Full Form of AGM – Annual General Meeting
The full form of AGM is the Annual General Meeting. AGM can be defined as an official gathering of the stockholders and directors of an incorporated company in every calendar year, and the most purpose of the annual general meeting is to ensure that there is 100 percent compliance concerning all the lawful requirements like preparation and presentation of the company’s financial statements, the appointment of an auditorAuditorAn auditor is a professional appointed by an enterprise for an independent analysis of their accounting records and financial statements. An auditor issues a report about the accuracy and reliability of financial statements based on the country's local operating laws., etc.
The purpose of the Annual General Meeting is to ensure full compliance with all the independent statutory requirements such as preparation and presentation of a company’s financial reports, auditor/auditors’ appointment, the election of a board of directors, and so on. In this light, it can be said that the AGMs are held to ensure that the business of a company is appropriately conducted on behalf of it, to make significant decisions concerning the welfare of the company, to approve the audited financial statements, to update the equity holders regarding the past and upcoming activities of the company, and so on.
Objectives of AGM
AGMs are conducted with an objective of transacting about ordinary as well as special business.
#1 – Objectives Pertaining to Ordinary Business
- To present the audited accounts in front of the company’s members and equity holders and get the same approved by them.
- To elect the new BODs or board of directors by means of a voting system.
- To appoint the auditors for the upcoming calendar year.
- To declare and affirm the dividendsDeclare And Affirm The DividendsDividend declared is that portion of profits earned that the company’s board of directors decides to pay off as dividends to the shareholders of such company in return to the investment done by the shareholders through the purchase of the company’s securities. as provided by the company’s BOD.
#2 – Objectives Pertaining to Special Business
- To seek the members and equity holders’ approval if the board of directors wishes to enhance the company’s authorized equity capital.
- To seek approval of members and equity holders if the BODs want to alter the company’s articles of association.
- To address any conflicts, issues, or grievances raised by the investors of the company.
- To safeguard the interests of the investors of the company.
How Does it Work?
It is held so that the incorporated company’s equity holders and members can vote on matters like selecting the board of directors, viewing the audited accounts of the concerned company, giving their approval on the same, etc. In large companies, it is the only meeting conducted in a calendar year where the equity holders and executives interact. SEC or Securities and Exchange Commission has made it mandatory for public companies to keep their stockholdersStockholdersA stockholder is a person, company, or institution who owns one or more shares of a company. They are the company's owners, but their liability is limited to the value of their shares. informed about the past, present and future activities of a company by means of an AGM. Public companies must conduct an AGM each financial year. The time between two consecutive AGMs must not exceed over fifteen months, and it is even mandatory for companies to send a notice in written and that too at least 21 days ahead of the AGM’s date, mentioning all the details of the same.
ABC, a newly incorporated company, wishes to hold its first AGM. Take ABC through all the requirements that it must necessarily fulfill to conduct an AGM.
ABC is a newly incorporated company must hold its first annual general meeting within a period of nine months right falling before the end of a financial year. The company must ensure that it sends a written notice to all its members and equity holders at least 21 days before it is planned to be conducted. ABC must make sure that it is maintaining the quorum of AGM to be levied with the status of a valid meeting. If ABC is a private company, it must have a minimum quorum of 2 members, and if it is a public company, it must have a minimum quorum of 3 members.
The annual general meeting holds huge importance and acts as a medium for incorporated companies (both public and privately held companies) to disclose significant information to the members and equity holders of the company. It is also conducted to get the audited financial reports of the company approved by the members and equity holders of the same. They are highly important from an equity holder’s point of view too. Equity holders during an AGM get to share their issues, concerns, and grievances, and they also get to know their share of dividends and the company’s ongoing and plans.
Difference between Annual General Meeting and Extraordinary General Meeting
The key difference between the Annual General Meeting and Extraordinary General Meeting are-
- An AGM is convened by the Board of Directors, whereas an EGM is convened by the Board of Directors, Board on the requisition of the equity holders or tribunal.
- A penalty is levied in case if an AGM is not summoned within the prescribed time, whereas the same is not levied in the case of an EGM.
- An AGM can be conducted on any day apart from national holidays and during office hours only, whereas an EGM can be conducted on any day irrespective of whether it is a national holiday or not and also at any given the time of day.
- An AGM is concerned with ordinary and special business, whereas an EGM is concerned only with special business.
Benefits of AGM
- An annual general meeting formulates a way for initiating communication between a company and its equity holders. The owners of the company, i.e., shareholders, get an insight into the present, past, and upcoming activities of the company, such as its performance, plans, strategies, targets, and so on.
- They also act as a forum where the equity holders get to question the company on affairs about the valuation of their holdings and growth prospects too.
- The appointment of the auditors for the upcoming term is another advantage of conducting an AGM.
- It also provided for the election of the board of directors using a dedicated voting system.
- Another benefit of having an AGM could be a proposal and confirmation of dividends that the company’s investors will supposedly receive on their holdings.
AGM is used for Annual General Meetings. An AGM can be defined as a mandatory meeting that must be convened by incorporated companies (both private and public) once in every financial year. It must be held at the incorporated company’s registered office, and it must be conducted on a business day during office hours only.
This has been a guide to the Full Form of AGM, i.e. (Annual General Meeting), and it’s meaning. Here we discuss how does AGM works, its purpose, along with an example, importance, and differences. You may refer to the following articles to learn more about finance –