AGM Full Form: Meaning, Purpose and Procedure Explained

Overview : Annual General Meeting (AGM) is a formal event in which a company's shareholders and board of directors come together to discuss strategies, or seek their approval through voting along with disclosing the financial performance towards them. Learn about key objectives, and procedure for conducting an Annual General Meeting of a company.

AGM stands for Annual General Meeting, which is a significant event for companies; from a strategic as well as regulations viewpoint. This is a big event in the corporate world where company directors and shareholders meet to discuss company performance, future plans and decisions.

At an AGM, the directors of the company present an Annual Report that comprises key information related to the company's strategies and performance therefore, discloses the financial health of the company towards its shareholders. In addition, shareholders are also gathered to vote on the current issues to help management reach a decision. In this article, we'll discuss the purpose, components and procedure of conduction of AGMs.

Takeaways

• AGMs are crucial events in the corporate landscape that are held annually to allow shareholders of a company to engage into in-person communication with the directors or key managerial persons of the company to know about the progress, and financial status of the company.
• Companies are statutorily required to hold AGMs within specified timelines.
• Failing to conduct AGMs can lead to legal consequences including disqualification of directors and hefty fines, so conducting AGM is obligatory for companies.

What Does AGM Stand For?

AGM stands for annual general meeting that might seem simple but it’s a big event in the corporate calendar. AGMs are a type of general meeting that includes not only annual meetings but also extraordinary general meetings, meetings of members and meetings of creditors or debt holders. These meetings provide a formal platform for discussions between company directors and shareholders.

Organizations holding AGMs like membership associations and companies with shareholders, annual general meetings and annual meetings are big events. Through these annual meetings, directors and shareholders meet annually to review company performance, strategies and future plans, it’s a cornerstone of corporate governance.

Purpose of AGM

Annual General Meeting serve multiple purposes in a company’s life cycle. One of its key roles is to provide a platform for shareholders to interact with company's management to be aware of the strategies, performance and financial health of the company, helping maintain transparency in governance. During this meeting shareholders vote on important issues like board appointments and dividend decisions, which shapes the company’s future.
Typically AGM is the only yearly opportunity for shareholders to interact directly with company executives. Shareholders can ask about company performance, strategy and any concerns they have during this interaction.

Components of AGM

An AGM consists of various components that are essential for corporate governance. One of the key components is the disclosure of the company's annual report and audited financial statements for shareholder approval. This practice is essential to carry out as it helps shareholders to review the performance of the company through its current financial status.

This current financial situation of the company helps shareholders make informed decisions. During AGM, shareholders have the right to vote to elect the board of directors. This process not only confirms who will run the company and also allows shareholders to dive deep into the company's strategies, previous year performance and future plans for its growth.

Voting on key issues like board appointments and dividend approvals is another important component and shareholders can do so through various means like proxy, post or email. These components together ensure shareholders have a significant role in governance and oversight of the company. Through these activities shareholders influence the direction of the company and hold management accountable.

When is AGM Held?

Timing has a crucial aspect if it comes to holding the first AGM of a company. A company is required to conduct its first AGM within the nine months of closing of its first financial year. The first meeting serves as setting the tone for the future annual meetings and establishes a routine for shareholders engagement.

After the first AGM, companies must hold their AGMs within six months of the end of each financial year. The general deadline is September 30 of every year. No gap of more than 15 months between two consecutive AGMs is permitted. It ensures that the AGMs are held on time each year. This continuity provides shareholders the opportunity to engage with the leadership of the company and witness the performance of the company.

In some cases, companies may need more time to hold AGMs. In such cases an extension of up to three months can be applied to the Registrar of Companies. This flexibility allows companies to comply with legal requirements while accommodating unforeseen delays.

Who Must Hold AGM?

Not all companies are required to hold AGM but most are. Regardless of their type, all companies except One Person Companies (OPC) must hold an AGM annually. OPCs are unique in that they are not legally required to hold AGMs due to their structure and size. Public companies need to comply with stricter regulations than private limited companies related to conducting AGMs. The reason behind such regulations is to ensure that companies with a larger shareholders base should have a relatively high grade of transparency and accountability.

Conditions for AGM

AGM has to be held as per conditions prescribed under law. By adhering to those conditions, companies can conduct AGM smoothly. Some key conditions for holding an AGM is listed below;

• New companies have to hold their first AGM within nine months of closing of the first financial year.
• Existing companies have to hold an AGM within six months of each financial year.
• A maximum gap of 15 months between two consecutive AGMs are allowed to ensure regularity in the meetings.
• AGMs should be held during business hours and not on national holidays.
• Location of AGM can be at the company's registered office or another place within the same city, town or village.
• Unlisted companies can hold AGM anywhere in India if all members agree.

