What is a Shareholders’ Meeting?
The term “shareholders meeting” refers to the meeting of the company’s stockholders wherein important resolutions and various corporate matters are presentable before the members for discussion as mandated by the company’s bylaws.
Some important affairs discussed during the meetings include reviewing and approving the company’s performance over a particular period, the appointment of a Board of Directors (BoD), major acquisitions & mergers, an increase in share capital, etc. These meetings may occur at a different frequency, such as annually, six-monthly, quarterly, or under exceptional circumstances.
Key Takeaways
Some of the key takeaways of the article are:
- Shareholder meetings are regulatory requirements that private and public companies must regularly conduct to discuss important resolutions and corporate matters.
- The meeting notification and discussion agenda must be ready well before the meeting date. For instance, the notice must be in transit at least 21 days before the meeting in case of an AGM.
- There are three major types of shareholders’ meetings – Annual General Meetings, Extraordinary General Meetings, and Class Meetings.
- There is a minimum quorum requirement for any shareholders’ meeting, which is 2 for private limited companies and 3 for any other companies.
How to Conduct a Shareholders Meeting?
To conduct a shareholders’ meeting successfully, the company needs to follow the steps mentioned below:
- The company must send a prior notice to all its shareholders. For instance, the information must be receivable at least 21 days before the meeting in case of an Annual General Meeting.
- The notice must specify the business matters for discussion in the meeting. Besides, the notice must briefly explain the topics and the associated draft copies of the relevant documents.
- The notice should specify the quorum requirements because the meeting may get adjourned in the lack of adequate quorum.
- The notice should specify the voting process necessary during the meeting. Many companies nowadays provide the option to vote electronically.
- The meeting must take place on the day specified in the circulated notice.
- After the meeting, the meeting minutes (MoM) must cover the discussions and critical decisions made. It is a meeting summary, which is then made available to all the members.
Types of Shareholder’s Meetings
There are three major types of shareholders’ meetings – Annual General Meetings, Extra-ordinary General Meetings, and Class Meetings.
1. Annual General Meeting (AGM)
It is one of the most important shareholder meetings and is compulsory for public and private companies. The time gap between two AGMs should not exceed 15 months, so these meetings compulsorily occur yearly. If the time gap exceeds the prescribed limit, the company must seek a time extension from the government, citing the reasons for the particular approval. The extension approval is limited to only three months.
The notice for an AGM should be circulated at least 21 days before the AGM. However, the notice period can be cut short in some exceptional cases only if all the eligible members provide their consent for the same.
2. Extra-ordinary General Meeting (EGM)
Any company calls these meetings in unique circumstances. The BoD usually possess the power to call for an EGM whenever they deem fit. Besides, an EGM can also take place on the shareholders’ request or the tribunal’s order.
Typically, such meetings discuss urgent business matters or imminent crises requiring the members’ special attention. So, these meetings can be on any day, including holidays.
3. Class Meeting
This type of meeting occurs when a company has to pass a resolution that affects only a particular class of shareholders. For instance, a company may call for a class meeting to discuss the dividend payout for non-cumulative preference shares, which doesn’t affect other classes of shareholders. These meetings are also popularly known as special meetings.
Shareholders Meeting Requirements
The following are the two primary requirements of a typical shareholder meeting:
- In the case of private limited companies, the quorum requirement is at least two members. On the other hand, at least three members must be there to fulfill the quorum requirement in the case of other companies.
- In the case of meetings other than AGMs, the meeting notice should be receivable at least 14 days before the discussion in the case of any company other than an unlimited company. The same notice period is seven days for an entire company. However, the notice period can shorten with the consent of the members.
Importance of Shareholder’s Meeting
Although a company’s management is responsible for making all its major decisions, they must complete the shareholders aware of the critical decisions and seek their approval before implementation. For this reason, the board must call for a shareholders’ meeting.
The type of meeting primarily depends on the matters discussed in the meeting. Generally, the following issues are under discussion in these meetings:
- Financial statements, reports of the BoD, and auditor’s report
- Appointment of the BoD and auditors of the company
- Decisions about corporate matters, such as mergers & acquisitions, split-offs & spin-offs, etc.
- Declaration of dividends, shareholder resolution, issuance of bonds, etc.
- Appointment of liquidators and many more
Conclusion
Every shareholders’ meeting type has its relevance and importance. Not every meeting can be an AGM or an EGM. The corporations must follow specific protocols and comply with all the regulatory requirements about calling and holding a shareholders’ meeting. Any lapse in compliance may cost the company hefty penalties.
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