An Extraordinary General Meeting (EGM) is an exceptional meeting of the shareholders and managers of the company to take important decisions.
The Role of an Extraordinary General Meeting
An Extraordinary General Meeting (EGM) is a formal meeting that brings together the partners of a company to make decisions. Unlike the Annual General Meeting (AGM), the EGM is not periodic and only intervenes in certain specific cases, other than the day-to-day management of the company. The shareholders vote on specific resolutions, such as changes in the company’s status.
When to call an extraordinary general meeting?
While an ordinary/annual general meeting must be convened regularly (generally once a year) to approve the accounts at the end of the accounting period, the extraordinary general meeting is called only when exceptional decisions have to be taken.
An EGM is necessarily gathered at the time of the decision to modify the statutes of the company. But it must more generally come together when the following points need to be discussed:
- increase or decrease of the share capital,
- modification of the objectives/mission of the company,
- change of head office location,
- liquidation or dissolution of the enterprise.
Since it is a meeting that goes beyond the normal framework and which will address essential subjects in the life of the company, the convocation to the EGM must respect certain rules.
How to convene an extraordinary general meeting?
An extraordinary general meeting may be convened by the managers or the Board of Directors, and as many times as necessary.
It is quite possible to hold at the same time an AGM and an EGM: this is called a mixed general meeting.
Exception: In France, in a limited liability company, only the manager has the capacity to convene a general meeting, whether ordinary or extraordinary. Unless it is an absolute emergency, the partners must be summoned at least 2 weeks in advance, by registered letter with acknowledgment of receipt.
The notice of meeting must include the agenda, date, time and place of the meeting, as well as the resolutions to be discussed and a form of proxy so that a partner may be represented if necessary. The purpose of the notice of meeting allows us to see immediately whether it is the ordinary general meeting or an extraordinary general meeting.
Functions of the vote at an EGM
At an EGM, in order for a vote to be valid, it must respect the principle of quorum and the required majority:
quorum = the minimum number of members to be present at the meeting,
majority required = minimum number of votes in favor of the decision.
In order to validate the decisions taken, the General Meeting must respect the quorum. And the proposed decisions will only be taken if the necessary majority of votes are reached.
At an extraordinary general meeting, the quorum and majority rules are the same for public limited companies and limited liability companies in France.
Quorum: 1/4 of the shares in the case of the first meeting on a given subject, or 1 / 5th of the shares if it is a second discussion on the same subject.
Majority: 2/3 of the votes or 2/3 of the represented shares.
After an EGM, a report or minutes containing the points discussed and the decisions taken must be drawn up.