Introduction to the Difference Between AGM and EGM

The article sheds light on the fundamental difference between AGM and EGM in the corporate landscape. Readers will gain insight into the unique purposes, frequency, and agendas of these crucial shareholder gatherings. By understanding the differences between AGMs and EGMs, shareholders and stakeholders will be better equipped to participate effectively in corporate decision-making processes and comprehend the significance of each meeting in shaping the future of the organization.

Shareholders’ meetings are pivotal events in the corporate world, fostering communication, decision-making, and transparency within a company. Among the most significant gatherings are the Annual General Meeting (AGM) and the Extraordinary General Meeting (EGM). While both are vital for shareholder participation and corporate governance, they serve distinct purposes and differ in their scope and frequency.

Main Difference Between AGM and EGM

Here is the Main Difference Between AGM and EGM

1. AGM: An Annual Gathering of Shareholders: The AGM is a mandatory yearly meeting that every company is required to hold within a specified period after the financial year-end. Its primary purpose is to present the company’s financial statements, including the balance sheet, profit and loss account, and cash flow statement, for shareholders’ approval.
2. EGM: Addressing Extraordinary Matters: Unlike the AGM, an EGM is convened only when specific urgent matters arise that require shareholder approval outside the regular AGM schedule. These “extraordinary” matters may include changes to the company’s articles of association, alterations to share capital, mergers and acquisitions, or other significant transactions.

Difference Between AGM and EGM with Table

Certainly! Below is a detailed Difference between the AGM and EGM as per the Companies Act, highlighting their Comparisons:

Difference Between AGM and EGM -AGMs and EGMs both serve essential purposes in corporate governance, they differ significantly in terms of frequency, agenda, notice periods, and the types of matters they address. AGMs are annual events that cover regular business transactions, while EGMs are convened for specific extraordinary matters that require immediate attention and approval from shareholders. Compliance with the statutory requirements for both types of meetings is crucial to ensure proper corporate functioning and shareholder engagement.

Pointwise Difference Between AGM and EGM

Here are ten key pointwise Difference Between AGM and EGM

1. Frequency:
   • AGM is held once every year, within a specified time after the financial year-end.
   • EGM is convened as and when necessary to address urgent matters that cannot wait until the next AGM.
2. Purpose:
   • AGM is primarily for presenting the company’s financial statements (Balance Sheet, Profit and Loss Account, etc.) for approval by shareholders.
   • EGM is convened to address specific extraordinary matters that require shareholder approval outside the regular AGM schedule.
3. Agenda:
   • AGM includes standard items such as financial statement approval, appointment of auditors, declaration of dividends, and other regular business.
   • EGM focuses solely on the particular matter(s) for which it is convened. The agenda is specific to the extraordinary matter(s) at hand.
4. Notice Period:
   • The notice period for an AGM is usually longer (as prescribed by the Companies Act and the company’s Articles of Association) to allow shareholders sufficient time for preparation and attendance.
   • The notice period for an EGM is typically shorter, as urgent matters need to be addressed promptly. It must comply with the statutory requirements for calling a meeting.
5. Quorum Requirements:
   • The Companies Act prescribes the minimum quorum required for an AGM, which is generally higher compared to an EGM, to ensure significant shareholder participation.
   • The quorum requirement for an EGM may vary depending on the company’s Articles of Association, but it is often lower than that of an AGM due to the urgency of the matter being discussed.
6. Ordinary Business vs. Extraordinary Business:
   • AGMs conduct regular business transactions, such as reappointment of directors, approval of audited financial statements, and dividend declarations.
   • EGMs only address extraordinary business, which could involve altering the company’s capital structure, approving major transactions, or making significant amendments to the Articles of Association.
7. Frequency of Resolutions:
   • In AGMs, routine resolutions are passed, and they often pertain to recurring annual matters.
   • EGMs typically involve passing specific resolutions related to the extraordinary matter(s) under consideration.
8. Statutory Requirement:
   • AGMs are mandatory under the Companies Act, and failure to conduct an AGM can lead to legal repercussions.
   • EGMs are also prescribed by the Companies Act, but they are not held at fixed intervals. They are convened as and when required by the board, shareholders, or other regulatory bodies.
9. Importance:
   • AGMs serve as a platform for shareholders to receive information, discuss company affairs, and exercise their voting rights on routine matters.
   • EGMs play a critical role in dealing with unforeseen issues or situations that demand immediate attention and shareholder consent. They are instrumental in making major decisions that impact the company’s structure and future.
10. Routine vs. Urgent Matters:
    • AGMs handle routine matters that require annual approval and review by shareholders.
    • EGMs are called to address specific urgent matters that cannot wait for the next AGM and need immediate attention and decision-making.

Understanding these key Difference Between AGM and EGM helps shareholders and stakeholders recognize the distinct functions and significance of AGMs and EGMs in corporate governance and decision-making processes.

What is AGM?

As per the provisions of the Companies Act, 2013 (India), an Annual General Meeting (AGM) is a mandatory yearly meeting held by every company incorporated under the Act. The primary purpose of the AGM is to ensure effective communication between the company’s management and its shareholders. It provides a platform for shareholders to participate actively in the decision-making process and exercise their rights as owners of the company.

