Discuss how the concept of Annual General Meeting became a protection for the shareholders of a company?

Company’s Meeting

According to company’s law; Where company’s members, board of directors or creditor’s are meet together to discuss company’s functions and take importance discussions  is called company’s meeting.

 Classification of company meeting

There are three types of company meeting; Shareholder’s meeting(Statutory meeting, Annual general meeting and Extra-ordinary general meeting), Meeting of the board of directors(Board meeting and committee meeting), and Special meeting(Class meeting and Creditor’s meeting).

 Shareholders

 A shareholder or stockholder is an individual or institution (including a corporation) that legally owns one or more shares of stock in a public or private corporation. Shareholders own the stock, but not the corporation itself (Fama 1980).

 Stockholders are granted special privileges depending on the class of stock. These rights may include:

  • The right to sell their shares,
  • The right to vote on the directors nominated by the board,
  • The right to nominate directors (although this is very difficult in practice because of minority protections) and propose shareholder resolutions,
  • The right to dividends if they are declared,
  • The right to purchase new shares issued by the company, and
  • The right to what assets remains after a liquidation.

 Stockholders or shareholders are considered by some to be a subset of stakeholders, which may include anyone who has a direct or indirect interest in the business entity. For example, labor, suppliers, customers, the community, etc., are typically considered stakeholders because they contribute value and/or are impacted by the corporation.

­­­Shareholders in the primary market who buy IPOs provide capital to corporations; however, the vast majorities of shareholders is in the secondary market and provide no capital directly to the corporation.

Therefore, contrary to popular opinion, shareholders of public corporations are NOT the

 (1) Owners of the corporation,

(2) The claimants of the profit, or

(3) Investors, as in the contributors of capital.[1] [2]

 General meeting

 General meeting of a company means a meeting of its members for specified purposes. There  are two kinds of general meetings, the annual general meeting, other general meetings.

 The Annual General Meeting (AGM)

 An annual general meeting (commonly abbreviated as AGM, also known as the annual meeting) is a meeting that official bodies, and associations involving the public (including companies with shareholders), are often required by law (or the constitution, charter, by-laws etc. governing the body) to hold. An AGM is held every year to elect the Board of Directors and inform their members of previous and future activities. It is an opportunity for the shareholders and partners to receive copies of the company’s accounts as well as reviewing fiscal information for the past year and asking any questions regarding the directions the business will take in the future

Attending the general meeting

  • President (who chairs the meeting)
  • Secretary (who prepares the minutes)
  • Recount clerk (who reviews the stock ledger

IMPORTANCE OF AGM:

AGM is an important institution for the protection of the shareholders of a company. The ultimate control and destiny of a company should be in the hands of its shareholders. Thus, shareholders should meet together at least once in a year to review the working of the company. This meeting affords that ­opportunity. It is in this meeting that directors will come up for re-election. Auditors retire at this meeting enabling the shareholders to consider whether they should be re-appointed or replaced. Dividends are declared at this meeting. Chairman delivers a speech listing the advances of the company during the year. Directors have to present annual accounts for the consideration of the shareholders. A failure to present the accounts is a punishable offence. The shareholders can ask any questions relating to the accounts or affairs of the company.

 What is an Annual General Meeting?

 What is an AGM?

Running the AGM

 An Annual General Meeting, commonly referred to as an AGM, is a formal meeting which is held once a year. It is a legal requirement for voluntary organisations that have company status. It is good practice for charities to have an AGM to act as a

review of the year and deal with issues such as the election of committee/board members and reviewing the annual accounts. Each individual organisation should have a section of its Constitution which deals with AGMs, and this gives guidance as to how the AGM should be run and what matters should be dealt with. Although it is a formal meeting, it can also be a good opportunity to communicate with members, clients, partners and other interested parties.

Timing

Again, each organisation should find guidance in its Constitution regarding when an AGM should take place. It does need to take place following the end of your financial year when accounts have been audited.

 Committee/Board Nominations.

Your Constitution should also give guidance on electing committee or board members. It is advisable to ask for nominations before the AGM, which should be proposed and seconded. Check whether your constitution has rules about who is allowed to stand as a committee or board member.

 Publicity and Invitations

It is usual for organisations to be required to give advance notice of the AGM. Your Constitution may state that this notice needs to be made public, e.g. through the local newspaper, and by writing to members 21 days prior to the event. A copy of the agenda (see below) should be sent along with the invitation. Committee and Board members should attend, and normally staff and other volunteers are encouraged to attend. Invitations may also go out to clients, and local decision-makers as appropriate.

 Venue

The venue needs to be as accessible as possible. Try to find out beforehand if attendees have particular requirements, e.g. wheelchair access, translation services. It is useful if the venue has a microphone.

 Running the AGM

The AGM is normally conducted by the Chair of the organisation. Minutes of the meeting should be taken by the Secretary. A typical AGM agenda will cover the following items:

       Opening remarks/Welcome

       Apologies

       Minutes of previous AGM

       Matters arising from the Minutes

       Presentation of Annual Report (Chair/Secretary)

       Adoption of Annual Report

       Presentation of Accounts (Treasurer)

       Adoption of Accounts

       Appointment of Auditors/Independent Examiner

       Election of Management Committee/Office Bearers

       Motions to be put to the AGM

       Any Other Competent Business

       Closing remarks

More details on each of these headings are available below.

Apologies

Apologies from individuals who have been unable to attend are read out and recorded.

Minutes / Matters Arising

It is usual to place copies of the minutes, the annual accounts and any other papers, on the seats of those attending, if it has not been possible to send them out beforehand. Matters arising from the minutes should be taken in the order they appear. In some cases the Chair may ask that matters arising be dealt with during the course of the meeting. The minutes of the previous AGM should be formally adopted by a proposer and a seconder, whose names should be recorded.

