Agm - Law-Direct Duty

Introduction:

This report will illustrate shareholders participation in listed public companies and particularly on debate whether to change the rules on the requisition of meeting, and debate on the future of AGM. This report starts from the summaries of provision and procedure of AGM and related case for the purpose and importance of the AGM. Following this, it will debate on the future of the AGM will be discussed. Furthermore, this report will illustrate current legislative regime of shareholder requisition of member meeting. Finally, the report will debate on shareholder requisition of member meeting and whether the rules should be changed.

The current legislative regime of mandatory AGM

There are explicit provisions and procedures with respect to the AGM of the Corporation Act 2001. AGM must be held in public company within 18 months after its registration. Also, it must to be held by company at least once a calendar year and within 5 months after the end of its financial year.^[1] However, it does not require a general meeting if the public companies have only one member. Members of company need to write questions to auditor and submit before AGM. Firstly, members of listed company need to submit question to the auditor. Also, auditors are needed to be passed the questions by the company (250PA). Secondly, when an AGM is held, it must be included necessary information: the annual financial report, directors’ report and auditor’s report, the election of directors, the appointment of the auditor and fixing of the auditor’s remuneration ^[2](250R).  Thirdly, at the meeting of listed company’s AGM, it requires auditor to attend (250RA). In addition, there is an opportunity given by shareholders for the members to ask questions or discussion on management of company at the AGM (250S), and questions about conduct of audit and auditor’s report also can be asked the auditors and their representatives (250T).

The case of In the matter of the South British Insurance Company Ltd (1980) refers to an application for order of AGM. In previous AGM, it is impossible for minority shareholders to disrupt the proceedings including make comment of the meeting. However, in the present, minority shareholders or proxies of minority shareholders of the company have rights to disrupt the AGM. The AGM is under a statutory obligation and it also contracts with shareholders. Hononur considers that AGM plays a significant role between shareholders and directors in company. The purpose and importance of the AGM is that it is an opportunity to hold shareholders, directors and director’ representative altogether and it also provides shareholders to have a right to ask questions, to make comment and receive company’s account information. Moreover, the shareholders have rights to vote and elect directors. Therefore, it forbids disruptive behavior happens when chairman calls the AGM and chair have right to terminate the meeting in a proper and orderly manner.

The future of the AGM

The AGM and shareholder engagement – discussion paper illustrates that with more and more the size of many public companies has been increasing, the old concept of an AGM should be changed. The AGM is the only tools between company and shareholders and the paper considers two aspects of AGM: One of them is some functions of AGM need to be changed and abolished. The other is format of the AGM should be more flexible. There are different choices of role and functions of the AGM in the future. Option one is that AGM would be restricted decision-making functions including discussing, electing directors, remunerating report and so on. Under this circumstance, it is more effective than current at the AGM whatever shareholders ask questions, or manage the company. Option two is that decision-making function would be cut off, but questioning, commenting, reporting function would still remain. The third option is that the system of AGM could become more flexible, which is better to fit different size of companies. The last option physical meeting of AGM can be abolished. Report function could be achieved by other form, such as electronic meeting and website. In addition, format of AGM also needs to be changed in the future. With the technology development, it provides more diverse form of the AGM. There are also three options for change. The first option is that shareholders can observe and vote through online participation in order to improve participation levels. Option two is the online-only meeting, which is most economical because all proceedings online without shareholders physical presented at any location. The third approach is virtual meeting, which means all presentations, discussions and voting through electronic solely.  

Shareholder engagement ad participant in Australia (2008) refers AGM is an accountability mechanism between shareholders and company. Evidence shows that participation and engagement of the AGM is essential to both shareholders and company. As a result, the value of share ownership should be improved through maintaining effective mechanisms to manage and control affairs by shareholders. Moreover, directors need to monitor effectively and shareholders manage efficiently to minimize risks. CSA suggested that too much technological advance makes AGM less relevant to shareholders. There is constantly falling of AGM attendance in a long term. CSA also maintain that AGM is less attractive to the shareholders because of the absence of a deliberative purpose. CSA also make some change of AGM. The first is that shareholders and directors must discuss and question at AGMs at a minimum time. The second is when in the crowded AGM season schedule of AGMs needs to be extended. The final change is to motivate chairs to give answer to shareholders at the AGM. Mr. Stephen Mayne also gives some advices to improve AGMs. First is that company should maximize the number of attendances by means of choosing more convenient time for shareholders and directors. The second is that forcing shareholders to ask questions at the meeting. The third is that individual shareholders need to limit their speaking time at the AGMs to protect them from being hijacked. The committee claims that AGM is the only opportunity for shareholders to have a face-to-face meeting although technology has undermined the importance of AGM to shareholders. The committee suggests that company needs to arrange AGMs to hold at appropriate time, which can increase attendance rate because online participation is unfair to those persons who attend the meeting. The committee also has opinion that ASIC should prepare for guidelines or principles of meeting carefully, which cannot only raise attendance level but also improve efficiency of discussing questions.