Overview of a Shareholders’ Resolution in Lieu of an Annual General Meeting (AGM)

What is a Shareholders’ Resolution in Lieu of an Annual General Meeting (AGM)?

A Shareholders’ Resolution in Lieu of an Annual General Meeting (AGM) is a written resolution for companies to approve matters that would otherwise be approved at an annual general meeting (AGM).

Decisions that are normally required to be made at an AGM (for instance, the approval and adoption of annual accounts; the appointment and removal of directors or auditors; and declaration of final dividends) can be approved in writing if the shareholders choose not to convene and hold an AGM.

When it is duly passed, a Shareholders’ Resolution in Lieu of an Annual General Meeting (AGM) has the same effect as if it was adopted at a duly constituted meeting.

What is the purpose of conducting an Annual General Meeting?

An AGM is a scheduled meeting that is conducted annually to discuss the overall growth of an organization, opportunities, and other routine tasks. The purpose of an Annual General Meeting is to give shareholders the opportunity to ask questions, receive information, and meet with the directors. The date of the annual general meeting is fixed in advance, however, if a company has something important to discuss then these tasks are discussed and approved through a Shareholders’ Resolution in Lieu of an Annual General Meeting (AGM).

What right do all common shareholders have over a company?

The main rights that all common shareholders have over a company are:

Voting Rights: Every shareholder has a voting right to elect the directors in the company annual meeting. If they are not able to vote physically, they can do so by using a proxy and mail in their vote.

Ownership in a portion of the company: Every shareholder has some amount of ownership in the company. However, the influence of shareholders over a company entirely depends upon the number of shares he/she acquires. They also have a claim on the portion of assets owned by the company.

Right to dividends: Dividends can be defined as the sum of money paid to shareholders by the company out of its profits. So, whenever the company makes some profit all the shareholders have the right to get the dividends out of that profit.

Right to transfer ownership: All the common shareholders have the right to sell their shares to another person according to their needs. When they sell their shares, automatically the ownership gets transferred to another person.

Right to information: Shareholders are also entitled to a right to information such as examining basic documents like company bylaws and minutes done by board meetings.

Why is a Shareholders’ Resolution in Lieu of an Annual General Meeting (AGM) needed?

Normally businesses conduct special meetings for discussing matters that need swift resolution however a company can use a Shareholders’ Resolution in Lieu of an Annual General Meeting (AGM) to pass or approve the things that would normally get resolved through an annual general meeting.

Conclusion

In many countries, an annual general meeting is a statutory requirement for a company’s directors and/or shareholders to gather and discuss the company’s financial report, overall business performance, and strategy. However, some business problems need swift resolution and it cannot wait till the next annual general meeting, in that case, a shareholder’s resolution in lieu of an annual general meeting is used to approve and resolve the important business matter.

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