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AGMs: Get the details right

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5th Sep 2011
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NOTE: Although written in 2011 this article with its useful checklists remains relevant as at December 2015.

Although there is no legal requirement to hold an Annual General Meeting many private limited companies still do - Jennifer Adams examines possible reasons for the meeting and details the notice requirements.

The section references that follow refer to the Companies Act 2006.

Why have an AGM?

  • AGMs must be held by private limited companies if so specified in the company’s articles or if the directors/shareholders/ members convene one.
  • For directors who are the only members and who see each other every day or at least are in regular contact, a formal general meeting (annual or otherwise) is potentially unnecessary as the Companies Act permits most business to be dealt with by written resolution. However, an AGM can be a rare opportunity for members who have minimal contact with directors to have their say and question directors about the company’s performance and prospects. This can be a positive PR opportunity for the company.
  • The Charities Commission still recommends that charities with company status hold AGMs by charities so that ‘the management of the charity can be explained, that members can feel that their views are noticed'.
  • A company is legally required to hold a general meeting in two specific instances: the dismissal of either a director before the end of their term of office (s168) or similarly of an auditor (s510). This requires the passing of an ordinary resolution with special notice being given and an AGM could be used for this purpose. The general meeting is to give the director or auditor the opportunity to personally state why they should not be removed. This is the only time that members actually need to be present - other resolutions can be by written resolution unless otherwise required as per the articles. Specifics of the removal of a director from office will be covered in a future article.

Notice

As an AGM is purely a general meeting that is held annually the notice period is the same. The meeting can be convened by:

  • Directors - giving 14 clear days’ notice or any longer period stated in the Articles (s307). Note that the “clear day” rule includes weekends and bank holidays (Model Articles s41(5)). The 14 days’ notice can be reduced or even waived provided the holders of at least 90% of the voting rights agree (unless a greater percentage is required by the company articles up to a maximum of 95%). (s307(4)).
  • Shareholder/members - Any member who has more than 5% of the voting rights may ask the directors to convene a general meeting; to discourage members from regularly requesting these, the percentage is increased to 10% if a meeting has already been held within the past 12 months. Note: the percentage relates to the voting rights, not 5% of the number of members so a single, large shareholder could make the request. Within 21 days the directors must resolve to call the meeting and then it must actually be held within 28 days of the notice date (s304). If the directors do not convene the meeting, s305 enables the members to do so at the company’s expense.
  • Court - if it is not practical to convene a meeting or to conduct it as prescribed by the articles or the Companies Act, then the Court may do so, to be held and conducted as the Court instructs. (s306)

Miscellaneous

  • Whoever convenes the meeting must send the notice to every member, every director and anyone notified to the company as being entitled to a share on the death or bankruptcy of a member (subject to the articles) (s310).
  • The notice can be sent electronically to members including being posted on the company website (s308/309).
  • The meeting can be held using closed circuit television linking locations with a central location where the board is present (s360A). An audio or email-only link is not allowed as the members need to see and hear each other. (Byng v London Life Association (1989) 1 All ER 560)

Remember: A company must continue to hold an AGM if it specifically states in its articles that one is required and must do so until the articles are amended to remove any reference to AGMs; this can be by written resolution or at a general meeting (including an AGM). If a company has not registered its own articles and there is no specific mention (as is usual) then the 2006 Companies Act applies by default and no resolution to dispense is required.

Further reading

Jennifer Adams FCIS TEP ATT (Fellow) is Associate Editor at AccountingWEB. A professional business author specialising in corporate governance and taxation, she has written for many of the leading specialist providers of legal, tax and regulatory publications. Jennifer runs her own accounting and consultancy business with offices based in Surrey and Dorset.

Replies (4)

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By Mokash
07th Sep 2011 14:33

Companies House errors???

Companies House errors: Check and check again

Why does your lead-in title make this reference? Hope we aren't being over sensitive but it seems odd when the article itself does not highlight any errors by CH. Should it read 'Common errors made when filing with CH'??

Thanks (1)
John Stokdyk, AccountingWEB head of insight
By John Stokdyk
07th Sep 2011 15:27

We're so sorry...

Human error, I'm afraid - and I'm the one who did it. I mistakenly pasted the link to this article into the headline artice in our Newswire top item this morning. Because Jennifer Adams wrote both, we didn't spot the difference in the checkting stage.

I'm terribly sorry if you've been confused or inconvenienced by the mistake. Here's where to find the article you want: Companies House filing errors: Check and check again

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By TrevorJSmith
15th Sep 2011 10:01

AGM's

I thought AGM's also approved Final Dividends to be paid, as opposed to Interim Dividends taken during the year. Or does this no longer matter, for small or one person owner/director companies?

 

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Replying to User deleted:
Jennifer Adams
By Jennifer Adams
15th Sep 2011 16:32

No AGM required

Check out a previous article I wrote entitled ‘‘Dividends - Get the details right’ - under the section headed ‘Proper declaration of dividend’:

 ‘Directors can authorise payment of interim dividends but final dividends need to be approved by ordinary resolution confirmed by a simple majority of shareholders; following CA 2006 this can now all be done in writing – no meetings are required.’

 

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