An Extraordinary General Meeting (EGM) is a gathering of company members that takes place outside the regular schedule of the Annual General Meeting (AGM). Under the Companies Act 2006, this meeting is often called for addressing urgent or special matters that cannot wait until the next AGM. This article delves into the historical context, types, procedures, and significance of EGMs.
Historical Context
EGMs have evolved as a crucial part of corporate governance. Historically, companies required a formal gathering to make significant decisions. With the Companies Act 2006, many such decisions can now also be made through written resolutions, but EGMs still hold substantial importance for discussions and decisions requiring immediate attention.
Types of General Meetings
- Annual General Meeting (AGM): Held once a year to discuss regular business activities, financial performance, election of directors, etc.
- Extraordinary General Meeting (EGM): Called outside the regular AGM schedule to discuss urgent or specific issues.
Key Events Triggering an EGM
- Major acquisitions or mergers.
- Amendments to company by-laws or articles.
- Issuance of additional shares.
- Removal and appointment of directors.
- Auditor resignation or appointment.
Detailed Explanations and Procedures
Calling an EGM
- By Directors: Most companies’ articles allow directors the discretion to call an EGM as needed.
- By Shareholders: Members holding not less than 10% of shares can requisition an EGM.
- By Auditor: A resigning auditor has the right to requisition an EGM to address their resignation reasons.
Notice Requirements
The Companies Act 2006 stipulates that adequate notice must be provided, which can be:
- In Hard-Copy Form: Traditional paper notice sent to members.
- In Electronic Form: E-mails or electronic notifications.
- By Means of a Website: Public notification via the company’s official website.
Charts and Diagrams
graph TD;
A[EGM] --> B[Directors Call EGM];
A --> C[Shareholders Requisition EGM];
A --> D[Auditor Requisition EGM];
B --> E[Issue Notice];
C --> F[Hold EGM];
D --> G[Address Resignation];
Importance and Applicability
EGMs are vital for addressing urgent corporate issues that cannot be delayed until the next AGM. They ensure that shareholders have a platform to discuss and vote on matters affecting the company’s future and governance structure.
Examples
- Mergers and Acquisitions: Shareholders might need to approve a proposed merger with another company.
- Director Removals: If a director needs to be removed due to misconduct, an EGM is called to address this immediately.
Considerations
- Compliance with Legal Requirements: Proper notices must be issued, and meeting protocols followed.
- Quorum Requirements: The meeting can only proceed if the necessary quorum (minimum number of attendees) is present.
- Documentation: Detailed minutes of the meeting must be recorded for future reference.
Related Terms and Definitions
- AGM: Annual General Meeting, held yearly for routine company business.
- Quorum: Minimum number of members required to conduct a meeting legally.
- Written Resolution: Decisions made without holding a physical meeting but agreed upon in writing by the required majority of shareholders.
Comparisons
- EGM vs. AGM: EGMs are held for urgent or special matters, while AGMs are routine annual meetings.
- EGM vs. Written Resolution: Written resolutions can replace EGMs for certain decisions, offering flexibility and efficiency.
Interesting Facts
- EGMs are often seen as a tool for activism, allowing minority shareholders to raise concerns.
- Companies with dual-class shares might see different voting powers during EGMs.
Inspirational Stories
- Shareholder Activism: In 2009, a significant EGM was called by shareholders of a major energy company to challenge the board’s decisions on executive compensation, showcasing the power of EGMs in corporate governance.
Famous Quotes
- “The success of any meeting lies in its preparation and execution.” – Anonymous
Proverbs and Clichés
- “Strike while the iron is hot.”
Jargon and Slang
- Proxy: A person authorized to act on behalf of a shareholder during an EGM.
- Requisition: A formal demand for an EGM by shareholders or auditors.
FAQs
Can an EGM be conducted virtually?
What is the minimum notice period for calling an EGM?
References
- Companies Act 2006.
- Corporate Governance Practices by John Wiley & Sons.
- Case Studies in Corporate Governance by Harvard Business Review.
Summary
An Extraordinary General Meeting (EGM) is a critical tool in corporate governance for addressing urgent matters that arise outside the annual meeting schedule. Governed by the Companies Act 2006, EGMs ensure transparency, shareholder engagement, and timely decision-making in corporate operations. Understanding the procedures, significance, and legal requirements of EGMs helps maintain robust corporate governance practices.
