The Hindu Business Line : AGMs relevant?

Come June-September, companies, especially their accounts and secretarial departments, are on tenterhooks, to ensure that the Annual General Meetings (AGMs) are held within the prescribed time. Generally, the business to be transacted, is four-fold, namely:

consideration of the accounts, balance sheet and the reports of the board of directors and auditors;

declaration of a dividend;

appointment of directors in place of those retiring; and

appointment of and fixing of remuneration for auditors.

Doubts have, of late, arisen about the necessity and usefulness of AGMs. There is no unanimity about their relevance and utility. In most AGMs nowadays, basic obligations are ignored and peripheral issues are raised or petty favours solicited. Persons with a few shares, especially of big companies, often have no substantial issues to raise at such meetings. They are only interested in the hospitality provided by the companies and in the gifts in cash or kind. But they usually raise such noise that the voices of well-intentioned shareholders get lost (T. N. Pandey, Advocate in Chartered Secretary — August 2007).

The UK once entertained the idea of doing away with AGMs altogether, even for listed companies (refer UK Consultation Document of 2000) for two reasons:

AGMs have failed to provide a forum for shareholders’ debate and information exchange that they were designed to provide; and

individual shareholders do not have equality of information and participation rights, with shareholders at different parts of the country, barring the registered office area, being unable to participate. Ultimately, private companies have been empowered to decide for them to hold, or not to hold, their AGMs. One recent publication suggested pre/post AGM meetings at different locations and the use of Internet and video-conferencing to reach a wider shareholder audience” (J. Krishnamurthy FCS, Hyderabad, in Chartered Secretary, November 2007).

In the US, there are two kinds of shareholders’ meetings — annual and special. For annual meetings, the by-laws generally fix the date — the agenda may include reports from management, consideration of resolutions introduced on behalf of management and such other matters as may properly come before such meetings. Other important features are:

accounts need not be approved by shareholders;

a quorum is required to start the meeting officially — courts are split as to whether a meeting that begins with a quorum may continue after some shareholders walk out;

the general format of a shareholders’ meeting includes a secretary’s report, a treasurer’s report, election of directors, old business and new business.

(Extracts from Key to Incorporating by S.A. Fox and supplemented by this writer’s attendance at an annual meeting in U.S.A.). The Centre has been promising for long that a new, completely revised Companies Act, mainly to take into account the dynamic changes in the corporate world is on the anvil. One cannot do away with the necessity of holding annual general meetings. At best, they give the directors an opportunity to meet the ‘owners’ of the company, at least once a year, and note the sentiments expressed about the company.

Some novel and highly useful propositions may come out of such meetings, conducive to the growth of companies, horizontally and vertically. As such, it is best not to tinker with the present provisions and leave them as they are in any contemplated amendments.

(The author is a company secretary.)

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