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

An Extraordinary General Meeting (EGM) is a meeting called for all shareholders of a company, or 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 at an emergency or urgent basis, where the issue at hand is too crucial to not be discussed till the next scheduled Annual General Meeting. This only happens in very rare and extreme situations in which the entire membership is required to be present for a decision to be taken.

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

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 members concerned is affected, this meeting may be held.
  2. EGMs may be held on holidays as well as weekends because of the urgency. This is a primary difference it has from AGMs.
  3. AGMs are usually called by the board of directors. An EGM may be called by shareholders, members of an organization, or even a tribunal.
  4. In case of 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 for quick resolution of issues.
  5. Procedure for the conduction of the meeting may be different than it usually is at AGMs. Since time is usually of the essence, only relevant topics may be raised from the minutes of the previous meetings.

Advantages of Extraordinary General Meetings

  1. The provision of an EGM is an absolute necessity to ensure transparency on the part of any organization with respect to its members or shareholders. It is key in protecting the interests of the members concerned and ensures 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 often details may 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 that they must be informed about the issue ensures transparency.
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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 in that duration and a resolution may be passed without arriving at a clear majority consensus.
  3. Proxy votes may always not 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
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