Extraordinary General Meetings (EGM)

Extraordinary General Meetings (EGMs) are meetings of a company’s shareholders that are convened outside of the company’s usual annual general meeting (AGM) schedule. These meetings are called to address urgent matters that cannot wait until the next AGM. EGMs serve as an essential mechanism for corporate governance, enabling shareholders and company management to discuss and decide on critical issues that arise unexpectedly.

Purpose of EGMs

EGMs can be convened for a variety of reasons. Some of the most common include:

  1. Amending the Company’s Articles of Association: This might be necessary to reflect changes in the legal framework, the business environment, or the company’s strategic direction.
  2. Mergers and Acquisitions: Shareholders may need to approve significant transactions such as mergers, acquisitions, or disposals of substantial assets.
  3. Emergency Financial Matters: This could involve approving emergency funding, capital restructuring, or significant changes to the company’s financial strategy.
  4. Changes in Share Capital: This includes issuing new shares or buybacks.
  5. Appointment or Removal of Directors: EGMs may be called to appoint or remove directors or senior executives.
  6. Litigation or Legal Matters: Significant legal matters that affect the company’s status or operations might require immediate shareholder attention.

The legal requirements for calling and conducting EGMs can vary by jurisdiction. However, several common elements are usually present:

  1. Who Can Call an EGM: Typically, EGMs can be called by the board of directors. In many jurisdictions, a certain percentage of shareholders, often 5-10%, can also request an EGM.
  2. Notice Period: Companies are usually required to give a specific period of notice to shareholders before holding an EGM. This period can vary but often ranges between 14 to 21 days.
  3. Notification: The notice must usually include the date, time, venue, and the agenda of the meeting. It ensures that shareholders are adequately informed about the issues at hand.
  4. Voting Rights: Usually, the same rules for voting at AGMs apply to EGMs. Shareholders may vote in person or by proxy.
  5. Quorum: A quorum, usually a minimum number of shareholders, must be present for the meeting to proceed legally.

Procedure of an EGM

The procedure for conducting an EGM is generally formal and follows a structured approach:

  1. Planning and Organization: The company’s board or requesting shareholders plan the meeting agenda, location, and timing.
  2. Issuing Notices: Notices are sent out to shareholders within the required time frame.
  3. Collecting Proxies: Shareholders who cannot attend in person submit proxy forms to appoint another person to vote on their behalf.
  4. Establishing Quorum: At the start of the meeting, the chairperson ensures that the quorum is met.
  5. Conducting the Meeting: The chairperson oversees the discussion on each agenda item.
  6. Voting: Votes are conducted for each resolution on the agenda, by a show of hands or poll, depending on the company’s articles and local regulations.
  7. Minutes and Resolutions: Minutes of the meeting are recorded, and the outcomes of the votes are documented as resolutions.

Importance of EGMs

EGMs are crucial for several reasons:

  1. Timeliness: They allow for key decisions to be made promptly, without waiting for the next AGM.
  2. Shareholder Democracy: EGMs uphold shareholder rights by ensuring they have a say in critical matters affecting the company.
  3. Crisis Management: They enable swift responses to crises or urgent situations.

Examples of High-Profile EGMs

Deutsche Bank EGM (2014)

In 2014, Deutsche Bank held an extraordinary general meeting to get shareholder approval for a capital increase aimed at strengthening the bank’s balance sheet. The bank raised approximately €8 billion through this initiative Deutsche Bank.

Tesla Motors EGM (2020)

Tesla held an EGM to secure shareholder approval for a stock split to make its stock more affordable to investors. This move played a significant part in boosting the company’s market capitalization dramatically Tesla.

Unilever EGM (2020)

Unilever’s EGM was convened to approve the unification of its dual-headed legal structure into a single parent company incorporated in the UK. This restructuring aimed to create a simpler corporate structure, enhance strategic flexibility, and improve governance Unilever.

Conclusion

Extraordinary General Meetings are indispensable tools in corporate governance. They facilitate urgent decision-making and ensure that shareholders can exercise their rights on significant and unexpected issues. By understanding the purpose, legal requirements, and procedures associated with EGMs, both companies and shareholders can effectively manage and navigate complex situations that demand immediate attention.