A concerning trend which we are seeing in recent due diligence reviews is companies, particularly over the last two years, not holding their shareholders’ annual general meeting (AGM).
Although many companies have already booked their 2022 office Christmas parties, companies must not forget to arrange their AGM. There are some very real deadlines quickly approaching for most Irish companies.
What is an AGM?
An AGM is an annual meeting of the shareholders of a company. A company must hold an AGM every calendar year and within nine months of its financial year end. For companies with a 31 December financial year end, this means the deadline for holding their AGM is 30 September. Newly incorporated companies have an initial grace period but must hold their first AGM within 18 months of the date of incorporation.
If your company misses its 2022 AGM deadline, or if it did not hold an AGM in previous years, please get in touch to discuss how we can help your company to address this.
What happens at an AGM?
Company law requires certain specific actions to be on the agenda for an AGM. Some items are only relevant for certain company types, but there are two items which must be on the agenda for all companies:
- The review by the members of the company’s affairs, and
- The consideration of the company’s statutory financial statements
What is the review of the company’s affairs?
Company law does not set any particular format for this review., In our experience, practice varies significantly from company to company. In some companies, this review is a mere formality. In other companies, this review can involve robust exchanges between shareholders and directors.
What if the financial statements are not available for the AGM?
Companies are generally aware of the requirement to file financial statements with the Companies Registration Office (CRO) each year. For companies with a 31 December year end, that filing deadline is generally in late November.
However, that filing deadline can lead companies into falsely believing that their financial statements only need to be finalised by the end of November. This is not the case. The financial statements must be finalised and produced at the AGM.
If your company has a 31 December financial year end and if your 2021 financial statements have not been finalised, you need to speak to your accountant today to finalise these as soon as possible.
Who does and does not receive notice of the AGM?
A company must notify its shareholders and its auditors, if it has auditors. The specific shareholders who are entitled to notice will depend on the rights in the company constitution and in any shareholders’ agreement. For example, non-voting employee shareholders may or may not have the right to attend the AGM.
Certain stakeholders are not automatically entitled to receive notice of the AGM. The holders of securities other than shares, for example, option holders, SAFE holders, convertible loan note holders, do not have a statutory right to receive notice of and attend the AGM. However, we would advise you to check whether the terms of any shareholders’ agreement gives investors a contractual right to notice.
When must the notice be issued?
Shareholders are entitled to at least 21 days’ notice of the AGM, excluding both the day on which the notice is served and the date of the meeting itself. Unless a company’s constitution permits notice to be given by electronic means, notice must be served to each member by hand or by post.
In certain cases, shareholders can unanimously agree to waive this minimum notice.
Are there any exemptions from holding an AGM?
No companies are automatically exempt from the need to hold an AGM, for example:
- Are small and medium-sized companies exempt? No
- Are companies which are audit-exempt exempt? No
- Are companies with just one shareholder exempt? No
- Are Irish subsidiary companies / Irish group company exempt? No
In certain cases, shareholders can pass a written resolution to dispense with the need to hold an AGM. However, this procedure is only available if it is done before the statutory deadline to hold the AGM. This procedure cannot be used to dispense with an overdue AGM.
Companies limited by guarantee, a legal form often used by sports clubs, owner management companies and charities, cannot use this dispensation procedure. They must hold an AGM.ps
While we cannot help your company to organise the office Christmas party, we can help your company to comply with its obligation to hold an AGM.
Remember, if your company misses the deadline for its 2022 AGM or failed to hold an AGM in previous years:
1. Don’t panic
2. Arrange to have last year’s financial statements prepared by your accountants and then approved by the board as soon as possible
3. Consider potential dates and locations for the AGM.
4. Speak to one of our Corporate Governance & Compliance team or your usual MHC contact to discuss how we can help you to manage this process.