What does it mean when a company that you invested in or plan to invest in decides to hold an "extraordinary general meeting"? Although you may have heard this term before, it is possible that you are not sure what it means or how it relates to the functions behind the scenes of the company. Here's a closer look at the extraordinary general meeting, the reasons they are held, and the process that leads to them.
The term "extraordinary" is used to describe something unusual and out of the ordinary. To fully grasp the meaning of the extraordinary general meeting, it is important to first understand its context.
The Annual General Meeting (or AGM) is a mandatory meeting that all shareholders attend on an annual basis. These meetings are where reports are presented to shareholders. Also, various functions like voting, appointment, and compensations are carried out. These meetings are scheduled in advance and occur within regular business hours.
However, extraordinary general meetings are not considered to be a normal meeting. Extraordinary general meetings are shareholder meetings that are held at an unusual time and other than the Annual General Meetings. These extraordinary shareholder meetings are called "extraordinary" and are used by companies or organizations to discuss urgent and unanticipated issues.
What are the Extraordinary General Meetings?
If the company's business is normal, any updates or reports about its performance, appointments, and other aspects will be delayed until the next AGM. If a company calls for an extraordinary general meeting, it means that shareholders have to address unexpectedly important matters. These urgent matters could include the resolution of an unexpected legal situation or the removal of a senior executive from the company.
Extraordinary general meetings, unlike other types of meetings like an Annual General Meeting (AGM) or a Statutory Meeting, are only used to resolve specific business issues or deal with company crises. These meetings are so important to shareholders that AGMs cannot be held during business hours or on weekends. However, extraordinary shareholders meetings may be held outside of business hours.
What's the procedure for holding an extraordinary general meeting?
Because extraordinary general meetings have such an important role, there are strict guidelines regarding how they are to be called. These are the circumstances and members that will allow for an extraordinary general meeting to be held.
- A company's Board can call for an extraordinary general meeting.
- A company director can call for an extraordinary general assembly at his or her discretion.
- At the request of its members, the Board may appeal for an extraordinary general assembly. The Board can, however, appeal for an extraordinary general meeting at its members' request. They must also call within three months to request it, even if they don't ask for one.
The members and shareholders of a company are the requisitionists. Only those who have substantial voting rights or stakes in the company's capital are eligible to request an extraordinary shareholders meeting.
- Shareholders who participate in an extraordinary general meeting also have an essential responsibility. It is the presentation of an explanation statement. This explains the purpose of the meeting, the issues it will address, and its importance. It contains pertinent information that will help members make informed decisions about the issues discussed and voted upon during the extraordinary general meetings.
This should give you an understanding of the meaning and reasons for extraordinary general meetings. These concepts can help you keep up-to-date with the changing circumstances and to make smart investment decisions.