What is an Extraordinary General Meeting?
An Extraordinary General Meeting or EGM is a meeting held by a company’s board members and shareholders to deliberate and address urgent matters that cannot be deferred until the next annual general meeting (AGM). Often referred to as emergency general meetings, EGMs are convened irregularly when a specific issue requires immediate attention from the board and shareholders.
What is the purpose of an EGM?
EGMs are special general meetings that are called in between AGMs. These assemblies foster rapid decision-making and corporate transparency by ensuring collaborative and urgent decisions are made.
In most cases, EGMs are called for the following reasons:
- Urgent corporate decisions – Sometimes, time-sensitive corporate decisions like approval of major mergers, acquisitions, or financial restructuring must be made quickly. EGMs allow for these decisions to avoid delays.
- Crisis management and resolutions – In times of major crises, such as financial scandals or sudden changes in leadership due to unforeseen events, an EGM can be held to make the necessary adjustments and actions.
- Legal Matter – Any legal emergency needing the point of view of the boards and shareholders has to be discussed in an EGM. Immediate resolution can help quickly resolve conflicts.
- Urgent policy changes – In cases like amending the company’s bylaws or constitution due to internal or external conflicts, calling an EGM can be beneficial to ensure everyone is informed and is part of the decision-making.
Who can call an EGM?
While EGMs are treated as unrehearsed meetings, they still follow legal rules to ensure compliance and governance. So who can call an EGM? Depending on the company’s constitution or governing documents, three parties can summon EGMs. First, the board of directors has the authority to call an EGM if they believe an urgent matter requires shareholder input or approval. Equally, the shareholders holding a certain percentage (often 10% or more) can request an EGM. Lastly, in some cases as outlined in the bylaws, other authorized individuals or groups, like the company secretary, can call for an EGM.
Furthermore, agenda-setting and voting are integral parts of EGMs. The agenda of the meeting should focus on the specific issue that necessitates the EGM. Shareholders may be asked to vote on major decisions and approval via a show of hands or proxy voting.
What is the difference between an AGM and an EGM?
As mentioned, annual general meetings and extraordinary general meetings differ primarily in their timing — AGMs are held regularly whereas EGMs are called at any time to address pressing issues. Here are the key differences of both general meetings:
- Purpose – AGMs cover general, pre-planned agenda items for shareholder meetings such as financial reports. EGMs, on the other hand, focus on resolving urgent and specific matters.
- Frequency – AGMs happen once a year, within the nine months ending each financial year. EGMs are held in between AGMs and have no limit in frequency.
- Timing – AGMs are scheduled annually on business days, whereas EGMs can be called at any time on any day.
- Initiator – AGMs can only be convened by the board of directors, while EGMs can be called by the directors, shareholders, or authorized parties.
EGM Notice Period
The notice period for an EGM refers to the minimum number of days that must be given to the participants before the meeting takes place. Typically, the notice period for an EGM is (a) 14 to 21 days as a requirement in various jurisdictions, or (b) shorter notice, in situations that a majority of shareholders agree. Shorter EGM notice periods require special approval, like a 95% majority of shareholders consenting to such notice.