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 each and every calendar year and the most purpose of the annual general meeting is to ensure that there is 100 percent compliance with respect to all the lawful requirements like preparation and presentation of the company’s financial statements, the appointment of an auditor, etc.
The purpose of the Annual General Meeting is to ensure that there is full compliance to all the independent statutory requirements such as preparation and presentation of the financial reports of a company, appointment of auditor/ auditors, the election of a board of directors, and so on. In this light, it can be said that the AGMs are held in order 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 its 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 dividends as provided by the company’s BOD.
#2 – Objectives Pertaining to Special Business
- To seek the approval of the members and equity holders 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 equity holders and members of the incorporated company can vote on matters like a selection of the board of directors, view the audited accounts of the concerned company and give their approval on the same, etc. In large-sized companies, it is the only meeting conducted in a calendar year where the equity holders and executives get to interact. SEC or Securities and Exchange Commission has made it mandatory for public companies to keep their stockholders informed about the past, present and future activities of a company by means of an AGM. It is mandatory for public companies to 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 for the purpose of conducting 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 make sure 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 so that it can be levied with the status of a valid meeting. If ABC is a private company then it must have a minimum quorum of 2 members and if it is a public company then 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, grievances and they also get to know their share of dividends and the company’s ongoing and future plans as well.
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 time of the day.
- An AGM is concerned with both ordinary and special business whereas an EGM is concerned with special business only.
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 pertaining to 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 by means of a dedicated voting system.
- Another benefit of having an AGM could be a proposal and confirmation of dividends that the investors of the company 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 necessarily convened by incorporated companies (both private and public) once in every financial year. It must be held at the registered office of the incorporated company 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 –