AGM and It's Importance
Companies are legally required to hold an Annual General Meeting (AGM). The AGM provides an opportunity for the directors and shareholders to gather together, touch base, exchange ideas, and disclose and vote on important issues.
In recent years, however, many companies have reported a significant decline in attendance and engagement levels.
What is an AGM?
An AGM is a forum for a company to present and gain shareholder approval of the audited accounts and financial reports, and to appoint auditors for the upcoming term. Directors are also voted in at AGMs, usually for a 12-month or two-year term. Shareholders might also vote on the compensation of officers and approve the proposed dividend rates.
Typically, the inaugural AGM must be held 12 to 18 months following company incorporation. Subsequent AGMs must be held within a prescribed period – in Hong Kong, that’s generally from April to May – before the company files its financial results for the previous year. Under the new Hong Kong Company Ordinance, a company must hold an AGM in respect of each financial year of the company, instead of each calendar year.
All shareholders who are entitled to vote must be notified of the date, time and place of the AGM within a given time frame and, where applicable, must be provided with a mechanism for proxy voting.
Why is an AGM Important?
Typically, the elected chairperson will preside over the meeting and provide shareholders with a big-picture overview of the company’s recent and predicted performance. Shareholders will then be given an opportunity to discuss the critical emerging issues and make informed investment decisions about whether to hold on to their shares or to invest their money elsewhere.
If stakeholders and board members play their part by listening actively and contributing useful feedback to the discussion, the AGM can be an eye-opening experience, since shareholders can offer an outside perspective. Even the questions themselves and the resulting debates can force board members to clarify certain aspects of the company’s operations. The meeting also gives shareholders access to insider information that has not yet been made available to the general public.
As companies are increasingly expanding into global markets and are faced with a host of challenges – intensifying competition, increased regulatory pressure, a more complex work environment, a global pandemic…, accessing fresh ideas and perspectives can help to spur innovation, develop or maintain a competitive edge, and build a stronger, more sustainable organisation.
How Can Companies Encourage Participation?
Today, people expect information-gathering and decision-making to be technology-enhanced, collaborative and engaging experiences, so there’s a growing sense that traditional AGMs held in large meeting halls are outdated.
Companies therefore need to think about new ways to encourage participation and use virtual meeting technology platforms that offer simultaneous engagement among participants. They have the potential to change the traditional format of the AGM, turning the event into a hybrid that allows both physical and remote attendance. (However, check the laws in your country – a virtual AGM might not be permissible.)
Companies must also commit to open discussion where even the tough questions are welcome, because they provide valuable insights and a sense of engagement and belonging for all participants.
An AGM might sometimes be considered inconvenient for directors and shareholders, but if managed well it will be a valuable tool that enables your company to drive innovation and development and tap into the skills and wisdom of directors and shareholders.
For more information about how T8 Corporate and Business Services can help you organise and manage your next AGM, contact us today.