What is an Annual General Meeting (AGM)?

An Annual General Meeting is a statutory meeting held at least once a year whereby the company organizes a meeting wherein its shareholders, directors and management come together for discussion. AGM is primarily aimed at the discussion of the company’s affairs, assessment of its performance and making of crucial decisions.

Key Objectives of an AGM

• AGM is typically an annual gathering of all the key stakeholders of the company along with its management and board to discuss important matters like the performance of the company, decision making on current issues such as appointment of directors, auditors, dividend payments etc., by way of voting;

• At the AGM, the board of the company places the financials of the company along with the auditors report before the shareholders of the company for their approval;

• Shareholders who cannot attend the AGM in person have an option to appoint a proxy to vote on their behalf;

• At the AGM, the shareholders are provided an opportunity to place before the management, a set of questions or place their concern, which the management is bound to answer or resolve; 

How an Annual General Meeting (AGM) Works

An Annual General Meeting,has a number of ways that it may be conducted and always has a sequence of steps to follow to be able to meet all the required objectives.

• Pre-AGM Process:

1. The board of directors and management of the company are required to ensure that all the documents for the meeting are prepared as well as the annual report, financial statements, and notices among other documents are sent out to the shareholders. 

2. The company then notifies all its shareholders, directors and other major stakeholders on the date, time and venue of the meeting and the agenda of the AGM. 

3.  The Q&A session may be included in advance where the shareholders pose some questions or make some proposals that will be answered during the meeting. 

• AGM Proceedings:

1. Welcome and Introduction: Board of directors chair, and presents the purpose of convening the meeting. This is followed by the actual opening of the meeting as well as the announcement made by the chairman on the proper conduct of the meeting.

2. Review of Annual Report and Financial Statements: The company is reporting its activities, performance, achievements or otherwise, the international business generally marketed by publishing an annual report, which is delivered to the shareholders by the CEO or the CFO. This section consists of the consideration made on the financial statements, as well as the report of the auditor.Directors’ reports also form a part of the annual report.It is the shareholders that cast their votes for the adoption of the company accounts and financial statements. 

3. Appointment / re-appointment of Directors: Shareholders cast their votes to appoint or re-appoint directors who are retiring by rotation wherever there is need. 

4. Appointment of Auditors: The shareholders of the company appoint the auditors of the company for a term of 5 years. Earlier there was a requirement for ratification of appointment of the auditors, which is now done away with. 

5. Discussion of Major Business Decisions: It is major business affairs matters like mergers and acquisitions, divestment or other changes in the company’s management strategy. 

6. Shareholder Questions and Concerns: Shareholders also hold the right of placing questions and also to provide their concerns over the performance, strategies or the governance of the company.These questions and concerns are also answered by the board and management. 

The ordinary business of the company will be passed by an ordinary resolution where the votes cast in favour are more than the votes cast against the resolution. For special business transactions, the type of resolution - ordinary or special depends on the relevant legal requirements. A special resolution however requires atleast 75% of the votes in favor for the approval.

AGM must be conducted during the business hours, specifically between 9:00 am to 6:00 pm. It can be held on any day that is not a national holiday, including the holidays declared by the Central Government. The meeting should take place within the city, town or village limits where the company’s registered office is located.

For the government companies, the AGM may also be held at an alternate location, subject to the Central Government’s approval. Unlisted companies may hold an AGM anywhere in India, provided they obtain prior consent from the members either in writing or electronically. 

For Section 8 companies, the board determines the date, time and venue of the AGM.

Post-AGM Process:

• The company issues the minutes of the AGM whereby such information is disseminated to all those interested.

• The company implements the decisions made during the AGM, such as appointing new directors or auditors.

• The company has remained active in communicating with the shareholders and stakeholders in the course of the year with the latest results and achievements.

AGM musts:

• Notice of Meeting:

1. A notice of the AGM has to be issued by the company to all the shareholders, directors, auditors and other stakeholders giving the details of the time, date, place and order of business of the meeting. 

2. The notice must be sent out within a reasonable timeframe, i.e., clear 21 days’ notice.

3. An AGM can be called at a notice period shorter than 21 days if at least 95% of the members entitled to vote in the meeting agree to the shorter notice. The consent may be given in writing or through electronic mode.

4. The notice may be given in writing through speed post or registered post or via electronic mode. The notice should be sent to the latest address of the member as available with the company in its records.

5. In the case of electronic communication, the notice should be sent to the e-mail address of the member as per the records of the company. The notice of the AGM should be placed on the website of the company or any other website as may be mentioned by the government.

