“Annual general meeting is an institution for the protection of the shareholders of a company, which proves the ultimate control and destiny of a company is vested in the hands of its shareholders” Discuss.



The perspectives on globally applicable corporate governance that is related to shareholders protection. Among others, active shareholders should not be unduly hindered in their activities such as securities, tax and regulations while their rights to vote and participate in shareholders meetings should be protected and enforced. The investors also should consider the right to vote and participate in annual meetings as an asset that provides an opportunity to influence the direction and management of the company. These perspectives emphasis that the shareholders themselves must play their role in preserving the good governance of the company. General meetings that comprise of Annual General Meetings (AGMs) and Extraordinary General Meetings (EGMs) are some of the limited platform that can used by the shareholders to defend their rights and protect their investment in the company. As compared to other many good governance mechanism, there is a lack of attention been given academically on the EGM. This has motivated the current study to first, explore in what way the EGM can be used to protect the right of the shareholders and second, to examine the level of the disclosure of the company in relation to the EGM.

Shareholder Meetings

 Every listed company, in common with all other registered companies, is obliged to hold an AGM at which specified items of business must be transacted. All shareholders are entitled to attend the meeting, at which three of the most important activities are

1. The board giving an account of its management of the business in the preceding financial year.

 2. The right of shareholders to ask questions of the board.

 3. Shareholders voting on resolutions put to them by the board. Section I of this Chapter reviewed the kinds of resolutions that boards put to shareholders at an AGM. Similar resolutions may also be put to shareholders at additional Extraordinary General Meetings (EGMs) during the course of a year. For example, EGMs may be held to approve a rights issue or a takeover, when the timing does not coincide with that of the AGM. Two features of these meetings are that very few shareholders attend compared with the size of the share register and those that do so are overwhelmingly private shareholders and not institutional investors, particularly at AGMs. Normally EGMs are very sparsely attended by both types of shareholder, most votes being cast by proxy. Proxy votes are often described as being ‘in the Chairman’s pocket’, but in practice they are seldom needed by the board of the company to support the resolutions it has put before shareholders. This is because if, by a show of hands, the majority of shareholders present at the meeting support the resolution this is normally sufficient to pass the resolution. Only if one or more of those shareholders present demand a formal poll will a vote take place weighted by size of shareholding. In these circumstances, proxy votes held by the Chairman and others, plus those votes cast by shareholders present, will be counted and determine the outcome. Companies report that this happens very rarely, but that the number of occasions when a full shareholder vote is taken (of those present or represented at a meeting) is increasing.


 A. AGM as a tool for shareholders protection The first objective of the research is to explore the purpose of the AGM and the reason it was conducted by the company. There are scarce resources of AGMs in academic literature and less effort by researchers to monitor the AGMs conducted by any company. This gives motivation for this study, to understand why companies conduct EGMs and whether these AGMs can provide an appropriate platform for shareholders to protect their rights.

 1) Removal of directors and appointment of new directors AGMs can be used if the shareholders feel their interests are in danger as a result of unwise decisions by the directors. In the fierce and fast pace of the business environment, the shareholders should note tolerate and compromise with underperformers and dishonesty of directors or they will see their money fly away and never come back.The shareholders of a construction company had voted to remove its existing directors and install a group of new directors. This is because the capital reduction scheme proposed by the former directors to resolve a crisis accumulated losses In one case of a local finance institution, the AGM was conducted when the existing directors rejected the attractive offer from their rivals for a buyout plan. The shareholders voted not to remove the directors but to appoint more directors in the board with the hope that that the “shareholders’ directors will have more power to dominate the board and revive the buyout plan.

 2) Rejection of takeover by another company This happens when the offer price is below the suitable price of the shares. Normally, market price and the net tangible assets will be the basis for a suitable price. This is straight forward but the hardest part is to determine the premium to compensate the opportunities of costs of the existing shareholders. There are no fast rules and hard numbers to determine an appropriate percentage to mark up. The only method we have is the estimation of the potential profit increases as result of the takeover Shareholders, with limited resources, such as brokers and analyst valuers, commentaries in newspapers should demand for a appropriate premium for their shares

 3) Undervalued offer price for privatization Listed, delisted and relisted. What happens is actually the company in the first place does not have money for its expansion program, so needs public money to finance the project, as borrowing money will cost them too much. A few years down the road, some people who dominate the power see “jewels” and want to take it up all single cent without sharing. So, they apply for delisting by acquiring shares from the retail investors. Again, the problem is in finding the price that can satisfy the current retail shareholders, and it would still pose a big question, so the AGM can be used as a platform for the shareholders to negotiate good numbers for them.

 4) Reject the unfair related party transactions This normally happened when the disposal or acquiring value of the assets does not reflect its worth and market value. In one case, a company wants to acquire a piece of asset at a specified value and price. However, the quite similar type of asset has been purchased by another company at a one-third lower price than the intended price. Why is the company unable to negotiate and get a good price as the other company?

 Obviously, if this transaction proceeds with the original price, it will lower the profit of the company and thus, affecting the dividends.


 5) Fighting against unreasonable capital reduction schemes The company operated under losses for a few years. Thus, carrying huge amount of accumulated losses. To “make up” the financial statement, capital reduction has been proposed to clean up the loss. Should the money of the shareholders be used to redeem the management’s past sins? If the proposed capital restructuring would dilute the existing power of the shareholders and deteriorate the shareholders value in the long run, it is recommended that the proposal be rejected.

 B. Disclosures of AGMs

 Good management practices will inculcate good governance by the board of the company and its relationship with the shareholders and stakeholders. Currently, there is no standard requirement or regulation to measure or assess how companies should conduct meetings and make their disclosures other than guidelines or best practices recommended by leading professional organizations. In addition, there is also no organized or structured effort by the regulator or other parties to examine or assess the conformance of companies with regards to disclosures or Best Practices of company’s AGMs. Thus, the other objective of this paper is to discuss and explore some of the issues and international best practices pertaining to AGMs. The selected best practices include disclosures and matters pertaining to resolutions, notices, and frequency of meetings, directors and shareholders’ attendance, voting results, minutes of meetings, venue and time of AGMs.

 1) Resolutions The EGM can be conducted to pass ordinary and special resolutions. The current survey finds that 37 companies conducted in total 48 EGMs. 32 EGMs were conducted to pass ordinary resolutions, seven EG