Annual General Meeting (AGM): Definition and Purpose

Annual General Meeting

Investopedia / Sydney Saporito

What Is an Annual General Meeting (AGM)?

An annual general meeting (AGM) is a yearly gathering of a company's interested shareholders. At an 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 the selection of auditors.

Key Takeaways

  • An annual general meeting (AGM) is the yearly gathering of a company's interested shareholders.
  • At an annual general meeting (AGM), directors of the company present the company's financial performance and shareholders vote on the issues at hand.
  • Shareholders who do not attend the meeting in person may usually vote by proxy, which can be done online or by mail.
  • At an AGM, there is often a time set aside for shareholders to ask questions to the directors of the company.
  • Activist shareholders may use an AGM as an opportunity to express their concerns.

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How an Annual General Meeting (AGM) Works

An annual general meeting, or annual shareholder meeting, is primarily held to allow shareholders to vote on both company issues and the selection of the company's board of directors. In large companies, this meeting is typically the only time during the year when shareholders and executives interact.

The exact rules governing an AGM vary according to jurisdiction. As outlined by many states in their laws of incorporation, both public and private companies must hold AGMs, though the rules tend to be more stringent for publicly traded companies.

If a company needs to resolve a problem between annual general meetings, it may call an extraordinary general meeting.

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.

Annual general meetings (AGMs) are important for the transparency they provide, the ability to include shareholders, as well as bringing management to accountability.

Qualifications for an Annual General Meeting (AGM)

The corporate bylaws that govern a company, along with its jurisdiction, memorandum, and articles of association, contain the rules governing an AGM. For example, there are provisions detailing how far in advance shareholders must be notified of where and when an AGM will be held and how to vote by proxy. In most jurisdictions, the following items, by law, must be discussed at an AGM:

  • Minutes of the 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 the 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 Topics Covered at an Annual General Meeting (AGM)

If the company has not been performing well, the AGM is also when shareholders can question the board of directors and management as to why performance has been poor. The shareholders can demand satisfactory answers as well as to inquire about the strategies that management plans to implement to turn the company around.

The AGM is also when shareholders can vote on company matters other than electing the board of directors. For example, if management is contemplating a merger or an acquisition, the proposal can be presented to the shareholders and they can vote on whether or not the company should proceed.

Several other elements may be added to an AGM agenda. Often, the company's directors and executives use an 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.

Berkshire Hathaway's 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."

Article Sources
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  1. Financial Industry Regulatory Authority. "Annual Meeting."

  2. U.S. Securities and Exchange Commission. "Shareholder Voting."

  3. National Archive, Code of Federal Regulations. "Title 17 § 229.407 (Item 407) Corporate Governance."

  4. National Archive, Code of Federal Regulations. "Title 17 § 240.14a-101 Schedule 14A. Information Required in Proxy Statement."

  5. Warren Buffett Archive. "Annual Meetings."