• Quorum:

The Companies Act, 2013 specifies the requirement of minimum quorum as per the number of members in the company. In the case of a private company, two members present at the meeting shall be the quorum for the AGM. In the case of a public company, the quorum is:

1. 5 members present at the meeting if the number of members is within 1000.

2. 15 members present at the meeting if the number of members is between 1000 to 5000.

3. 30 members present at the meeting if the number of members is more than 5000.

• For the meeting to be valid at least a quorum of the minimum number of shareholders have to attend the AGM. 

•  The quorum may be mentioned in the company’s articles of association or through its bylaws that have been established. 

In situations, where the required quorum is not present within half an hour from the scheduled time, the meeting shall be adjourned to the same day in the following week, at the same time and same place.

• Voting Rights:

1. The voting shareholders must be allowed to attend the AGM and to vote on any resolutions in that general meeting.

2. Members can cast votes by a physical ballot or postal ballot or through e-voting.

• Proxy Voting:

1. According to the statutes each shareholder who cannot attend the general meeting shall be entitled to appoint his proxy to attend the meeting. 

2. The company must provide a proxy form and ensure that proxy votes are properly counted.

3. In case the proxy is appointed by a corporate shareholder, the proxy form should be signed and sealed by an authorised signatory of the corporate. 

• Chairman and Secretary:

1. There should be a chairman to chair the AGM to ensure it is held in an organised manner. 

2. A company secretary or other authorized person must be present to record the minutes of the meeting and ensure that all necessary documents are prepared and distributed.

3. The minutes book is to be maintained at the registered office of the company or at such other places as may be approved by the board.

4. The members / shareholders have the right to request for the inspection of the  minutes book of the AGM upon paying the prescribed fee. The company shall, upon receipt of such application and fees, provide a copy of the minutes requested for, within 7 days of such request.

5. In case of non-compliance, such a company shall be liable to a penalty of Rs. 25,000/- and every officer in default shall be liable to a penalty of Rs. 5,000/-. 

• Extension in holding of AGM:

The Registrar of Companies (ROC) has the authority to extend the timeline of the applicant from holding the AGM within the due date by 3 months. Such application can be made by the company in e-form GNL-1 specifying the reasons for seeking such extension and the period for which such extension is sought. The reasons for which such extension may be sought are either of the following:

1. Delay in finalising of financial results;

2. Delay in preparation and finalisation of auditors report;

3. Mergers & acquisitions;

4. Non-availability of directors for valid reasons such as death; and so on.

The ROC shall record the reasons for granting such extension. 

More Topics Discussed at an Annual AGM 

Although the major purpose of an AGM is to examine the position of the company, appoint directors and approve the accounts, other activities may be considered and action taken. Here are some additional topics that may be covered at an AGM:

• Executive Compensation:

1. Often, shareholders may be allowed to approve or disapprove of compensation of managers, directors or chief executive officers of the company. 

2.  It may justify the level of compensation offered and detail how they correlate with the general performance of the company. 

• Share Buybacks and Dividends:

1. The company may offer share buyback or dividend which is usually an action that has to be approved by the shareholders. 

2. These proposals may be a topic of debate and possibly shareholders’ resolution with references to the company’s capital structure and value. 

• Mergers and Acquisitions:

1. It can offer recommendations with regards to mergers and acquisitions, or divestment which usually need to be authorized by shareholders. 

2. These may include shareholders debating before casting their votes to these proposals while bearing in mind the strategic, financial, or competitive implications that come with the same. 

• Environmental, Social, and Governance (ESG) Issues:

1. For example, shareholders may have a worry or notification with reference to climate change, diversity, inclusion, or supply chain management. 

2.  This may include reporting on the company's progress on its ESG related policies and addressing shareholders' complaints. 

• Board Composition and Diversity:

1. The shareholders can also debate and decide on matters regarding the board appointments such as; the selection of new directors or dismissal of directors currently in the board. 

2. The company may provide information on its board diversity and inclusion policies, including gender, racial, and ethnic diversity.

• Shareholder Proposals:

1. Managers receive emails from shareholders regarding various issues that they want to be discussed such as governance structure, remuneration policy or corporate social responsibility. 

2.  The company may respond to these proposals and in the response elaborate on its stand on each of the issues. 

• CEO's Address and Q&A:

1. The CEO may deliver an address, providing an overview of the company's performance, strategy, and outlook.

2. It is a platform where the shareholders may pose questions and question and answer sessions are conducted with the CEOs and other managers. 

• Other Business:

1. The AGM may involve other business like changes made on the articles of association or bylaws of the company or adoption of new operations of the business.

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