Australia: What is the difference between an AGM and an EGM?

An annual general meeting (AGM) is a yearly meeting of a company's shareholders (or 'members') and board of directors to discuss the company's affairs. While any company can choose to hold AGMs, only public companies with more than one shareholder are legally required to do so. On the other hand, an extraordinary general meeting (EGM) is simply any other unscheduled meeting of a company's members. Whether you are a director or a member of a public or private company, this article explains the differences and requirements of these meetings.

AGMs

The Corporations Act only sets a legal requirement for public companies to hold AGMs. The rules set out below are only binding on public companies. Private companies only have to hold AGMs if their constitution or shareholders agreements set such a requirement. Accordingly, the timing, notice, and other private company AGM requirements vary.

Purpose

AGMs were traditionally the primary way for members of a company to keep informed of its affairs. However, the rise of the internet has made it far easier to keep informed about a company's affairs without physically attending meetings. Still, AGMs remain an essential opportunity for members to ask the board of directors questions and scrutinise their decisions.

Timing and Penalties

Under the Corporations Act, a public company must hold an AGM at least once a year within five months after the end of its financial year. Failure to hold an AGM following these requirements carries a maximum penalty of $2,220 or 3 months' imprisonment.

Notice

Before an AGM can occur, a company must provide at least 21 days' notice to its shareholders. An exception is unless the company constitution specifies a longer notice period. You must give written notice to:

• each shareholder entitled to vote at the AGM;
• each director; and
• the company's external auditor.

You can give notice personally, by mail, electronic means (such as email) or by any other means that the constitution permits. The notice must state:

• the place, date and time for the AGM;
• the general nature of the meeting's business; and
• any special resolutions to be proposed at the meeting.

Although it is possible to call an AGM on shorter notice, doing so requires the unanimous approval of members.

Attendees

Besides the directors and shareholders of the company, an AGM is typically also attended by:

• the company secretary;
• any candidates for director;
• the company's legal representatives;
• external experts; and
• the external auditor.

Business of an AGM

There are certain key matters that an AGM always addresses, and therefore, you do not need to specify them in the written notice. It is, however, still good practice to include such items in the notice. Key matters include:

• consideration of the company's annual financial report, directors' report and auditor's report;
• election of company directors;
• appointment of the auditor and fixing of their remuneration; and
• voting on the adoption of the remuneration report.

The chair of the AGM must allow a reasonable opportunity for members to ask questions and make comments about the management of the company. Members should also have the opportunity to question the auditor if they attend.

EGMs

An extraordinary general meeting (EGM) is simply any other unscheduled meeting of a company's members. In Australia, people do not typically use the term 'EGM'. Instead, the terms 'members meeting', 'shareholders meeting' or 'general meeting' are more common. This article will use the term 'general meeting' going forward.

Directors or shareholders will typically call for a general meeting on an ad hoc basis if a company wants to make a decision that requires shareholder approval. Private companies have the option of passing a written resolution or circulating resolution of the members. This is an alternative to calling a general meeting, which will pass when all members who can vote, sign the resolution.

You may be a director of a private company needing to pass a shareholder resolution, and all of the shareholders approve. In that case, it usually is much easier to pass a circulating resolution instead of calling a general meeting.

Calling a General Meeting

Under the Corporations Act, a company director can call a members meeting at any time unless the company's constitution provides otherwise. Directors must also call and arrange a members meeting if requested by:

• members with at least 5% of the votes that may be cast at the meeting; or
• at least 100 members entitled to vote at the meeting.

Members with at least 5% of the votes wishing to circumvent the need to request the directors to call a meeting can call and arrange to hold a members meeting themselves. The only difference is that members calling a general meeting must themselves pay the expenses of calling and holding the meeting.

Notice

The notice requirements for general meetings are the same as for AGMs. However, general meetings can be called on shorter notice with the approval of members with 95% of the votes to be cast. Note, AGMs require unanimous member approval for shorter notice.

Business of an EGM

A general meeting typically only aims to pass a specific members' resolution. Hence, the business of a general meeting will be limited to discussion of and voting on the proposed resolution.

Members should only call for a general meeting if there is a proper purpose – i.e. a proposed resolution requiring shareholder approval. Directors are not required to hold a general meeting if requested by members whose only intention is to harass the company or air their grievances.

Key Takeaways

AGMs are a legal requirement for public companies. For private companies, the requirement of holding an AGM is only if their constitution or shareholders agreement specifies. EGMs or general meetings are any other unscheduled shareholder meetings and aim to pass a specific resolution requiring shareholder approval. If the proposed resolution has the unanimous approval of the shareholders, then private companies may simply pass a circulating resolution without needing to hold a meeting.