What does it mean when a company you have invested in or are planning to invest in, decides to have an ‘extraordinary general meeting’? You may have heard the term before but might be unclear on what the term means and how it pertains to the behind-the-scenes functions of the company. So, to help you better understand the concept, here is a closer look at extraordinary general meetings, why they are held as well the procedure that goes into holding them.
What is Extraordinary General Meeting?
The term ‘extraordinary’ is used to mean ‘unusual’ and is used to refer to something that is out of the ordinary. Therefore, in order to fully understand the extraordinary general meeting meaning, we must first understand the context of these meetings.
In general, the shareholders of a company typically convene on a yearly basis for a mandatory meeting known as the Annual General Meeting, or AGM. During these regular meetings, reports are presented to the shareholders and various functions such as voting, appointments, compensations are determined and carried out. These meetings are planned out in advance and take place within regular business hours.
With extraordinary general meetings, however, this is not the case. In simple terms, extraordinary general meetings can be understood as shareholder meetings that take place apart from the Annual General Meetings and at an irregular time. These extraordinary shareholders meetings are held by the company or organization to deliberate upon urgent and unexpected issues and are therefore deemed “extraordinary”.
Why are Extraordinary General Meetings Held?
In the event that the business of a company is going on as usual, all updates and reports regarding its performance, appointments and other aspects can usually wait until the next AGM. Hence, if an extraordinary general meeting is called for a company, it indicates that there are unexpectedly urgent matters that the shareholders are required to discuss and resolve. Some examples of these urgent matters could be the resolution of a sudden legal situation, or it could even be the removal of a senior executive in the organisation.
Unlike other forms of meetings such as an Annual General Meeting or a statutory meeting, extraordinary general meetings are reserved exclusively to discuss special business or resolve situations of crisis for the company. Moreover, these meetings hold such high priority for the shareholders that while AGMs can only be held on a non-holiday and during business hours, extraordinary shareholders meetings can be held on holidays as well as outside business hours.
What is the Procedure for Holding an Extraordinary General Meetings?
Given the importance that extraordinary general meetings hold, there are specific and stringent guidelines surrounding how these meetings are to be hello as well who can call these meetings in the first place. Here are the members and circumstances for the holding of an extraordinary general meeting:
– The Board of a company, on its own motion, can hold anextraordinary general meeting.
– The Director of a company can also call for an extraordinary general meetingon his or her discretion.
– The Board can appeal for an extraordinary general meeting at the request of its members. On the other hand, the requisitionists themselves can also appeal for the meeting and call for it within three months of their request, even if the Board does not demand for one itself.
– The requisitionists in the aforementioned case constitute the members and shareholders of a company. However, only those individuals that have a substantial voting power or stake in the company’s capital have the power to request for an extraordinary shareholders meeting.
– An extraordinary general meetingalso has an essential responsibility towards the shareholders that participate in it. This is the presenting of an explanatory statement that contains all the details about why the meeting is being held, what issues it will address as well as its importance at the given point in time. It also contains relevant information that can help the members make prudent decisions on the matters discussed and voted on during the extraordinary general meeting.
Hopefully, this gives you a better insight into the extraordinary general meeting meaning as well as the reasons behind why they are held in the first place. Concepts such as these can help you stay apprised of the updates and changing circumstances of the companies you invest in and make prudent investment choices.