No more AGMs

Amongst the many changes introduced by the Companies Act 2006 is the good news that private companies will no longer need to hold an annual general meeting (AGM) and will find it far easier to conduct almost all of their business by written resolution.

For many years, company law required every company, including private companies, to hold an AGM with not more than 15 months between meetings. This was amended in 1989 to allow private companies to make an election “by elective resolution” to dispense with the AGM. Many private companies, but not all, took advantage of this. Holding a formal members’ meeting always helped to facilitate the passing of necessary resolutions including, for example, the payment of a dividend and the reappointment of the auditor where the company has an audit.

From 1 October 2007 there is no longer any requirement in the law for private companies to have an AGM. However, if there is an existing provision in the Articles of the company requiring an AGM this will need to be removed by special resolution before you can dispense with the AGM. A company may of course still choose to have a shareholders’ meeting and meetings can be called by directors or by members representing 10% of voting shares.

The new legislation envisages written resolutions being used to make nearly all shareholders’ decisions. If the company wishes to remove a director or the auditor, then a meeting is still required by the legislation.

Written resolutions can be proposed either by the directors or by members representing 5% of votes or whatever is stated in the articles. Previously a written resolution required the unanimous approval of the shareholders. Under the new Act, and again from 1 October 2007, private companies will be able to pass written resolutions without needing the consent of all shareholders. The resolution can also be circulated to the shareholders electronically, for example by publication on a website. There are two types of written resolution in the Act; ordinary resolutions which require a simple majority of the eligible votes to approve them and special resolutions which require 75% actually voting in favour. Please be aware that the Articles of individual companies sometimes require a higher majority for each of these.

In the absence of an AGM, private company meetings are now on 14 days notice unless the Articles require something different and 90% of members rather than the previous 95% can agree to hold a meeting at short notice.
Other consequences of no longer having an AGM are:

• where the company has an audit the auditor is automatically re-appointed for the following year
• private companies will no longer need to lay accounts before the AGM; however, shareholders will still be entitled to receive the accounts as at present.

These new rules will enable you to make decisions more quickly and efficiently without the need for a meeting and will be of benefit for most private companies. Please contact us if you would like to discuss any specific matters in more detail.