What is an Extraordinary General Meeting (EGM)?
An Extraordinary General Meeting (EGM) is a meeting held by a company or an organization to deliberate upon matters that require the urgent attention of senior executives, the board of directors, and all shareholders and cannot be deferred until the next scheduled annual general meeting. The EGM is convened at an irregular time to address a crisis.
All matters transacted at an EGM are deemed special. For example, the removal of a top executive might constitute the agenda of an extraordinary general meeting. An EGM is also called a special/emergency general meeting.
- An Extraordinary General Meeting (EGM) is a meeting held by a company to deliberate upon matters that require the urgent attention of senior executives, the board of directors, and all shareholders and cannot be deferred till the next scheduled annual general meeting.
- According to the Indian Companies Act, 2013, an EGM can be convened by the board as well as by specific members/shareholders of the company that fulfills certain criteria.
- Usually, the EGM is conducted by the chairman who reads out the resolutions, addresses the questions and concerns of the members, oversees the voting, and declares the results.
Calling an EGM
According to the Indian Companies Act of 2013, an extraordinary general meeting can be convened by specific members/shareholders or groups of members of a company that fulfills the criteria listed below:
1. If the company has a share capital
Only the members that hold 10% of the company’s paid-up capital or more can call an EGM. They must carry voting rights regarding the agenda on the date of submitting the request.
2. If the company does not have a share capital
An EGM can be called by the members that hold at least 10% of the total voting power of all the members who have a right to vote on the matter on the date of submitting the request.
A requisition for an EGM by the members is considered to be valid if clearly states the specific issue for calling the meeting, is duly signed by the members, and is submitted at the company’s registered office.
Upon the submission of a valid request, the board of directors of the company must call for an extraordinary general meeting within three weeks. In case the board fails to do so, the members can themselves call the EGM within three months of depositing the request. An EGM meeting the criteria can be adjourned to a future date as well.
Procedure of an EGM
Before calling an EGM, the board of directors finalizes the resolutions to be deliberated by members and/or shareholders in the meeting. The members are to be informed of the resolutions and their importance well in advance so that they can research the matter and effectively express their opinions and concerns in the meeting.
Unless otherwise stated in the company’s bylaws, at least five members must be personally present in an EGM in case of a public company, and at least two in case of any other company.
Usually, the EGM is conducted by the chairman who reads out the resolutions. The board, expected to possess a thorough knowledge of the situation, appraises the members of the benefits of the resolution and addresses their questions.
Votes are cast by the members in the interest of the shareholders and the company, and the result is declared. Members who are unable to attend the EGM may delegate their voting power to another member, known as a “proxy.” The rules regarding proxy votes vary from one organization to another.
Annual General Meeting (AGM) vs. Extraordinary General Meeting (EGM)
- An AGM must be held by the company within nine months of the end of every financial year to discuss various business matters with the members, while an EGM has no such requirement.
- An EGM can be called only for a special agenda or a situation of crisis requiring urgent attention of the members, while an AGM can be called for ordinary or special business.
- An EGM can be held at a national holiday and outside of business hours, which is not the case with an AGM.
- An AGM can only be convened by the board of directors of a company, while an EGM can additionally be called on the request of the members as detailed above.
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