Presentation of Annual Report

The annual report can be presented by either the Chair or the Manager/ Coordinator. It should give an overview of the main achievements of the year. The new Charity Regulations give specific guidance on the required content for annual reports in relation to Registered Charities.

Presentation of Accounts

The accounts are presented by the Treasurer. It is usual for copies of the accounts to be given to those attending. The Treasurer will highlight some of the figures in the accounts, explaining any that need explanation, and give a general overview of the financial position of the organisation. It is usual for them to thank the auditor/independent examiner if appropriate.

Auditor or Independent Examiner?

An audit by a registered auditor is required:

       If the organisation’s gross income, or expenditure in the current or preceding two years is in excess of £500,000 (this applies both to Charities with Company status and to Unincorporated Charities – that is Charities that don’t have any other legal form apart from Charitable Status)

       If there is a requirement in the organisation’s constitution

       If the voluntary management committee choose to appoint one

If none of these requirements apply, the organisation may only need to have its accounts examined independently. This does not have to be carried out by a registered auditor and is not usually as expensive. However, Charity Law in Scotland now has certain requirements regarding who is eligible to act as an independent examiner, depending on whether your organisation’s accounts are kept in the Receipts and Payments format or are fully accrued. For more details, please consult OSCR’s guidance booklet on Independent Examination.

If there is a requirement for a full audit, the audit must be undertaken by a registered auditor i.e. someone who is a member of a professional organisation that registers auditors. If your organisation is a constituted community group that does not have Charitable or Company Status, then an independent examination should meet your requirements. In this case, an independent examiner can be any independent person who the committee believe has the ability and experience to examine the accounts such as a banker, business person, or accountant. It should not be carried out by a member of the committee.

Appointment of Auditors

If an organisation is happy with the performance of its auditors it is usual to move for adoption of the existing auditors. If for some reason there is to be a change of auditor, this can be arranged by the committee during the coming year.

Election of Management Committee/Office Bearers

The constitution will provide guidance on the election of committee or Board members, including the length of time they should serve. Each individual wishing to stand needs to have a proposer and a seconder.

Voting Procedure

Check your constitution to find out who is eligible to vote at the AGM. If the constitution does not provide clear guidance on what to do in the event of a tie, then it is usual practice for the Chair of the organisation to have a casting vote. The existing committee need to be clear about voting procedures as laid out by the constitution before attending the AGM.

Motions to be put to the AGM

A Motion to be put to an AGM should usually be received by the organisation an agreed time before the AGM, so that it might be included with the papers sent out to those attending. Some organisations do not allow motions to be put at the AGM on the spur of the moment. Motions may take a number of forms. There may be a motion to petition the Scottish Parliament, or the local authority; in support of the actions of another organisation; to change the direction or the organisation or increase/limit the extent of its work.

Amendments

Any proposed amendments to the constitution are also discussed at the AGM. These have usually been discussed by the present committee and the Chair may wish to take a few moments to explain why the Committee believe that the change is needed. Amendments are often made to update the constitution in the light of new legislation or new circumstances. When the motion or amendment has been presented a vote will take place.

Any Other Competent Business

Some organisations choose not to include this on the agenda. AOCB can double the length of a meeting and throw up many unexpected questions and comments. On the other hand, it can be a useful opportunity for those who are involved with, or interested in your organisation to have their say.

Conclusion of Business

The meeting is formally brought to a close by the Chair.

 Support from CVS Fife

CVS Fife can provide one-to-one support for organisations preparing for their AGM, see the Services page for more information or give us a call.

MERITS OF MEETINGS:
Meetings are great for people who work best face to face. The advantage of meetings is it allows them to see the progress of what they are doing or what are others are doing in terms of everyday work or projects. Meetings are a great way to explain complex and non-complex ideas and offer a great format to exchange ideas and really think them out. Meetings are a great way to communicate lots of information a short amount of time and create a “game plan for the future ahead.”

 Some of the advantages of the meetings are:

  • It helps in developing better solutions than any one individual can do.
  • It provides free interchange of ideas, thereby stimulating and clarifying thinking.
  • Group decisions promote more effective coordination of subsequent action plans.

The biggest merit is that meetings help in building good working relationships

 Conclusion

Finally, we see there have some  rules and regulation in attending the annual general meeting for all shareholder and stockholder. investors must also be careful of the positive impressions given by the management during the AGM. Some shareholders do not even know who the board of directors are when buying shares of a company. When we attend a company’s AGM, we get to see the directors in person, understand their background and analyze whether these people have relevant expertise in the business of the company. We also get to know how much the company is paying them, and whether shareholders’ money is well spent on people who can actually drive the company to further success and growth. During the Q&A session, shareholders are given the chance to ask questions. However, some companies may require interested participants to pre-register for this. Serious shareholders should get hold of a copy of the annual report and go through it before attending the AGM to fully utilize this opportunity for clarification.

As shareholders, we need to understand our right and have the correct mindset. Even though we may only carry one vote, the minority shareholders’ voice will be heeded by the management if every minority shareholder is able to cast a vote in the AGM. However, if everyone still thinks that the one vote will not make any difference, we will be putting our money at the mercy of the management and the major shareholders, hoping that whatever they do will maximise value for all shareholders.

 So remember, attending the AGM is important for every shareholder of the company

 REFERENCE

  1)Commercial law and industrial law- Arun kumar sen and Jitendra kumar sen.

  2)Business law-Mohammad khalaquezzaman.

 Source

http://www.cvsfife.org/publications/agm.htm

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