Meeting of members should be held to take members approval on some business matters. To transact ordinary business and the special business (if any) of the company, the annual general meeting is held by the board, whereas special business is discussed in the extraordinary general meeting.
A company has a separate legal identity distinct from its members, but they are the ones who establish the company as a corporate entity. Nevertheless, the company is an artificial person, and so its will is expressed, in the form of resolutions passed at the meetings. There are three types of a business meeting convened by the company, which are annual general meeting, extraordinary general meeting and class meeting.
Take a read of this article to understand the differences between annual general meeting ad extraordinary general meeting.
Content: Annual General Meeting (AGM) Vs Extraordinary General Meeting (EGM)
|Basis for Comparison||Annual General Meeting (AGM)||Extraordinary General Meeting (EGM)|
|Meaning||An Annual General Meeting (AGM) is the general meeting which must be held by the company every year, to discuss various business matters.||An Extraordinary General Meeting (EGM) is any meeting other than the AGM in which business relating to company's management are transacted.|
|First meeting||Must be held within 9 months of the end of the financial year.||No such requirement|
|Business||Ordinary business and special business (if any) is transacted.||Special business only.|
|Day and Time||It can be held on any day excluding national holiday, in business hours only.||It can be held on any day including national holiday, and any time during a day.|
|Penalty||When meeting is not summoned within the stipulated time, penalty is levied.||No penalty is prescribed as per law.|
|Convened by||Board||Board, Board on requisition of shareholders, requisitionist or tribunal.|
Definition of Annual General Meeting (AGM)
Annual General Meeting (AGM), as its name suggests, is the company’s yearly event, wherein members have a chance to talk about company’s performance, profitability and day to day activities. According to the Companies Act, 2013, every company not including one person company, must convene an annual general meeting, once in a year, to discuss matters of ordinary business.
In case the company does not conduct an annual general meeting in any financial year, the members have the right to approach the appropriate authority, who in turn gives directions for calling the Annual General Meeting of the company. There are two types of Annual General Meeting, given as under:
- First Annual General Meeting: It should be convened within nine months of the end of the financial year. Therefore, there is no need to hold any AGM in the year of company’s commencement.
- Subsequent Annual General Meeting: All other AGM after first one are known as subsequent annual general meeting, which is to be held within six months of the end of the financial year or 15 months from the last AGM, whichever is earlier.
Definition of Extraordinary General Meeting (EGM)
An extraordinary general meeting refers to the general meeting that is held, to transact the matters concerning the administration of company’s affairs which requires the consent of the members concerned.
When it is not possible for the company to wait for the next AGM, the company’s articles of association provide for holding general meeting other than the AGM, to transact special business items, which are known as Extraordinary General Meeting. It may be called by:
- Board: Whenever the board considers suitable, it holds an extraordinary general meeting of the company.
- Board on the requisition of members: The board summons for an EGM, when it receives requisition from a sufficient number of members, on the date of receipt of the requisition.
- Requisitionist: When the board, does not call for meeting within 21 days from the date of receipt of valid requisition with respect to any matter, the requisitionist may call for EGM, within 45 days of such requisition.
- Tribunal: An EGM may also be called by the tribunal on the application of any member or director, who possess the right of casting votes if in case it is not possible to convene the member’s meeting.
Key Differences Between Annual General Meeting (AGM) and Extraordinary General Meeting (EGM)
The points presented here, explains the differences between annual general meeting (AGM) and extraordinary general meeting (EGM):
- An Annual General Meeting (AGM) is the meeting which should be organised by the company in each calendar year, to discuss various business matters. On the other extreme, an Extraordinary General Meeting (EGM) is any meeting other than the AGM in which business concerning company’s management are discussed.
- The first Annual General Meeting (AGM) must be convened not more than nine months from the close of the financial year. Conversely, there is no such requirement in the case of Extraordinary General Meeting (EGM).
- Both ordinary business and special business are transacted at AGM, whereas only special business is transacted at EGM.
- An AGM should be conducted on any day other than a national holiday, in business hours only. As against, an EGM can be carried out on any day including national holiday, and anytime during a day.
- When Annual General Meeting (AGM) is not called within the stipulated time, penalty up to Rs. 1,00,000 and Rs. 5000 per day is imposed. In contrast, no penalty is prescribed as per law for not calling an Extraordinary General Meeting (EGM).
- While an AGM is called by the board only, EGM can be summoned by Board, Board on the requisition of shareholders, requisitionist or tribunal.
21 days clear notice is to be given to every member, for carrying out the general meeting. These meetings are held by the company to make sure that an equal and fair opportunity is provided to all the members, to participate in the decision-making process of the company.