What is Extraordinary General Meetings ?
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An Extraordinary General Meeting (EGM) refers to a shareholders' meeting convened outside the company's regular Annual General Meeting (AGM). EGMs are typically called to address urgent or special matters that need to be resolved before the next AGM. These meetings are convened by the company's board of directors, shareholders, or other authorized entities to discuss and decide on significant issues such as amendments to the company's articles of association, major asset transactions, mergers and acquisitions, changes in board members, etc.Key characteristics include:Ad-Hoc Nature: EGMs are not regularly scheduled meetings but are convened as needed.Specific Agenda: Meetings focus on discussing and resolving specific urgent or significant matters.Convening Authority: Called by the board of directors, shareholders, or other authorized entities according to the company's bylaws or legal requirements.Legal Validity: Resolutions passed at an EGM carry the same legal weight as those passed at an AGM.Example of an Extraordinary General Meeting application:Suppose a publicly traded company receives a takeover bid and needs to make a decision quickly. The company's board of directors decides to convene an EGM to discuss and vote on whether to accept the takeover bid. During the meeting, shareholders listen to detailed presentations on the takeover proposal and vote on whether to approve the acquisition.
Definition
An Extraordinary General Meeting (EGM) is a shareholder meeting convened outside the regular Annual General Meeting (AGM). EGMs are typically held to address urgent or special matters that need resolution before the next AGM. These meetings are called by the company's board of directors, shareholders, or other authorized entities to discuss and decide on significant issues such as amendments to the company's articles, major asset transactions, mergers and acquisitions, or changes in board members.
Origin
The concept of an Extraordinary General Meeting originated from the need for corporate governance to provide a flexible mechanism to handle urgent or important corporate matters outside the annual general meeting. As corporate structures have become more complex and globalized, the importance of EGMs has increased, making them a crucial tool for companies to respond to rapidly changing business environments.
Categories and Features
The main features of an Extraordinary General Meeting include:
1. Non-periodic: EGMs are not regular annual meetings but are convened as needed.
2. Specific Agenda: The meeting addresses specific urgent or significant matters.
3. Convening Method: Called by the board of directors, shareholders, or other authorized entities according to the company's articles or legal requirements.
4. Legal Effect: Resolutions passed at an EGM have the same legal effect as those passed at an AGM.
Case Studies
Case 1: Suppose a publicly listed company receives a takeover offer and needs to make a decision quickly. The board decides to convene an EGM to discuss and vote on whether to accept the offer. During the meeting, shareholders hear detailed presentations of the takeover proposal and vote on whether to approve the acquisition.
Case 2: Another company faces an opportunity to sell a major asset, and the board believes shareholder approval is necessary to proceed. They convene an EGM to present the terms and potential impacts of the transaction, ultimately deciding through shareholder voting whether to proceed with the deal.
Common Issues
Investors might encounter issues when applying the concept of an EGM, such as:
1. Improper Convening: Not convening the meeting according to the company's articles or legal requirements can render resolutions invalid.
2. Information Asymmetry: Shareholders may not have sufficient information to make informed decisions. The key to resolving these issues is ensuring the legality of the meeting's convening and the transparency of information.
