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In Finance, What Is an Extraordinary General Meeting?

Extraordinary general meetings are rare occurrences for many companies.
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  • Written By: Stacy Blumberg
  • Edited By: Heather Bailey
  • Last Modified Date: 12 December 2014
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Companies typically have an annual general meeting, or AGM, once a year. On occasion, there is a need to have another meeting outside of the annual general meeting. An extraordinary general meeting, called an EGM, is any meeting held by a company other than the annual general meeting.

Annual general meetings are required by law in many countries for companies who trade their stock publicly. The date of the AGM may change from year to year but usually no more than 15 months can pass between them. Goals of the AGM include election of directors, presentation and approval of audited accounts, and discussions of the firm’s past and future activities.

Unlike annual general meetings, extraordinary general meetings are rare. An EGM is held when an issue arises that is too pressing to wait until the next AGM to address. Extraordinary general meetings, sometimes called emergency general meetings or special general meetings, are required by law in some countries if a company’s net assets fall below a certain point. In the US, this amount is half the value of its called-up share capital.

An extraordinary general meeting can be called by directors, shareholders, or auditors. To call a special general meeting, shareholders must possess a certain percentage of the voting rights. In the US, shareholders must have at least ten percent of voting rights to call an EGM. Departing auditors also have the ability to call an extraordinary general meeting, but this is extremely rare.

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The purpose of an extraordinary general meeting depends on the circumstance. Emergency general meetings may be called to elect a new board of directors. They may also convene to approve a rights issue or a change to the company’s articles of association.

Once an extraordinary general meeting is proposed, a notice must be sent to all existing shareholders alerting them of the meeting time, date, and location. Notices usually give 21 days or more advance notice of the meeting to allow the shareholders to plan accordingly. The notice also alerts the shareholders to the issues to be addressed at the meeting. If a shareholder is not able to make the meeting, a proxy may be assigned.

Extraordinary general meetings are usually run in a similar manner to an annual general meeting. There is a set agenda followed and a chairperson who runs the meeting. An extraordinary general meeting may be shorter than an annual general meeting depending on the cause for calling the meeting.

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Discuss this Article

anon319435
Post 3

How is the decision made in an EGM? Let's say we have 100 shareholders and only 15 of them attended the EGM. Can the 15 folks make a decision or will the EGM be postponed due to lack of attendance?

allenJo
Post 2

@David09 - In all the years that I’ve owned stock in a company, I’ve received notices for maybe a handful of these emergency meetings. I’ve never attended them personally, instead choosing to rely on the published shareholder meeting minutes.

In none of the emergency meetings was there anything earthshaking in my opinion.

Frankly, if it was an emergency brought on by a drop in the company’s market valuation, the public at large would have known about it already before the meeting.

It is, after all, the drop in stock price that creates the emergency in the first place, is it not? In my opinion official meetings are always too little, too late, in that regard.

David09
Post 1

I wonder if an extraordinary stockholders meeting will cause the share price of a company to immediately plummet? I suppose it depends on the reason for the meeting to be called – not every meeting is the result of undercapitalization.

But in today’s market, any “emergency meeting” is likely to make investors a bit nervous and jittery. I worked in a telecommunications company where they had to call a sudden meeting in advance of the layoffs.

We knew what the meeting was about, and management wasn’t very good at breaking the news to us. Somehow, I’ve become inoculated to spin as a result, over the years.

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