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An Extraordinary General Meeting (EGM) is a key event in the life of a company – one that isn’t scheduled as part of your usual annual cycle. Instead, it is convened on an urgent basis to address critical issues that simply cannot wait until the next Annual General Meeting (AGM). In this article, we’ll walk you through what EGMs are, the legal framework surrounding them under Australian law, the typical reasons for calling one, and practical tips for planning and conducting this important meeting. If you’re a business owner or a director looking to understand how to make timely decisions while staying compliant, let’s dive in.
What is an Extraordinary General Meeting (EGM)?
An EGM is a meeting of a company’s shareholders held outside of the regular AGM schedule. It is designed to tackle urgent matters that require the immediate attention and approval of shareholders. Unlike routine meetings that cover annual financial reports, director elections, and other pre-planned business, EGMs are called to resolve issues that suddenly arise – whether it’s an urgent restructuring decision or the removal of a key executive.
Because EGMs are unscheduled, they serve as a critical tool to ensure that the governance of the company can adapt to emergencies or new developments quickly. They are sometimes also referred to as “special” or “emergency” general meetings.
The Legal Framework Governing EGMs in Australia
In Australia, the rules surrounding EGMs are primarily set out in the Corporations Act 2001 (Cth). This comprehensive legislation outlines the procedures a company must follow when calling and conducting an EGM. For instance, under the Act, shareholders holding at least 5% of the company’s voting shares have the power to requisition an EGM. This ensures that if a significant number of shareholders feel an urgent matter must be addressed, the board cannot ignore their concerns.
In addition to the statutory requirements, companies usually set out further details in their own company constitution or bylaws, which provide guidance for the internal management of meetings. Understanding both the statutory framework and your company’s internal rules is critical for ensuring that an EGM is conducted in a legally compliant manner.
Reasons for Calling an EGM
There are several compelling reasons why an EGM might be necessary. Below, we’ve outlined the most common scenarios:
Urgent Decision-Making and Crisis Management
Sometimes business conditions change faster than expected. Key decisions such as mergers, acquisitions, or major capital restructuring require swift action to protect shareholder value. Unlike AGMs that are held at a predetermined time each year, EGMs provide flexibility to respond to market conditions in real time.
Removal or Appointment of Key Personnel
An EGM is also an appropriate forum for addressing personnel issues at the executive level. For example, if there are concerns about misconduct or poor performance, shareholders may call an EGM to vote on the removal of a director or executive member. This scenario frequently requires immediate action to preserve the reputation and operational integrity of the company.
Addressing Legal or Regulatory Concerns
There may also be legal matters – such as disputes over contracts or compliance issues – that require shareholder input before a company can move forward. In such cases, an EGM allows shareholders to debate the situation and decide on the best course of action, potentially preventing further legal complications.
For a more comprehensive discussion on how regulatory requirements can influence corporate decisions, it’s useful to compare these urgent decisions with routine board activities conducted during AGMs.
The Procedure for Conducting an EGM
While the urgency of an EGM might suggest it is a rushed process, there are precise steps that must be followed to ensure the meeting is valid and its resolutions are legally binding.
Notice and Agenda
Before an EGM can take place, the board of directors (or the requisitioning shareholders) must prepare a detailed agenda. This agenda outlines the specific resolutions that will be discussed and voted on during the meeting. Shareholders must receive formal notice of the EGM with all relevant details, such as:
- The ASIC registered address or venue where the meeting will take place.
- The date, time, and method (in-person or via eligible electronic platforms) of the meeting.
- The agenda items and resolutions proposed.
For non-listed companies, it is common for shareholders to receive at least 21 days’ notice, although this period may vary depending on the company’s constitution or specific circumstances.
Establishing a Quorum and Voting Procedures
A quorum is essential to ensure that the decisions made are legitimate. The company’s constitution often sets the quorum requirements, typically based on the percentage of shares represented. If a quorum is not met, the meeting may be postponed or rescheduled.
Voting can be carried out in various ways during an EGM, including:
- In-person voting: Shareholders attend the meeting and cast their votes.
- Proxy voting: If shareholders are unable to attend, they can designate a representative to vote on their behalf. It is essential that all proxy arrangements comply with both the Corporations Act and the company’s constitution.
- Electronic voting: With the increasing use of technology, some companies now allow shareholders to vote electronically. This must also be clearly stipulated in the meeting’s notice or the company’s bylaws.
Recording and Validating Decisions
Once the voting is completed, the minutes of the meeting must accurately reflect the proceedings and the resolutions passed. These minutes serve as a legal record of the decisions made at the EGM and might be scrutinised during regulatory reviews or legal disputes.
