What Is an Information Circular?
An information circular is a document for a company’s shareholders outlining important matters on the agenda at the annual shareholders' meeting or a special shareholders' meeting. The information circular also solicits proxy votes and provides procedures for voting on key issues.
Some companies call an information circular a "Management Information Circular," a "Notice of Annual Meeting of Shareholders and Proxy Statement," or a "Notice of Special Meeting of Stockholders."
- Publicly traded companies use information circulars to provide their shareholders with important information regarding an upcoming annual shareholders' meeting or a special shareholders' meeting.
- Companies will often call the information circular a "Notice of Annual Meeting of Shareholders and Proxy Statement" or a "Management Information Circular."
- Typically, an information circular will include the upcoming meeting's date and time, agenda, voting instructions to elect directors to serve on the board of directors, a corporate governance disclosure, and executive compensation information.
Understanding an Information Circular
The information circular may cover matters such as the election of the board of directors, possible mergers and acquisitions (M&A), or the need for new financing. This document acts as a "heads up" to shareholders planning to attend the annual meeting, preparing them to discuss major issues and cast their votes on the direction of the company. It also provides key information to shareholders who won't be attending the annual meeting. Often companies will deliver this document in electronic form via a link sent to current shareholders.
Example of an Information Circular
In May 2020, Brookfield Asset Management Inc. distributed an information circular ahead of its annual shareholders’ meeting. The company listed these key items on the agenda that would be discussed during the meeting:
- The firm’s consolidated financial statements for the fiscal year ended Dec. 31, 2019 (including the external auditor’s report)
- The election of new directors, who will serve for a one-year term
- The appointment of a new external auditor to also serve a one-year term and the compensation for this role
- The consideration and the potential passing of an advisory resolution on executive compensation
- The consideration of two additional shareholder proposals
Of particular interest to many investors are details regarding executive compensation and board of director compensation that are included as part of the information circular announcing the company's annual meeting. Typically, this information will include such details as base salary, bonuses, stock awards such as restricted stock units (RSUs), non-equity incentive compensation, and all other forms of compensation.
For example, the 2020 Annual Meeting of Shareholders and Proxy Statement for Apple Inc. included an executive compensation table summarizing the compensation received by the company's top executives over a three-year period. In 2019, Chief Executive Officer Tim Cook received an annual base salary of $3 million and non-equity incentive plan compensation of approximately $7.7 million. A separate table listing outstanding equity awards shows the market value of shares or units of stock held by Cook that have not vested was approximately $276 million as of Sept. 28, 2019.
Form 14A (also known as the "definitive proxy statement") is a publicly available form the Securities and Exchange Commission (SEC) requires companies to file when a shareholder vote is needed. Analysts and activist investors study this statement in an effort to discover key details regarding a company's governance and its potential future profitability.
Information Circular and Annual Shareholders’ Meeting
For larger companies, the annual shareholders' meeting is typically the only time during the year when shareholders and executives interact. Many states require both public and private companies to hold annual shareholders' meetings (also called annual general meetings or AGMs) although 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.
The information circular is critical in preparing shareholders on points to be discussed. Some provisions detail how far in advance shareholders must receive notice of where and when the AGM will take place and how to vote by proxy.
In most jurisdictions, the AGM must discuss the following items by law:
- Minutes of the previous year’s AGM (which must be presented and approved)
- Annual financial statements (which are presented to shareholders for approval)
- Ratification of directors’ actions (in which shareholders approve the board of directors’ decisions from the previous year, often including the payment of dividends)
- Election of the board of directors for the upcoming year