The ABCs of AGMs
You had that great business idea and you wisely incorporated your company, and now with the pesky formalities out of the way you are busy making your business grow and prosper and profitable. That’s great that you have taken these initial steps and are off to the races businesswise, but the procedure of being a corporation doesn’t end when you receive your certificate of incorporation. Corporations are like houseplants or humidors — they need ongoing attention. One of the requirements of having a corporation is having annual general meetings.
Under s. 182 of the BC Business Corporations Act, a company is required to hold annual general meetings more or less annually. The first annual general meeting of a newly incorporated company must occur within the first 18 months of its existence (typically when it is incorporated or amalgamated). After the inaugural meeting, a corporation must continue to hold AGMs at least once each calendar year and not more than 15 months after its last AGM.
If the company is holding a physical meeting, the directors must send out notice of the AGM to the shareholders. Notice of the meeting must contain the details of where and when it is, as well as the business that will be transacted; typically the company’s articles will contain details on how the notice must be delivered. The notice is to be delivered to the shareholders at least the “prescribed number of days” before the meeting but not more than two months before the meeting. The prescribed number of days for notice is set out in s. 3 of the Regulations for the Business Corporations Act and is also the number of days set out in the articles (if that number is at least 10 days and the company is not a public company). If no number of days is set out in the articles or if that number is not at least 10 days, then the required number of days’ notice is 21 days.
Certain business is required to occur at each AGM, namely:
-financial statements (if any) that the directors are required to present must be produced and published (pursuant to s. 198), along with an auditor’s report (required for reporting issuers) [note that the financial statements must have been previously approved by the directors of the company and signed by at least one of them and deposited in the company’s records office on or before the date of the AGM];
-an auditor must be either appointed or waived by the shareholders of the company — in order to waive the appointment of an auditor there must be a unanimous resolution of all shareholders (whether or not they hold voting shares);
-typically, directors are elected by the shareholders at AGM, although this is not required under the Act and the precise timing for election of directors will depend in part on the company’s articles; and
-additionally, the directors will typically provide a report to the shareholders of the company (although this is not required under the Act) any other ordinary business may be transacted at the meeting.
With this in mind, in essence: the meeting is held, business is transacted, shareholders vote, minutes are taken, and next year you get to do it all again.
Of course many companies are relatively small operations with only one shareholder or simply do not care for the formality of holding a physical meeting; for these companies, there is the option of waiving the AGM. Pursuant to s. 182 (2) of the Business Corporations Act, all of the shareholders who would be entitled to vote at an AGM can, by a unanimous, written and signed resolution, consent to all of the business that would be required to be transacted at the meeting, or can opt to waive the holding of the AGM that year.
A couple of things are worth noting about this. This must be a unanimous resolution, which makes it fairly easy to accomplish if you only have a handful of shareholders, but once you have a greater number of shareholders, arranging for them all to pass a resolution to waive the AGM can be very challenging. It is for this reason that many medium sized and larger companies opt to have the meeting.
Annual General Meetings seem self-explanatory, but obviously they are a bit more complicated than the name suggests. There is a bundle of laws and regulations that must be complied with correctly to ensure that your company stays in compliance with the Business Corporations Act and in good standing with the Registrar. Not having an AGM may mean that a future directors’ resolution is invalid, or that the directors have not been duly elected, or that the corresponding appointment of officers by said directors cannot be confirmed. Furthermore, failing to file the required post-AGM (or post-waiver of the AGM) Annual Report can ultimately result in the company being dissolved.
Take the appropriate steps to ensure that your AGMs and the business transacted are properly and if it all seems a bit overwhelming, give us a call.