How to conduct an AGM

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Continuing our two-part guide on preparing and conducting an AGM, we look at the key elements required to conduct an annual general meeting successfully. This two-part guide covers all the essentials from calling the AGM and establishing a quorum to voting and the required follow-up actions.

The Board has resolved to hold the company’s AGM and confirmed the time, date and location; the Board of directors has approved the resolutions to be presented to shareholders, and a suitable venue is booked. Next it is time to prepare and issue the notice of AGM to a schedule that ensures that when it is issued the company gives at least 21 clear days’ notice. For more information on how to calculate this – see part one of our guide.

PLCs with input from their share registrars will typically send the following items to their shareholders with the Notice of AGM:

The company’s annual report*
A form of proxy
A form of direction for Depository Interest voting (if applicable)

Shareholders who have elected to receive these documents by electronic transmission and via the company’s website will also be notified of their issue.

[* Note that section 424(3) of the Act requires that a company’s accounts and reports must be sent 21 days before the relevant accounts meeting.]

Calling the AGM

In most cases, the directors of a company will call the AGM; however, shareholders can require directors to call an AGM subject to the requirements of section 303 of the Act.

Conduct of the AGM

A resolution at AGM is validly passed if notice of the meeting and the resolutions are given in accordance with Part 13 Chapter 3 of the Act – the requirements outlined here – and the AGM is conducted as described in Chapter 3 (s. 301).

The AGM agenda

Simplistically, the agenda of an AGM is:

Notification of who will Chair the AGM (this is usually the chairperson of the company, or a director of the company – the articles of association often specify who).
Confirmation that there is a quorum, and that the meeting can proceed.
Introduction of the Board members present.
Introduction to the business of the AGM as set out in the Notice of AGM.
Presentation of each resolution (and voting).
Closing remarks.

A trading update can be given, if appropriate. If a listed company plans to give a trading update it will confirm its intention in a market announcement by RNS in advance of the meeting. The details of any update are given post-meeting when the results of the AGM for a listed company are announced.

MSP Company Secretarial offers support services to help conduct AGMs effectively. Contact us here.

Quorum

Unless otherwise specified in the company’s articles of association, then a quorum for an AGM is two members present, be that the member (shareholder) or their proxy (s. 318).

Letters of representation are often required to demonstrate a quorum

It is essential that people attending the AGM are properly identified as registered shareholders. Where a shareholder holds the company’s shares in their own name – i.e. the person attending is the shareholder shown in the share register, then he or she is readily identified as a member of the company (and can be counted in the quorum). When the shareholder attends the meeting, all that they need do is present proof of identity.

Where the person attending is not the registered shareholder, then that person needs a letter of representation that confirms they represent a registered shareholder.

Other companies are often registered shareholders of a PLC. That means that companies and individuals appear on a PLC’s share register. A company becomes a registered shareholder for one of two reasons. Most commonly, a company is a ‘nominee’, a company that is appointed by an individual to hold and administer the shares in the PLC digitally (usually via the CREST electronic platform). That individual is said to be the beneficial share owner and the company then is the individual’s “nominee”. Secondly, a company that is not a nominee can be the registered shareholder of a PLC where that company is the owner of the PLC’s shares. This situation occurs when such companies buy the PLC’s shares and appear as assets on their balance sheet, for example.

In either case, the person attending on behalf of the nominee holder or on behalf of the registered company shareholder needs a letter of representation from the registered entity that (i) confirms the identity of the entity’s representative, (ii) the number of shares held that can be voted at the AGM, and (iii) that their representative can attend, vote and speak at the AGM.

There must be documentation available to confirm that whoever attends the AGM is a registered shareholder (proof of ID) or is a representative of a registered shareholder (letter of representation) for those persons attending to be counted in the quorum of the AGM. A registered shareholder is the person (or entity) entered on the PLC’s share register. If one of the two persons attending the PLC’s AGM cannot prove they are or they represent a registered shareholder then the AGM cannot be quorate and if the quorum requirement cannot be met by another person, then the AGM cannot proceed.

Forms of proxy

Section 324 of the Act gives shareholders the right to appoint another person as their proxy “to exercise all or any of [the shareholder’s] rights to attend and to speak and vote at a meeting of the company”. Typically, a PLC’s share registrar looks after the preparation of a form of proxy, and so for the purpose of this article, it is useful to think of the form of proxy as another type of letter of representation where it nominates an individual to attend the AGM on behalf of the registered shareholder and to vote at the AGM as prescribed in the form of proxy on behalf of the registered shareholder.

Who can be chairman of an AGM?

A company’s articles usually state who will chair the meeting and what happens when that person is not available (e.g. Art. 31 of the Model Articles for a PLC). A shareholder may be elected to chair the meeting by resolution at the meeting (s. 319(1)).

Voting at an AGM

Voting on resolutions is often by a show of hands, so long as the articles permit it, however a poll can be demanded. The requirement to demand a poll cannot be any more restrictive than allowing a poll where more than (i) 5 shareholders having the right to vote on the resolution; (ii) member(s) holding more than 10% of the total voting rights of all the members having the right to vote on the resolution; or (iii) member(s) having more than 10% of the total sum paid up having the appropriate rights to vote on the resolution (see section 321 of the Act).

Following voting, the Chair of the meeting will declare whether the resolution was carried or not carried.

