Key Takeaways
- Special meeting for urgent shareholder decisions.
- Called outside regular Annual General Meetings.
- Can be convened by board or qualifying shareholders.
- Addresses critical issues like mergers or executive changes.
What is Extraordinary General Meetings (EGM)?
An Extraordinary General Meeting (EGM) is a special shareholders' meeting convened outside the regular annual schedule to address urgent and significant company matters requiring immediate attention. Unlike the Annual General Meeting, an EGM focuses on time-sensitive issues that cannot wait, such as changes in the C-suite or critical financial decisions.
This meeting enables shareholders and directors to make swift decisions and respond to unexpected challenges or opportunities that impact the company's governance or capital structure.
Key Characteristics
EGMs have distinct features that differentiate them from routine meetings:
- Irregular timing: Called as needed, not on a fixed annual schedule.
- Urgency: Focused on immediate, exceptional matters requiring prompt shareholder approval.
- Limited agenda: Only covers specific extraordinary topics such as mergers, leadership changes, or financial restructuring.
- Convened by: Typically called by the board of directors or shareholders holding a minimum percentage of voting power.
- Legal compliance: Must follow strict notice and procedural requirements to ensure valid decisions.
How It Works
The process to convene an EGM begins with the board or qualifying shareholders formally requesting the meeting and setting a clear agenda. Members are notified in advance, allowing sufficient time to review materials and prepare for discussions.
During the EGM, the board presents the urgent issues, followed by focused deliberation and voting. Shareholders may vote in person, by proxy, or electronically, depending on company bylaws. Valid resolutions often require a qualified majority to pass, ensuring key decisions reflect shareholder consensus.
Examples and Use Cases
EGMs are commonly used in situations demanding rapid shareholder action. Examples include:
- Airlines: Delta and American Airlines have called EGMs to approve emergency capital restructuring amid market disruptions.
- Corporate governance: Companies facing sudden C-suite changes or misconduct may convene EGMs to vote on executive removals.
- Capital decisions: Firms issuing new share classes, such as A shares, often require EGMs to approve amendments to their capital structure.
- Growth opportunities: Rapid mergers or acquisitions can be facilitated through EGMs to secure shareholder consent without delay, aligning with strategies found in best growth stocks.
Important Considerations
When participating in or calling an EGM, it's critical to ensure all procedural requirements are met to avoid legal challenges. Proper notice periods and transparent communication help shareholders make informed decisions.
Additionally, consider the impact of urgent resolutions on your investments; for example, changes approved during an EGM could affect company valuation or shareholder rights, similar to risks managed in backstop arrangements.
Final Words
Extraordinary General Meetings address urgent company matters that cannot wait for the annual cycle, making timely shareholder participation crucial. Stay alert for EGM notices to ensure your voice influences key decisions affecting governance, finances, or leadership.
Frequently Asked Questions
An Extraordinary General Meeting (EGM) is a special meeting of a company's shareholders held outside the regular annual schedule to address urgent matters that require immediate attention and cannot wait until the next Annual General Meeting (AGM).
The key difference is timing and purpose: an AGM is a regular yearly meeting for routine business like approving accounts and electing directors, while an EGM is convened for urgent or extraordinary issues that need immediate shareholder approval.
An EGM can be called by the company's board of directors or by shareholders who meet specific criteria, such as holding at least 10% of the company's paid-up capital or voting power, depending on the jurisdiction.
EGMs are often held to address urgent matters like executive changes, mergers and acquisitions, capital restructuring, amendments to governance documents, crisis management, legal issues, office relocation, or company liquidation.
Before an EGM, the board must set the agenda and notify shareholders in advance to ensure they are informed. During the meeting, the chairman usually conducts the session, presents resolutions, and shareholders discuss and vote on urgent matters.
Yes, in many jurisdictions shareholders with a minimum percentage of voting power, often 10%, can requisition an EGM if the board fails to call one despite urgent issues needing resolution.
In some countries, such as the UK, directors must call an EGM if specific financial thresholds are breached, like when net assets fall to half or less of the called-up share capital, ensuring urgent shareholder intervention.
