1st, 2019. It stated that the top 1000 listed organisations – based on their market capitalisation as calculated on March 31st – must ensure that a general meeting must be organised not later than 5 months post the end of an FY.
An AGM is an interaction between a company’s shareholders and its directors. It must be noted that shareholders with voting rights may move any motion at a meeting.
The meeting provides shareholders with an opportunity to discuss matters of mutual interest. These may include –
Also, audited accounts are approved in such meetings.
Apart from these discussions, shareholders may ask for dialogue and debates on other issues. They are classified as ‘special businesses.’
Furthermore, if a shareholder is unable to attend an AGM, he or she can vote via proxy. They may send a vote either by post or via email.
There are separate provisions for the first Annual General Meeting of a Limited company and its subsequent ones. The basics are discussed below.
The maiden AGM of a Limited Company must be held within 18 months from the date it is incorporated. At that point, there may not be too many shareholders; still, an AGM must be organised.
The next yearly meeting may be held on the earliest possible instance of the following days –
For subsequent meetings, the above-mentioned criteria hold with one addition. Once 6 months have passed since a company’s profit & loss accounts plus balance sheets have been published, and earnings declared to shareholders, it cannot arrange for an AGM.
The following are some vital cogs of the wheels of a yearly meeting between the directors and shareholders.
All shareholders, auditors, trustees, and associated parties must be informed at least 21 days before an AGM is to be held. A notice of this upcoming meeting plus the concerned company’s annual report must be sent at least 3 weeks in advance.
Note that if 95% of the shareholders agree, a company’s notice period can be shortened.
It is a legal term that essentially mandates the minimum number of representatives from both sides without which a meeting cannot begin. Without a full quorum, an AGM cannot go ahead.
Section 103 of The Companies Act (2013) requires the following numbers.
|Only for Public companies|
|Total number of members (as on the day of the meeting)||Quorum requirement|
|Above 1000 but below 5000||15|
|For private companies|
|Number of members does not matter||2 members|
If an Annual General Meeting does not have a full quorum, the meeting must be postponed by a week. The timing, venue, and agenda will remain the same; however, the BoD may change these elements using their discretionary powers.
Note that shareholder proxies cannot be part of a quorum.
Meetings can be set only between 9 am and 6 pm on any day, including weekends, except on national holidays. The venue is mostly the company’s registered office, failing which the BoD will work on a replacement venue and convey it to all attendees.
Lastly, AGM rules can be tweaked for charitable or non-profit companies which are registered under Section 8 of The Companies Act (2013). These organisations do not pay any dividends and deal mostly in science, environmental causes, arts, sciences, and sports. They also encourage original research in diverse fields.
An Annual General Meeting is not just a business interaction. At times, shareholders can gain keen insights into corporate workings. Legendary investor, philanthropist, and billionaire Warren Buffet’s AGMs at Berkshire Hathaway are packed tight each year as he shares his lessons and imparts business strategies.
Apple, Samsung, Reliance India Limited, BAE Systems, Alibaba, and several other Fortune 500 giants generally have well-attended AGMs every year.
The Volkswagen Group’s axiom for AGMs – “An AGM starts only after it ends” – reflects German passion for business and football.
It is one of the reasons why thousands of people attend annual meetings of their companies- large and small- each year. This sense of collective ownership is a vital driving force.
Ques. Why is an AGM held?
Ans. AGM allows the company’s members to know about the reports from the Committee on the achievements over the year. Also, it is important to elect the Committee for the year ahead.
Ques. What is the discussion about in an annual general meeting?
Ans. AGM is essentially conducted to allow shareholders to vote on both company issues and the selection of the board of directors. In many large scale companies, this meeting is usually the only time throughout the year when shareholders and executives interact.
Ques. What is the procedure to hold an Annual General Meeting?
Ans. The company holding the AGM must give clear notice of 21 days to its members. Such type of notice must talk about the venue, the date and day, and the time scheduled for the meeting.
Ques. What are the requirements for an Annual General Meeting (AGM)?
Ans. All the companies must conduct an Annual General Meeting every year except for one Person Company. The first Annual General Meeting of a company should be conducted within 9 months from the end of the first Financial Year after its incorporation.
Ques. Can a company hold an annual general meeting through video conferencing?
Ans. Section 96 of the Companies Act, 2013 does not permit the Companies to call and conduct the meeting through video conferencing or via other audio-visual means.