What is an 'Annual General Meeting - AGM'
An annual general meeting (AGM) is a mandatory yearly gathering of a company's interested shareholders. At the AGM, the directors of the company present an annual report, which contains information for shareholders about its performance and strategy. Shareholders with voting rights vote on current issues, such as appointments to the company's board of directors, executive compensation, dividend payments and selection of auditors.
BREAKING DOWN 'Annual General Meeting - AGM'Shareholders who do not attend the meeting in person may usually vote by proxy, which can be done online or by mail.
The exact rules governing the AGM vary from jurisdiction to jurisdiction. As a rule, both public and private companies must hold AGMs, although the rules tend to be more stringent for publicly traded companies.
The holding of an AGM is the principal right of the company's shareholders. In large companies, it is typically the only time during the year when shareholders and executives interact. If a company needs to resolve a problem between annual general meetings, it may call an extraordinary general meeting.
The corporate laws that govern the company, along with its memorandum and articles of association, contain the rules governing the AGM. For example, there are provisions detailing how far in advance shareholders must be notified of where and when the AGM will be held and how to vote by proxy.
In most jurisdictions, the following items, by law, must be discussed at the AGM:
• Minutes of previous meeting: The minutes of the previous year's AGM must be presented and approved.
• Financial statements: The company presents its annual financial statements to its shareholders for approval.
• Ratification of director's actions: The shareholders approve and ratify (or not) the decisions made by the board of directors over the previous year. This often includes the payment of a dividend.
• Election of the board of directors: The shareholders elect the board of directors for the upcoming year.
Several other elements may be added to the agenda. Often, the company's directors and executives use the AGM as their opportunity to share their vision of the company's future with the shareholders. For example, at the AGM for Berkshire Hathaway, Warren Buffett delivers long speeches on his views of the company and the economy as a whole. This has become so popular that it is attended by tens of thousands of people annually, and it has been dubbed as Woodstock for Capitalists.
There is often a time set aside for shareholders to ask questions to the directors of the company. Activist shareholders may use AGMs as an opportunity to express their concerns.