AGM Meaning Explained

An Annual General Meeting, or AGM, is a meeting of a company’s shareholders which, as the name suggests, takes place once a year. At this meeting, shareholders have an opportunity to hold the company’s management to account and to exercise their voting rights to have their say in how the company is run.

In this article, we will explore AGM meaning in detail, take a look at the legislation which governs it in the UK, highlight the key participants involved and much more!

What Is an AGM?

An AGM, or Annual General Meeting, is a general meeting of a company’s shareholders held every year. For public companies in the UK, this meeting is mandatory under the Companies Act 2006.

There is no specific agenda which companies must stick to; however, typically, annual results will be presented, the board will update shareholders on business matters and decisions which require shareholder approval will be made. There is also often time set aside for shareholders to ask questions to the board of directors.

Companies Act 2006

The Companies Act 2006 is an act which was passed by the UK parliament in order to reform UK company law. Amongst other things, it deals with public companies' obligations with regard to Annual General Meetings.

Preparation and Notice Requirements

Under Section 336 of the Companies Act 2006, public companies in the UK must hold an Annual General Meeting within six months of their financial year end. The minimum notice for a public company calling an AGM is 21 days; however, the meeting can be held at shorter notice provided all members of the company agree.

Requirements and Procedures

Furthermore, under Section 338A, shareholders may request the company to include a matter to be dealt with at the annual meeting. A company is obliged to include such a matter if it has received requests from:

• Shareholders representing at least 5% of the total voting rights; or
• At least 100 shareholders who have the right to vote and hold shares in the company for which there has been paid up an average sum, per member, of at least £100.

Roles and Responsibilities at an AGM

So, now we know what an AGM is and some of the requirements for AGMs in the UK according to the Companies Act 2006, let’s take a look at some of the players involved in these meetings and their respective roles.

Shareholders

At the centre of proceedings are the shareholders themselves.

Whilst the majority of shareholders are not involved in the day-to-day running of a company, there are certain decisions which can only be made with their approval. Consequently, the main role of shareholders at the AGM is to vote on decisions, or resolutions, which are brought before them.  

For shareholders, an AGM is not only an opportunity to have their say, but also to hold management to account. We’ve already noted that, subject to certain conditions being met, shareholders can require resolutions to be included at an AGM. As well as this, shareholders also usually have an opportunity to ask questions of the company’s directors. 

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Voting Rights and Proxy Voting

However, it’s important to note that not all shares are created equal. A company may have different classes of shares, some of which may not carry the right to attend general meetings or to vote.  

For those shareholders who do have the right to vote, they will be able to vote on resolutions brought before the AGM. Of course, shareholders are not required to attend the AGM in person and, if not present, can typically vote on resolutions by proxy.  

Types of Resolutions

There are two types of resolutions which can be put before shareholders at an Annual General Meeting: Ordinary Resolutions and Special Resolutions.

Ordinary resolutions require a simple majority in order to pass (i.e. more than 50%). Examples of ordinary resolutions can include:

• Approval of Annual Report
• Appointment/Removal of an Auditor
• Appointment/Removal of a Director
• Dividend declaration

On the other hand, special resolutions need a supermajority of at least 75% in order to pass a shareholder vote. Naturally, given the requirement of a supermajority, special resolutions tend to be more significant decisions, such as:

• Amending, or adopting new, articles of association
• Authorising share buybacks
• Changing the company’s name
• Winding up or liquidating a company

Board of Directors

An AGM is an opportunity for a company’s directors and shareholders to come together.

The board will usually present the company’s recent financial performance and time is often set aside for directors to field questions from shareholders. As mentioned previously, resolutions at the meeting may also include voting on the removal or appointment of a director.

The Chair

The Chair of the meeting will either be appointed by the directors or specified within the company’s articles.

The Chair is essentially responsible for making sure the meeting runs smoothly, impartially supervising proceedings and ensuring the prepared agenda is followed. Amongst other things, they will propose the resolutions and declare the result of each one after voting has taken place.

Usually, during the question-and-answer portion of the meeting, questions are directed to the Chair, who may either answer the question themselves, or pass it along to the relevant member of the board.

Company Secretary

Whilst the Chair is the face of the meeting itself, the company secretary operates more behind the scenes, generally doing a lot of the work necessary to make sure the meeting happens in the first place. 

Their duties can typically include: 

• Finding and booking a suitable venue.
• Notifying members of the meeting.
• Organising and preparing the agenda. 
• Preparing the script for the Chair.
• Taking minutes during the meeting and circulating these to shareholders who aren’t present.

Quorum and Attendance at an AGM

Shareholders are entitled to attend an AGM, unless they own a class of share which does not carry the right to attend general meetings or to vote. However, they are not obliged to attend and, as noted previously, may vote on resolutions by proxy.

Nevertheless, in order for the meeting to be valid, there must be a minimum number of “qualifying” people in attendance, what is known as a quorum. A meeting which has a quorum is said to be quorate.

Definition and Requirements for a Quorum

Under section 318 of the Companies Act 2006, unless the company in question only has one shareholder, two “qualifying persons” are considered a quorum. A “qualifying person” is considered as either:

• An individual who is a member of the company (i.e. a shareholder);
• A person authorised to act as a representative of the corporation at the meeting (although the quorum is not met if there are only two persons and both meet this definition); or
• A person appointed as proxy of a member (a quorum is not met if both persons present are proxy for the same member).

However, this is the bare minimum according to the Companies Act 2006. A company may, and many do, set rules for a higher quorum in its articles of association. 

Consequences of Not Meeting Quorum

If the meeting is not quorate, then any business conducted at the meeting is not valid. Consequently, in the event of a quorum not being met, the meeting should be adjourned by the Chair until the correct number of members are able to be in attendance.

Conclusion

The AGM is an important date in the calendar for any publicly traded company. Whilst other General Meetings may take place throughout the year, the Annual General Meeting is the only one which is mandatory for a company to undertake on an annual basis.

It gives shareholders an opportunity to hold management to account, ask questions about the performance and future direction of a company and have their say on how the company is run by voting on resolutions.

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