What is Extraordinary General Meeting (EGM)? | Definition, Features, Advantages vs Disadvantages

An Extraordinary General Meeting (EGM) is a meeting called for all shareholders of a company, members of an organization, or employees at an office at a time other than the scheduled Annual General Meeting (AGM).

An Extraordinary General Meeting is always held on an emergency or urgent basis, where the issue is too crucial not to be discussed until the next Annual General Meeting. This only happens in very rare and extreme situations in which the entire membership must be present for a decision to be taken.

Since these are emergency meetings, most people may be involved at a moment’s notice. Thus the purpose of the meeting is always highlighted and spelled out clearly for members to understand the pressing urgency.

Key Takeaways

1. An Extraordinary General Meeting (EGM) is a meeting of a company’s shareholders called to discuss and vote on significant matters that cannot be postponed until the next Annual General Meeting.
2. The board of directors or shareholders can convene an EGM, and the notice for the meeting must be given in advance to all shareholders.
3. The decisions taken in an EGM are binding on the company and its shareholders, and the meeting minutes must be maintained for legal and record-keeping purposes.

Features of an EGM

1. Usually, EGMs are held only in very urgent legal and administrative matters. If, for a certain reason, the financial interest or safety of the members concerned is affected, this meeting may be held.
2. EGMs may be held on holidays and weekends because of the urgency. This is a primary difference it has from AGMs.
3. The board of directors calls AGMs. Shareholders may call an EGM, members of an organization, or even a tribunal.
4. In case of the absence of some members, voting on any urgent matters may also take place by proxy. Even though this is not an ideal solution, it is necessary to resolve issues quickly.
5. Procedure for the conduction of the meeting may be different than it is at AGMs. Since time is of the essence, only relevant topics may be raised from the minutes of the previous meetings.

Advantages of Extraordinary General Meetings

1. Providing an EGM is an absolute necessity to ensure transparency on the part of any organization concerning its members or shareholders. It is key in protecting the members’ interests and ensuring their involvement in important decision-making.
2. It is an important way of protecting and helping members of any organization assert their rights. In a company’s bylaws, details may often be laid out regarding which situations require the intervention of shareholders through an EGM. This ensures the board of directors is not empowered beyond reason.
3. Because there are strict guidelines for the calling of an EGM, it can be said with certainty that members are aware of the gravity of the situation. Further, the requirement to be informed about the issue ensures transparency.

Disadvantages of Extraordinary General Meetings

1. Since the problem primarily concerns the board of directors directly, it is possible that the resolution is presented to the members concerned in a manner that suits their purpose.
2. An EGM is often held on weekends and national holidays. All important shareholders may not be available for that duration, and a resolution may be passed without arriving at a clear majority consensus.
3. Proxy votes may not always reflect the reality of the situation.

References

1. https://www.researchgate.net/profile/AHMAD_SAIFUL_AZLIN_PUTEH_SALIN/publication/272831516_Extraordinary_General_Meeting_Shareholders’Protection_and_Transparency-_Empirical_Evidence_from_Public_Listed_Companies/links/54f1385b0cf24eb87941eb39/Extraordinary-General-Meeting-Shareholders-Protection-and-Transparency-Empirical-Evidence-from-Public-Listed-Companies.pdf