Understanding the Difference Between AGM and EGM in Share Market
Corporate governance andshareholdercommunication are crucial aspects of the stock market. Among the various meetings held annually, Annual General Meetings (AGM) and Extraordinary General Meetings (EGM) hold significant importance. This article delves into the distinctions between these two types of meetings, explaining their purposes and the circumstances under which they occur.
What is an Annual General Meeting (AGM)?
The annual general meeting (AGM) is a yearly event held by a company to discuss its activities and plans for the upcoming fiscal year. As per Section 96 of the Companies Act, every company, except for one-person companies, must hold an AGM annually. The meeting is convened by the Board of Directors to conduct a comprehensive review of the company's performance and future strategy.
Key Points about AGM
Annual meeting: Held once a year. Board responsibility: The Board is responsible for convening or authorizing the calling of the AGM. Membership participation: Shareholders have the opportunity to discuss the company's activities and strategies. Transactions: The AGM handles both ordinary business and any special business that requires attention. Regulatory oversight: Any shareholder may approach the prescribed authority if the Board fails to hold the AGM.Understanding Extraordinary General Meeting (EGM)
While an annual general meeting (AGM) covers the routine matters, there are numerous business matters that need immediate attention and cannot wait for the next annual meeting. This leads to the scheduling of an Extraordinary General Meeting (EGM).
The articles of association of a company typically outline the procedures for convening such meetings, which may be held for various urgent purposes other than those addressed in the AGM. EGMs can be called by the Board at any time when there is an urgent matter that requires shareholder approval.
The Key Differences between AGM and EGM
The fundamental difference between AGM and EGM lies in their primary objectives and the timing of their convening. While AGMs are held annually to review and discuss the company's performance and future plans, EGMs are convened for urgent issues that demand immediate attention.
Key Differences
Purpose: AGM for annual review and planning, EGM for urgent and immediate issues. Frequency: AGM is an annual event, EGM can be convened at any time. Content: AGM includes ordinary business and special business, EGM focuses on urgent and unforeseen matters.Contacting the Prescribed Authority
Companies are required to hold AGMs annually, but under certain circumstances, the failure to do so can lead to legal intervention. If the Board fails to convene the AGM in any given year, any member of the company can approach the prescribed authority. The authority then has the responsibility to direct the calling of the AGM to ensure that shareholders have a chance to contribute to the company's governance.
Conclusion: Both AGM and EGM play crucial roles in the corporate governance of a company. While AGMs are necessary for annual reviews and planning, EGMs fill the gap to address urgent and unforeseen business matters.