Key Features and Provisions of AGM under the Companies Act, 2013:

1. Frequency:
   • Every company must hold its first AGM within nine months from the date of its incorporation.
   • Subsequent AGMs must be conducted within six months from the financial year-end (FYE). The company’s FYE can be any date within a year, subject to a maximum gap of fifteen months between two AGMs.
2. Notice of AGM:
   • The company must send a notice of the AGM to all its shareholders, directors, auditors, and others entitled to receive the notice.
   • The notice must specify the date, time, and place of the meeting. It should be sent at least twenty-one days before the AGM, excluding the date of the notice and the date of the meeting.
3. Business Transacted at AGM:
   • Approval of the annual financial statements (including the Balance Sheet, Profit and Loss Account, and Cash Flow Statement) is the primary agenda at the AGM.
   • Shareholders also discuss and approve matters like the appointment or reappointment of directors, auditors, and the declaration of dividends.
4. Explanatory Statements:
   • Every resolution proposed to be passed at the AGM must be accompanied by an explanatory statement. This statement provides necessary details to enable shareholders to understand the implications of the resolution.
5. Quorum Requirement:
   • The presence of a minimum number of members, either physically or through video conferencing or other electronic means, is necessary to constitute a quorum for the AGM.
   • Unless the Articles of Association specify a higher number, the quorum for a public company is either five members or 1,000 members, whichever is lower. For a private company, it is either two members or the total number of members, whichever is lower.
6. Voting Rights:
   • Shareholders attending the AGM have the right to vote on various resolutions. Each share typically carries one vote, but differential voting rights may exist as per the company’s Articles of Association.
7. Recording of Minutes:
   • Detailed minutes of the proceedings at the AGM must be recorded, and they should be signed by the chairperson of the meeting.
8. Adjournment of AGM:
   • If the quorum is not met within half an hour from the scheduled time, the AGM stands adjourned to the same day in the next week at the same time and place or to such other date, time, and place as the board may determine.
9. Other Matters:
   • Shareholders can raise questions and seek clarifications on company matters during the AGM.
   • In case of a public company, the appointment of an individual or firm as an auditor may also be ratified during the AGM.

The AGM serves as a crucial event in the corporate calendar, promoting transparency, accountability, and active shareholder participation in company affairs. As per the Companies Act, it is imperative for all companies to comply with the provisions related to the AGM to ensure proper corporate governance and regulatory adherence.

References for Difference Between AGM and EGM

1. https://www.icsi.edu/media/website/SS-2%20General%20meeting.pdf

What is EGM?

An Extraordinary General Meeting (EGM) is a gathering of a company’s shareholders, board members, and other stakeholders, convened to discuss and vote on urgent matters that arise outside of the Annual General Meeting (AGM). Under the Companies Act, 2013 of India, EGMs serve as a crucial mechanism for shareholders to address critical issues that cannot be postponed until the next AGM. This detailed explanation will delve into the purpose, process, and statutory requirements for convening an EGM, with an example illustrating the notice period and procedural gap.

Difference Between AGM and EGM

Purpose of an EGM

EGMs are typically called to address urgent business matters requiring shareholder approval. These can include:

1. Changes in Capital Structure: For instance, altering the share capital, issuing new shares, or approving a buyback of shares.
2. Amendments to the Articles of Association or Memorandum of Association: These fundamental changes require the consent of shareholders.
3. Appointment or Removal of Directors and Auditors: If a director or auditor needs to be appointed or removed urgently.
4. Approval of Major Transactions: Such as mergers, acquisitions, or the sale of significant assets.
5. Other Special Resolutions: Any other business matter that requires immediate attention and cannot be deferred until the AGM.

Convening an EGM

According to the Companies Act, 2013, an EGM can be called by:

1. Board of Directors: The Board can call an EGM whenever necessary.
2. Requisition by Members: Members holding at least one-tenth of the paid-up share capital (in case of companies with share capital) or one-tenth of the total voting power (in other cases) can requisition an EGM.

Notice Requirements

Section 101 of the Companies Act, 2013 specifies the notice requirements for EGMs:

• Notice Period: A clear 21 days’ notice must be given to all members, directors, and auditors. This period can be shortened if at least 95% of the members entitled to vote agree to a shorter notice period.
• Contents of the Notice: The notice must specify the date, time, venue, and agenda of the meeting. It should also include an explanatory statement as required under Section 102, explaining the reasons for the resolutions proposed.

Example of Notice Period and Gap

Consider a hypothetical company, XYZ Ltd., which needs to hold an EGM to approve a major acquisition. The Board decides on June 1, 2024, to call an EGM.

1. Notice Issued: The notice must be issued at least 21 days before the meeting. If the EGM is scheduled for June 30, 2024, the notice must be dispatched by June 9, 2024, to ensure a clear 21 days’ notice.
2. Notice Gap: The gap between issuing the notice and the meeting date ensures that shareholders have adequate time to consider the agenda items and make informed decisions. In this case, the gap is 21 days.
3. Approval for Shorter Notice: If XYZ Ltd. needs to expedite the process and hold the EGM on June 20, 2024, they must obtain consent from at least 95% of the shareholders to shorten the notice period.

Quorum and Voting

Section 103 of the Companies Act, 2013 outlines the quorum requirements for an EGM:

• Public Companies: A minimum of five members present in person is required.
• Private Companies: A minimum of two members present in person is required.

Resolutions at the EGM are typically passed by a simple majority unless specified otherwise (e.g., special resolutions requiring a 75% majority).

Conclusion

EGMs are a vital part of corporate governance, enabling companies to address urgent and significant matters that cannot wait until the AGM. The Companies Act, 2013, ensures a structured process for convening EGMs, providing adequate notice to shareholders, and facilitating informed decision-making. Through the prescribed notice period and procedural requirements, the Act aims to balance the need for timely decisions with the rights of shareholders to participate in key corporate decisions.