Extraordinary General Meetings (EGM)

Definition

Extraordinary General Meetings (EGM) are meetings called by a company that are outside of its regular, scheduled Annual General Meeting. They are usually called to discuss pressing matters that require immediate attention and cannot wait until the next regular meeting. Typical issues might include mergers and acquisitions, changes to corporate governance, or other critical business matters.

Phonetic

Extraordinary: /ˌek.strəˈɔːr.dən.er.i/General: /ˈdʒen.ər.əl/Meetings: /ˈmiː.tɪŋz/EGM: /ˈiːdʒiːem/

Key Takeaways

Sure, here you go:

1. Extraordinary General Meetings (EGM) are unscheduled meetings outside of the normal Annual General Meetings (AGM) and are typically called to deal with urgent issues. They provide a platform for shareholders to vote on important matters that can’t wait until the next AGM.
2. The notice period for an EGM is often shorter than that for AGM because it is typically called in response to a crucial matter that requires immediate attention. But the minimum notice period may vary depending upon the company’s bylaws or the regulatory laws of the country.
3. Matters dealt with in EGMs are usually those that significantly affect the company’s operation or profitability, such as mergers and acquisitions, amendments to the company’s constitution, large capital expenditures, or divestment of a business division.

Importance

Extraordinary General Meetings (EGM) play a crucial role in business and finance as they provide a platform for shareholders to discuss and make important decisions on urgent and exceptional matters that emerge between two Annual General Meetings (AGM). As the issues addressed during EGMs are typically of pressing nature, they offer an opportunity for corporate responsiveness and adaptability, facilitating timely decision making that can potentially affect a company’s operations, financial standing or strategic direction. In addition, EGMs also exemplify good corporate governance practice by creating room for transparency, accountability, and stakeholder engagement in the decision making process, thereby impacting a company’s reputation and investor confidence.

Explanation

Extraordinary General Meetings, widely termed as EGM, serve a critical role in facilitating decision-making outside the regular schedule of an organization or business. These gatherings are especially relevant when urgent matters arise that require immediate attention and cannot wait until the next scheduled Annual General Meeting (AGM). The purpose of EGM is to enable stakeholders to agree on pressing issues and make pertinent decisions that affect the operation and future direction of the company. EGMs can be used for numerous situations such as approving significant business decisions, adjusting company regulations, appointing new directors, making changes to capital structure, or addressing any crises that may have arisen. The day-to-day management of a company may not be in a position to deal with these issues unilaterally, necessitating the input of the company’s shareholders. Thus, EGMs provide an essential platform for discussion and decision-making in extraordinary circumstances that could significantly impact a company’s trajectory.

Examples

1. Yahoo Inc.’s Extraordinary General Meeting (EGM) in 2008: This meeting was called by shareholders after Microsoft proposed a takeover bid for Yahoo. At the EGM, shareholders expressed their opinions, which were against the previous decision made by the Board of Directors to reject Microsoft’s offer. The meeting resulted in significant managerial and structural changes in the company. 2. Volkswagen’s Extraordinary General Meeting in 2015: This EGM was called in the wake of the emission scandal where Volkswagen admitted to installing software on cars to manipulate emissions tests. The scandal led to a drastic decrease in the company’s market value. The EGM was held for the leadership to explain the situation to the shareholders, discuss the steps for damage control, and implement new stringent measures to prevent such occurrences in the future. 3. British Petroleum (BP) EGM in 2010: BP held an EGM after the Deepwater Horizon oil spill in the Gulf of Mexico, one of the worst environmental disasters in the US history. The company had to face billions in fines and its image was significantly tarnished. At the EGM, shareholders and board members discussed the impact of the incident, potential legal and financial implications, and strategies for handling the crisis.

Frequently Asked Questions(FAQ)

Related Finance Terms

• Special Resolution
• Proxy Voting
• Quorum
• Corporate Governance
• Shareholders’ Rights

Sources for More Information

• Investopedia
• Corporate Finance Institute
• LinkedIn
• Sleek