Shareholder meetings are crucial for businesses, and ensuring compliance with legal procedures is paramount. Within the company’s Articles of Association framework, Extraordinary General Meetings (EGMs) are pivotal in dealing with time-sensitive matters that cannot be deferred until the next AGM. As founders, understanding the importance of EGMs, their distinct role compared to AGMs, and the process of conducting them is vital to navigating the intricacies of Singapore’s corporate governance landscape. By upholding compliance with these non-compulsory meetings, we empower our companies to make informed decisions and foster sustainable growth in this dynamic business environment. Read to know more.
Inside This Article:
What is an EGM or an Extra Ordinary General Meeting?
An Extraordinary General Meeting, or EGM, is a shareholder gathering in Singapore held to address urgent matters that must be resolved before the next AGM. Unlike AGMs, EGMs occur irregularly when the board deems it necessary. The company secretary assists in arranging and hosting these meetings. The Articles of Association govern the procedures for holding EGMs, offering a platform for discussing critical business matters. By conducting EGMs, businesses ensure timely decision-making and efficient problem-solving with shareholders and management.
What is the Purpose of Convening an EGM?
A company may convene an EGM for various reasons, depending on its unique circumstances and the governing laws and regulations. Some potential reasons include addressing special resolutions, urgent matters, shareholder initiatives, director or shareholder disputes, and compliance with legal or regulatory requirements.
- Special Resolutions: Some decisions in a company require a special resolution, which typically demands a higher threshold of shareholder approval than an ordinary resolution. These decisions may include amending the company’s articles of association, changing its name, approving a merger or acquisition, authorising significant capital expenditures, or altering the share capital structure. To obtain the necessary shareholder approval for such matters, the company may call for an EGM.
- Urgent Matters: There are situations where a company faces urgent matters that demand prompt attention and must act on the next scheduled Annual General Meeting (AGM). These urgent matters could include addressing a financial crisis, resolving a legal dispute, or complying with regulatory requirements. An EGM provides a prompt way for the company to seek shareholder input and decide on these pressing issues.
- Shareholder Initiatives: In some jurisdictions, shareholders collectively holding a specified percentage of the company’s shares have a right to request an EGM to discuss and vote on specific matters. Shareholders may propose alterations to the company’s executive compensation, corporate governance, environmental policies etc. The company must call for a meeting and address the proposed matters if the required threshold for a shareholder-initiated EGM is met.
- Shareholder or Director Disputes: Disputes between the company’s shareholders or directors may necessitate an EGM to resolve or make critical decisions.
- Compliance with Legal or Regulatory Requirements: Some countries’ corporate laws or securities regulations may require companies to hold an EGM for specific purposes. For example, if a company wants to approve a crucial transaction, such as a merger or acquisition, it may be mandated to obtain shareholder approval at an EGM.
Who Can Call an EGM?
Here are the details about calling an EGM and the scenarios where it might happen:
- EGMs can be called by the company’s board of directors or its members.
- Members can request an EGM if they individually hold at least 10% of the voting shares or if multiple members collectively own 10% of the issued shares.
- A court of law may order an EGM to be convened if conventional means are unworkable, such as failure to meet quorum criteria or when day-to-day management is stuck in limbo.
Comparison between AGM vs EGM
| Aspect | Extraordinary General Meeting (EGM) | Annual General Meeting (AGM) |
|---|---|---|
| Reason | Urgent business matters | Mandatory annual meeting |
| Participants | Directors, shareholders, and board members | Directors and shareholders |
| Who can call it? | Board directors, members, and shareholders (10%+ shares) | Directors |
| Timing | Any day, including weekends and holidays, at any time | During working days, business hours |
| Frequency | As needed and not a regular occurrence | Once a year |
| Basis for Validity | Quorum | Passing resolution by written means |
| Core Purpose | Addressing urgent issues | Presenting financial statements, approving transactions |
| Minimum Notice Duration | 14 days for special resolutions (Private companies), 21 days for special resolutions (Public companies) | 14 days |
In summary, an EGM is called to address urgent matters. It can be convened by directors, members, or shareholders. It can be held any day, including weekends, and occurs as needed. On the other hand, an AGM is a mandatory annual meeting held during working days, where directors and shareholders participate. The directors call it, and it occurs once a year, focusing on presenting financial statements and approving company transactions.
Process for Conducting an EGM in Singapore
The convening of an Extraordinary General Meeting (EGM) varies based on the type of company and its applicable regulations. The process involves the following steps:
Step 1: Determining the Meeting Agenda:
The company’s board of directors decides on the resolutions or agendas that require voting during the EGM. These resolutions are outlined and discussed during the meeting.
Step 2: Notifying Stakeholders:
The company must provide the stakeholders with written notice of the EGM. The notice includes explanations about the significance of the meeting and the resolutions to be discussed. The minimum notice period is 14 days for EGMs with special resolutions for private companies and 21 days for public companies. The notice duration might vary based on the company’s constitution.
Step 3: Conducting the EGM:
During the EGM, the chairperson reads the resolutions and proposes them for approval. Shareholders participate in voting to decide the outcome of each resolution. The chairperson addresses questions, oversees the voting process, and announces the results. A quorum (minimum required number of eligible voters) must be present to ensure the validity of the EGM and its resolutions.
Step 4: Post-Meeting Procedures:
Upon passing the resolutions by the end of the meeting, the proposals gain approval from the majority of shareholders. In certain cases, specific actions are required to formalise the approved resolutions. For instance, if an EGM passes a special resolution for the voluntary winding-up of a company, a copy of this resolution must be given to the ACRA (Accounting and Corporate Regulatory Authority) within seven days. Additionally, the resolution must be published in a Singapore newspaper within ten days. Following these steps, the company can appoint a liquidator and initiate voluntary winding-up proceedings.
In summary, conducting an EGM involves determining agendas, notifying stakeholders, conducting the meeting, and taking post-meeting actions as needed. The process ensures transparency and proper decision-making within the framework of Singapore’s corporate regulations.
Conclusion
As a company secretarial partner, we recognise that orchestrating Extraordinary General Meetings (EGMs) is about compliance and harnessing their strategic potential. Our expert facilitation ensures EGMs become opportunities for agile decision-making, responsive governance, and stakeholder alignment. With us by your side, EGMs evolve into dynamic platforms where urgency meets astute direction, driving businesses forward.
FAQs in Convening Effective EGMs
What Constitutes a Legitimate EGM?
- A valid quorum must be established for an Extraordinary General Meeting (EGM). The quorum signifies the minimum number of participants required at the meeting to be eligible for voting. Generally, specific quorum requirements are outlined in the majority of corporate constitutions. According to Section 179(1)(a) of the Companies Act, if the company’s constitution does not specify the quorum, the minimum number of members needed to attend the meeting in person is two.
What are the notice periods for EGMs in private and public companies?
- A minimum notice period of 14 days is mandatory for private company meetings. In the case of special resolutions in public companies, a notice period of 21 days is required. However, the company’s constitution may stipulate a different notice duration.
Can the notice period be shortened?
- If a majority of members, collectively possessing at least 95% of the total votes, agree to a reduced notice period, the company can implement it.
What information should be included in the notice?
- The notice must encompass substantial details about the intended agenda for the EGM. It should indicate the meeting’s date, time, and venue.
How can the alerts be delivered to the members?
- Notices can be sent via registered mail. Alternatively, electronic transmissions like emails or postings on the company’s official website are acceptable if the company’s constitution permits using electronic communication.
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