What is AGM? Importance, purpose and merit and demerit of AGM

What is AGM?

Ans:

An Annual General Meeting or AGM in business is a gathering of a company’s interested shareholders. At the AGM, which is usually mandatory, the company’s directors present an annual report. The report informs the stockholders (shareholders) about the company’s profits or losses.

At the AGM, senior management also tells shareholders how well or badly the company performed, why, and what its strategy is. Rather than Annual General Meeting, some people simply say General Meeting.

Importance, purpose and merit of AGM

Importance of AGM: It is only the AGM of the company that the shareholders may exercise any control over the affairs of the company. They may confront their directors, their elected representatives at least once a year. They also get an opportunity to discuss the affairs and review of the working of the company. They may also take necessary steps for the protection of their interest. They may for instance refuse to re-elect a director whose action and policy they disapprove. They may also take up any other business relating to the affairs of the company for discussion. Annual accounts are also presented for consideration of the shareholders and dividends are declared at the AGM.

The purpose of the AGM is to enable the company to report on its affairs during the past year to its shareholders and to deal with the following matters:

• To place before the meeting the approved annual financial statements together with the directors’ report and an audit committee report.
• To elect or re-elect directors who may retire by rotation.
• To approve, in advance the directors’ fees for the year ahead, if not already approved at a shareholders meeting.
• To appoint the audit committee.
• To appoint auditors to the company for the new financial year and to determine the auditors’ remuneration
• To deal with any other business required by the memorandum.

Merit of meetings

•  People can air their views or grievances
•  People avoid inconveniences caused by individual decisions.
•  People get solutions to their problems.
•  People can ask for assistance in tasks that are difficult to perform.
•  Relationship and unity in an organization is promoted through interaction.
•  Encourages sharing of ideas.
•  People’s ideas are respected.
•  Solves conflicts and reduces tension.
•  Improvement in performance of an organization is at tainted through ideas shared in meetings.

 Demerit of meetings

•  Costly in cases where one has to travel to different places to attend meetings.
•  Wastage of time in case the agenda of the meeting is not met or people fail to contribute to the meeting effectively.
•  Slow implementation of activities or task since it has to be approved by members in the meeting. It has to follow certain procedure.
•  Demands personal appearance for the meeting to take place.
• Slow decision making because members have to raise opinions and serious points to be noted down. The members have to decide on which to follow and what to forego. This is not an easy task since members will want their opinions considered.