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 containing information for shareholders about the company's 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
Annual general meetings, or annual shareholder meetings, are primarily held to allow shareholders to vote on company issues and for the company's board of directors. In large companies, this meeting is typically the only time during the year when shareholders and executives interact. 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 according to jurisdiction. As outlined by many states in their laws of incorporation, both public and private companies must hold AGMs, although the rules tend to be more stringent for publicly traded companies. Public companies must file annual proxy statements, known as Form DEF 14A, with the Securities and Exchange Commission (SEC). The filing will specify the date, time and location of the annual meeting, as well as executive compensation and any material matters of the company concerning shareholder voting and nominated directors.
If a company needs to resolve a problem between annual general meetings, it may call an extraordinary general meeting.
An AGM's Mandatory Agenda
The corporate bylaws that govern a company, along with its jurisdiction, 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.
Additional Elements of the AGM
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. The annual gathering has become so popular that it is attended by tens of thousands of people each year, and it's been dubbed the "Woodstock for Capitalists."
There is often a time set aside for shareholders to ask questions to the directors of the company, and activist shareholders may use AGMs as an opportunity to express their concerns.