Legal Requirements and Compliance
It is not just the procedures but also the legal requirements that underpin a valid EGM. Compliance with these requirements minimizes the risk of shareholder disputes or regulatory challenges.
- Notice Period: As mentioned, the minimum notice period is usually 21 days for non-listed companies, although listed companies sometimes abide by different guidelines as overseen by ASIC.
- Meeting Details: The notice must clearly state the time, date, venue (or technology used), and a detailed agenda covering the key business items. Failing to provide these particulars can render any resolutions passed during the meeting vulnerable.
- Quorum Requirements: Check your company’s constitution or replaceable rules regarding the quorum. It’s vital that these thresholds are met for decisions to be valid under the Corporations Act 2001.
For those who want a deeper understanding of their business structure and its impact on governance, familiarising oneself with these legal requirements is highly recommended.
EGMs Compared with Annual General Meetings (AGMs)
Understanding the differences between EGMs and AGMs is crucial for shareholders and directors alike, as the purpose and scope of these meetings diverge significantly.
- Scheduling: AGMs are pre-scheduled and occur once a year to discuss routine matters such as financial results, director appointments, and dividend decisions. EGMs, however, are convened at any time in response to unforeseen business issues.
- Purpose: While AGMs focus on the company’s annual performance and planned agenda, EGMs are aimed at addressing urgent matters that require immediate shareholder input. This could range from significant corporate restructures to crisis management issues.
- Documentation and Procedures: Although both types of meetings follow strict procedural guidelines, the notice periods and agenda requirements differ. EGMs require rapid organisation and a tailored communication strategy to ensure shareholders are adequately informed in short order.
For a broader discussion on whether business structure matters in how meetings are conducted, it’s useful to compare these two types of meetings to understand the flexibility and urgency inherent in EGMs.
Practical Tips for Planning and Conducting an EGM
Successfully planning and conducting an EGM requires attention to detail and clear communication with shareholders. Here are some practical tips to ensure your EGM runs smoothly:
- Prepare Thoroughly: Develop a detailed agenda and ensure all relevant documents and proposals are distributed well in advance. This gives shareholders time to review the issues before the meeting.
- Communicate Clearly: Use multiple communication channels – email, registered post, and online notices – to ensure all shareholders receive the notice of the meeting. Check with your company’s constitution for any specific communication requirements.
- Maintain Records: Document every stage of the process, from the issuance of the notice to the final minutes. Adequate record-keeping is essential, especially if resolutions are later challenged.
- Be Transparent: Share the rationale behind each agenda item and why an EGM is necessary. Transparency not only increases shareholder trust but also helps in overcoming potential disputes.
- Seek Professional Advice: Given the complexities involved, many companies benefit from consulting with a corporate lawyer. This is especially useful if the EGM is being convened for sensitive issues like a director’s removal or major restructuring.
Common Issues and How to Address Them
Despite careful planning, EGMs can sometimes face common challenges. Being aware of these issues in advance can help you mitigate potential risks.
Low Shareholder Turnout
When shareholders do not participate, meeting quorums may not be met, jeopardising the validity of any resolutions passed. To combat this, ensure that your notice strategy emphasizes the importance of the meeting and makes it as accessible as possible – consider electronic voting options to boost participation.
Disputes Over the Agenda
Disagreements about what should be discussed or the wording of resolutions can emerge, particularly in high-stakes scenarios. It’s important to draft the agenda as clearly and objectively as possible. Obtaining legal advice in drafting these documents can further help in avoiding ambiguities or disputes later on.
Proxy and Voting Disputes
Proxy voting is a convenient option for shareholders who cannot attend in person, but it also opens up potential disputes regarding the delegation of authority. Clearly communicating the rules surrounding proxy voting – including how proxies are appointed and how votes are counted – will reduce misunderstandings. Ensure that all information is available well ahead of the meeting.
Key Takeaways
- An Extraordinary General Meeting (EGM) is essential for addressing urgent or emergent matters that cannot wait until the next AGM.
- The requirements for calling and conducting an EGM are set out both by the Corporations Act 2001 (Cth) and by your company’s internal governance documents.
- EGMs are typically convened to handle urgent decisions such as crisis management, executive director removals, or significant corporate restructures.
- Following strict procedural guidelines – including proper notice, quorum requirements, and clear agenda setting – is critical to ensure that the resolutions passed are legally valid.
- Comparing EGMs to AGMs highlights the flexibility required to address unforeseen issues as opposed to the routine business conducted at annual meetings.
- Practical planning, transparent communication, and professional legal advice are key to successfully holding an EGM.
If you would like a consultation on Extraordinary General Meetings (EGMs), you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.
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