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  • Category: Finance and Investments

    What is the purpose of the Extra Ordinary General Meeting (EGM)?


    Are you wondering about the objective of conducting an EGM? Looking out for answers to this query online? No worries, our experts shall provide you with inputs to understand more about EGM.

    The company normally takes decision-based on meetings with board of directors. When a company wants to declare bonus or dividend or any corporation action, it calls a meeting like AGM (Annual General Meeting) or EGM. What is the purpose of calling EGM? How is it different from AGM?
  • Answers

    5 Answers found.
  • Annual General Meeting (AGM): This meeting is hold annually i.e. once in a year. It is mandatory to hold this meeting annually and gap between two AGM's should not be more than 15 months in two years. The main purpose to hold an AGM is bringing all the members together to discuss various business related issues and other issues related to the better functioning of the company, strategies and performance of the company. In this meeting they take resolutions and take steps to protect their interest. Main points of discussion in AGM are Ordinary or routine business and special business. Usually first AGM is hold within the 18 months of the incorporation of the company and then AGM should be held each year within six months of the end of the financial year. AGM is called by the Board of Directors by giving 21 days notice to all members/ company's shareholders for the meeting. All the certified copies of balance sheets, audit reports and other reports are also forwarded to all the members before meeting. In this meeting shareholders also vote on current issues like election of Board of directors, selection of auditors, execution compensation, declaration of dividends, adoption of annual accounts, annual report, director's report and auditor's reports etc. Some special matters are also taken in the AGM like alteration of Articles of Association (AoA)and increase in authorized capital etc.

    Extra Ordinary General Meeting (EGM): It is also called a special general meeting or emergency general meeting. This meeting is hold other than the Annual General Meeting (AGM). It is called on a short notice to discuss an urgent matter arise between the annual shareholder meeting which usually occurs at a fixed date and time. In this meeting executive members of an organization, shareholders of a company, or employees of an official body comes together. The main reason of organizing an EGM is to discuss some urgent issue or any crisis situation about the company that may arises suddenly and requires the input of all senior board members. It is used to call to resolve or look into an emergency issue and take important measures such as resolving an immediate legal matter or sometime elimination of a key manager, or any matter that can't wait of annual shareholder meeting.

    There are some key difference between AGM and EGM:
    1. AGM is held annually at a fixed time and date. While EGM is called only during an emergency to discuss on urgent matters.
    2. AGM is held only during Business hours on the other hand EGM can be carried out on any day including holiday.
    3. AGM can be called by company's board only while EGM can also be called by the board on the call of shareholders, requisitionist, or tribunal.

  • In a limited company whether it is a public sector or private sector there will be a board of directors. Some directors will be working directors and some will be additional directors or non executive directors. All important decisions will be taken in this board meeting. But even after getting the board permission certain issues are to be approved by General body for implementation. Those issues can't be postponed till the next AGM. In such case the company has to call for an Extra Ordinary General Body Meeting.

    The issues regarding bonus shares issue, obtaining special loans etc, may have to get the general boy approval.

    drrao
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  • Annual General Meeting (AGM) is a routine thing in the schedule of company's working and every year it is hold to take a stock of the actions and business done in the last year and to apprise the share holders or stakeholders about the status of the company and profit and loss account along with the balance sheet. The company also publishes an annual report at this time of the year for the perusal of the share holders. Nowadays digital copies are also being sent by email to them.

    On the other hand an Extraordinary General Meeting (EGM) is quite different from the AGM and is held when some urgent issue about the company arises or there is a situation of crisis which requires the attention of the shareholders, senior executives and the Board of the company. Members having a significant share (not less than one-tenth of the paid up share capital in the company or not less than one-tenth of the voting rights) can also call for an EGM. In any case the board of the company would have a period of 21 days to call for EGM and once called it should be held within 45 days from the day it was called. In case the EGM is requisitioned by the persons having more then one-tenth share and the board does not comply to call for EGM due to some reasons, the requisitioners can call for the EGM themselves within 3 months time. These procedures are adopted as per the company law in India.

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  • Annual General Meeting or AGM: Annual General Meeting (AGM) is a meeting held yearly by every company other than One Person Company (OPC) which is mandatory by law for its members and shareholders. The director of the company provides information about the company's performance and strategy through an annual report. There is a governing rule wherein every company both public and private must hold Annual General Meeting once in a year and the law may vary from state to state or jurisdiction. The AGM has an agenda that is forwarded to its members or shareholders in advance to prepare them when coming for the meeting. The meeting may include appointments to the company's board of directors, the election of officers, selection of auditors for the coming financial year, budget for the coming year or project, distribution of dividends, vote on current issues, and any other issues that rises in the meeting along with the financial standing of the company in that year. The AGM will have:
    - The Board of directors will present the financial statements for approval.
    - The Board of directors will present the auditors' reports for approval.
    - Appointment of new Auditors for the new financial year.
    - Declaration of Dividend.
    - Election or appointment of new Directors, president, office bearers, etc.

    Extraordinary General Meeting or EGM: Extraordinary General Meeting (EGM) is also called emergency general meeting or special general meeting as it is not mandatory to conduct EGM but is called for by the board of directors to discuss urgent matters and therefore these meetings are neither pre-scheduled nor pre-informed. The EGM will have:
    - Any legal matter or dispute
    - Appointment or removal of an Executive.
    - Any urgent matter to be discussed, etc.

    The major difference between AGM and EGM are:
    AGM: These are called by the Board of directors annually during normal working hours to discuss the past, present and future of the company.
    EGM: These are called by the board on request of a shareholder or national company law tribunal(NCLT) on an urgent basis to pass a special resolution or any major matters.

    “The most important thing in life is to learn how to give out love, and to let it come in." — Morrie Schwartz

  • According to clause 42 of table F, all the meetings other than the ones called annual general meeting shall be classified in Extra Ordinary General Meeting. The Board of Directors have the autonomy to call extra ordinary general meetings whenever they deem it fit. The reason for the extra ordinary general meeting is that the annual general meeting is conducted within a gap of eighteen months between two consecutive meetings. This gap is mandatory and has to be maintained at all times except in some emergency cases.
    When EGM is to be called ?
    Usually an EGM may be called in the following circumstances-
    1) By the Board -An extraordinary general meeting may be called by the Board on its motion.
    2) By a Director- An EGM may be called by a director and if a time they are called and the authority is not in India, the Director capable of acting shall be called to form the quorum.
    Matters to be dealt in EGM -
    1) According to company act 2013, any business considered in EGM shall be considered as a special business.
    2) EGM is used to help the Board to know more about certain facts which are important in nature.
    3) The share holders should be given the oppurtunity to know more about the business to be transacted.
    4) This meeting would help the members to understand the implications of business and to take appropriate action.
    Procedure to call EGM -
    The meeting can be called at any day other than the National Holiday and the procedure for calling EGM is given in the articles of association of the companies.


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