Procedure for Holding AGM

1. Convene a Board Meeting

A board meeting must follow provisions of the Section 173 and the Secretarial Standards on Board meeting (SS-1). The key points of the board meeting are listed as below;

• Deciding the Date, Time & Agenda for AGM
• Approving AGM's draft notice with an explanatory statement
• Appointing a scrutinizer in case of e-voting by shareholders
• Authorizing the Company Secretary (CS) or another officer to issue notice to all members/entitled recipients

2. Notice for AGM

A notice for AGM should be prepared in written or electronic mode at least before 21 days from AGM as per (Section 101(1)). However, the minimum notice period for AGMcan be less if 95% of members agree. Notice has to be sent to all members, auditors and directors at least 21 days prior to the meeting. This notice must also be featured on the official website of the company if any. The notice should clearly include;

• Venue of Meeting
• Date, Date with Timings of AGM
• Agenda
• Date of Notice Issuance
• Signature of Convener

In case of virtual AGMs, it is important to prepare a notice consisting of how members without email id can participate. This ensures all members are properly informed about the AGM to be held and have the opportunity to attend.

3. Convene General Meeting

It's important to maintain the quorum, including the presence of the Chairperson, throughout the meeting (Secretarial Standard on General Meetings). Quorum is essential for the proceedings of AGM. AGM without full quorum has to be adjourned and rescheduled for the same time and place the following week. At every AGM, the board of directors are obliged to present the financial statements for the financial year. The company must also attach a report by its board to the financial statements laid before shareholders at the annual meeting. This report should include;

• Summary of Financial Results
• Company's Operational Performance, along with its Subsidiaries, JVs and other associates
• Director's Responsibilities Statement
• Explanation/Comments by Board regarding Auditor Qualifications, Reservations or Adverse Markets
• Changes/Commitments impacting Financial Position of company
• Proposed Dividends or transfers to reserves
• Details of related party transactions
• Information on loans, guarantees or investments
• CSR information

4. Voting Methods

Different voting methods are available during AGM including physical ballot, postal ballot and e-voting. Shareholders who cannot attend in person have the option to cast their votes through proxy. AGM can also have participation from members through video conferencing or other audio-visual means. This flexibility allows all members to participate in the decision making process regardless of their location.

5. Prepare & Maintain the Minutes Book (Section 118 & SS-2)

Within 30 days of AGM's conclusion and passing of resolution, minutes of AGM and resolution passed by postal ballot must be prepared and maintained.

Legal Framework for AGM

An AGM is governed under Section 101 to 112 of Companies Act, 2013. These Sections lay down rules and provisions for conducting AGM and ensure companies follow standard practices. Public companies have to file annual proxy statements. This statement is called Form DEF 14A and has to comply with AGM norms.

Charitable companies under Section 8 of the Companies Act 2013 have customized AGM rules as per their requirements. AGM is further governed by corporate laws, jurisdiction and company’s memorandum and articles of association.

Consequences of Not Holding AGM

If companies fail to fulfill provisions mentioned under Section 96 of the Companies Act, 2013, they might bear serious legal and financial consequences. Those are listed below;

• Monetary Penalties: If a company or authorised person fails to adhere to provisions of Section 96 to 98, the authorities may impose financial penalties of up to INR 10 lakh on the company and its directors. This shows the importance of complying with AGM norms to avoid such consequences.
• Disqualification: Directors responsible for AGM compliance can be disqualified from holding that position or may also be fined by regulatory bodies.
• Persisting Default: If the default persists even after penalty, the tribunal may impose an additional monetary fine of Rs. 5,000 per day for each day of default.

Post-AGM Compliance

After the AGM, companies have to comply with several regulations. Minutes of previous year’s meeting have to be approved and presented at AGM, signed and documented within thirty days. Companies have to file Form MGT-15 to report AGM proceedings to the Registrar of Companies within thirty days to get AGM’s outcome recorded and compliant with regulations. Company Secretary or authorized person has to document the AGM proceedings. Minutes book has to be kept at a registered office or approved location.

Conclusion

AGM is necessary for corporate governance, transparency, shareholder engagement and accountability. Adhering to the legal requirements, provisions and procedure help smooth and compliant conduction as well as completion of AGM. So, understanding and participating in AGM educates and empowers shareholders and lays a strategic foundation that companies can run effectively and transparently.

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Editorial Team | in

Setindiabiz Editorial Team is a multidisciplinary collective of Chartered Accountants, Company Secretaries, and Advocates offering authoritative insights on India’s regulatory and business landscape. With decades of experience in compliance, taxation, and advisory, they empower entrepreneurs and enterprises to make informed decisions.