Questions at meetings (traded companies)

Questions from shareholders attending the AGM of a traded company that relate to the business of the meeting must be addressed (see section 319A of the Act). Section 360C of the Act defines a traded company as a company whose shares carry rights to vote at a general meeting and whose shares are admitted to a UK or EU regulated market (with the consent of the company). UK regulated markets are listed here.

Handling the unexpected

Not all AGMs go as planned. You need to be aware of what to do in the event of:

The quorum for the meeting is not achieved
The need for a poll when a show of hands is either deadlocked or votes in the opposite manner to the proxy voting
There is a disturbance at the meeting
A ‘special resolution’ receives over 75% votes in favour, but the resolution was not explicitly identified as a special resolution on the Notice of AGM
A member claims that the 21 clear day rule was not observed, and the meeting is therefore not being properly held
There has been an accidental failure to give notice of a resolution or meeting
Only 21 clear days’ notice period has been given but a resolution requiring special notice was included in the Notice of AGM

On these matters and others, MSP Company Secretarial can assist you with practical support and professional advice.

After the AGM

When the AGM has ended, PLCs need to attend to:

Completing minutes of the AGM and having the chair of the meeting sign the minutes for the company record.
File special resolutions (and any resolutions specified in section 29(1) of the Act) with Companies House within 15 days.
Listed PLCs promptly release the results of the AGM via RNS (and details of any trading update given at the AGM).
When a poll is taken at the AGM for a traded or quoted company, then the results must be made available on the company’s website in accordance with section 341 of the Act.
A listed commercial company must send copies of non-ordinary business resolutions passed at the AGM to the FCA and release a RNS confirming this (UKLR 6.4.1R, 6.4.2R, and 6.4.3R).

MSP Company Secretarial specialise in supporting organisations with each of these areas. Contact us to discuss how we can help you.

How MSP Company Secretarial can help

Not only are AGMs a statutory requirement, but they are also a way to engage shareholders and contribute to the governance of companies. It is important that they are conducted properly from giving notice to holding the meeting through to proper post-meeting actions. MSP Company Secretarial can ensure AGM compliance by:

Advising on a company’s obligations – statutory and regulatory requirements.
Drafting the notice of AGM.
Liaising with your company’s share registrar to produce the forms of proxy and forms of direction.
Drafting RNS notices.
Providing a professional Company Secretary to attend AGMs, prepare a script for the Chair, and prepare accurate minutes.
Filing resolutions with Companies House and filing notices with the FCA.
Preparing announcements and details about minutes for your company’s website.

What happens if a resolution needs to be passed as a special resolution but is shown as an ordinary resolution on the Notice of AGM?

The resolution cannot pass in accordance with section 283 of the Act, and so the resolution fails.

Can a PLC reduce the number of days’ notice it gives when calling an AGM?

Only a non-traded PLC (i.e. one that is not traded on a UK or EU regulated market – see section 360C of the Act for the full definition of a traded company) can call its AGM with fewer than 21 clear days’ notice so long as the company complies with section 337(2) of the Act – “if all the members entitled to attend and vote at the meeting agree to the shorter notice”.

Can shareholders require other matters to be dealt with at a PLCs AGM?

In the case of a PLC, a resolution may be proposed by shareholders representing at least 5% of the total voting rights of all members make the request, or where at least 100 shareholders where the average sum per member making the request is a holding of at least £100 (section 338(3) of the Act).

Shareholders of traded companies can also include matters to be addressed at the company’s AGM other than the resolutions proposed to be moved at the AGM. To include such matters, then the requirements are the same as those requirements shown above for including a resolution at an AGM (section 338A(3) of the Act).

What makes an AGM invalid?

When considering matters associated with holding a valid meeting, we think about whether an AGM is properly called, properly notified, the meeting is properly attended, and the resolutions are fit.

So, an AGM fails in the following circumstances:

the notice of meeting does not state that the general meeting of a PLC is the annual general meeting;
a quorum is not present;
resolutions cannot be validly passed because notice of the meeting and of the resolutions proposed are not given in accordance with Chapter 3 of Part 13 of the Act (as summarised here); (iii) a resolution requires special notice (of 28 clear days) but only 21 clear days’ notice is given; (iv) a resolution that must be passed as a special resolution is not explicitly identified as a special resolution in the notice of meeting and therefore fails even if over 75% of votes are cast in favour of the resolution; or
does not comply with a company’s articles relating to AGMs.

What are the common mistakes made when conducting an AGM?

Common mistakes contributing to the failure of an AGM include:

Inability to form a quorum or allow someone to attend because the person does not have a letter of representation. Directors who are shareholders where the registered shareholder is a nominee, often overlook the need to have a letter of representation from their nominee. Shareholding directors are often relied upon to form the quorum of the meeting, and if their holding is registered to a nominee and they have not arrange a letter of representation, then they cannot count in the quorum and that can threaten the ability to hold the AGM.
A mistake in calculating the minimum notice of 21 clear days means insufficient notice has been given and if that is the case, the AGM cannot be validly held and so if at any AGM that is held with insufficient notice, then any resolutions passed are not valid.
Not explicitly stating that a resolution is proposed as a special resolution on the notice of meeting and so even if passed at the AGM it is ineffective.
A resolution to remove a director or an auditor requires special notice of 28 days’ clear – giving (just) 21 days’ clear notice for an AGM will be insufficient to properly address a resolution requiring 28 clear days’ notice, and such that resolution cannot be validly passed.
Not setting out clearly in the notice of AGM the time and date of the meeting and the place of the meeting.