What is an AGM and what purpose does it serve?

Each financial year has certain important events for companies. These include the quarterly financial reports, the submission of final accounts and others. One of the most important events for a company in a year, however, is the annual general meeting (AGM). Here’s all you need to know about AGMs. An AGM is a mandatory annual gathering of a company’s shareholders. While all shareholders are allowed to attend, it is not mandatory for them to be there at the meeting. All companies need to hold an AGM within six months of the end of the previous financial year, according to the stipulations laid down in The Companies Act, 2013.

The meeting is a way for the management of the company to communicate to the shareholders all pertinent information regarding the company’s performance, appointments and other details for the previous and ongoing year.

An AGM needs to be held mandatorily even if the company is a privately held company. Only one-person companies (OPCs) are exempted from holding AGMs.

What purpose does it serve?

Apart from being a statutory mandate, the AGM is the most effective way for a company to communicate with the largest number of its shareholders at one time. A company will issue a 21-day notice to all its shareholder for the upcoming AGM. The notice is also sent to the directors, the auditors, and all members of the company. Additionally, the notice also states the business that is to be conducted at the AGM. The assembled shareholders are able to vote on these matters.

These topics include discussions and adoption of the audited financial statements of the company, discussions on the director’s report and auditor’s report, discussions over dividend declaration, and the matter of appointment of new directors and auditors. In addition, other matters may be up for discussion as special business of the company, though these require 75 per cent of the vote to pass as a resolution.

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