Friday, 12 September 2008

Don't despair with annual meetings

Companies dreading the prospect of yet another annual general meeting may have the chance to ditch them altogether.

Graham Davies, our Senior Partner, said thanks to the Companies Act 2006, the meetings could be a thing of the past for some firms.

“The previous opt-out system, where a company needed to pass a resolution to do away with the need for an AGM, has been replaced by an opt-in system. Now, a private limited company only needs to hold an AGM if it wants to, or if it has to – either because its articles say so, or because ten per cent of its shareholders demand one.”

But Graham warned that bosses should always check their company’s articles to make sure they were not acting illegally.

“The problem is what happens to all the business issues that would usually have been dealt with at the meeting, such as approval of accounts, and the retirement of directors by rotation.”

Graham said since October 2007, companies were no longer required to put their accounts before the members at an AGM. “There is still an obligation though to send them to all your company’s shareholders.”

He said companies could of course retain their AGM as it was a good opportunity to bring everyone together. “If you do plan to continue holding annual meetings, you must be aware that the rules have now changed.”

Everyone must be given 14 days’ notice of the meeting (previously it was 21 days), and any resolutions proposed will be ordinary or special (extraordinary and elective resolutions no longer exist).

“For some companies, the AGM will continue to be a useful chance to review the business and its performance – for others, if the circumstances are right, it may well now be a thing of the past.”