Annual General Meeting
Also written AGM
The meeting every company must call once a year, where shareholders vote on major decisions and approve the dividend — and the R&T agent runs the notices, proxies and e-voting behind it.
In plain language
A company's shareholders are its owners, but they do not run the business day to day. Once a year they meet to review it. This meeting is the Annual General Meeting, or AGM.
The workbook calls the general body of shareholders the highest decision-making authority in a corporate set-up. At the AGM, shareholders attend, ask questions, and vote for or against the proposals put to them. A company's dividend, for instance, is declared by the board but approved by shareholders at the AGM.
The R&T agent is not a shareholder, but it does most of the paperwork that makes the AGM happen: notices, proxy forms, attendance registers and, increasingly, the e-voting behind it.
How it works
The R&T agent's AGM notice must reach shareholders 25 days in advance by post or courier, or 21 days in advance by email. The notice goes to members, statutory and secretarial auditors, all directors and the debenture trustee, if any.
Before the meeting, the R&T agent also has the annual report despatched not less than 21 days before the AGM — as a soft copy to shareholders who have registered an email address, and as a hard copy of the prescribed abridged statement, or the full report on request, to the rest.
Proxy forms must reach the company at least 48 hours before the AGM. Where the meeting offers e-voting, the voting site is activated on the date the company sets and closes at 5.00 p.m. on the day before the AGM. A company running the meeting by video conferencing must be able to seat at least 1,000 members on a first-come-first-served basis.
During the meeting, the R&T agent confirms the quorum, reports the number of registrations to the company secretary, and activates e-voting at the AGM itself on the chairman's instruction.
A worked example
Kaveri Industries Ltd fixes its AGM for 29 September. Working backwards from that date:
| Deadline | Task |
|---|---|
| By 8 September (21 days before) | Annual report despatched |
| By 4 September (25 days before) | AGM notice posted/couriered |
| By 8 September (21 days before) | AGM notice emailed to those registered |
| By 27 September, 5.00 p.m. | E-voting site closes |
| By 27 September, before 9.00 a.m. on the 27th (48 hours before) | Proxy forms must be received |
A shareholder holding 12,000 shares who wants a resolution defeated must vote, or lodge a proxy, before the 5.00 p.m. cut-off on 27 September — arriving at the meeting itself, with the e-voting window already closed, leaves only a poll taken at the meeting, if the company allows one.
Why NISM asks about it
Chapter 2, section 2.2, introduces AGM rights as part of ownership. Chapter 13, sections 13.8 and 13.10, cover the R&T agent's pre-AGM, during-AGM and post-AGM duties in detail. Expect the 25-day / 21-day notice distinction, the 48-hour proxy deadline and the e-voting close time.
Common exam traps
- 25 days is for post or courier; 21 days is for email. The two numbers sit in the same sentence and are routinely swapped.
- The annual report's 21-day rule is separate from the notice period — both are 21 days for email, which is easy to conflate, but they are two different documents.
- The dividend is declared by the board, but approved by shareholders at the AGM — the board does not have the final word.
- Proxy forms are due 48 hours before the meeting, not 24 hours and not "before the meeting starts".
Check yourself
1.________ rights give the equity investor a say in the management of the company.
- a)Voting
- b)Dividend
- c)Both voting and dividend
- d)Transfer
Show the answer
Answer: (a) Voting
Investors are given voting rights which allow them to vote on important decisions taken by the company. The voting rights are in proportion to the number of shares held by the investor and allow them to express their views by voting 'For' or 'Against' a proposal.
Voting is the mechanism of management participation — dividend is a return, not a say.
Where the vote is exercised: the General Body Meeting of shareholders is the highest decision making authority in a corporate setup. Typically, a company will call a meeting of the shareholders once a year. This meeting is known as the Annual General Meeting (AGM). Shareholders have a right to attend the AGM of the company and participate in the proceedings.
Note that the General Body Meeting outranks the board.
What the dividend right actually is: ownership rights in a company also mean that the investors who hold equity shares are entitled to participate in the profits of the company. This participation will be in the form of dividends that are periodically declared by the company.
A right to share profits, not to direct the business — which disposes of option C.
Option D names a separate right. Ownership Transfer Rights mean that a company is not required to return the equity capital to the investor as it is perpetual in nature. However, investors can sell their shares to other investors who may want to buy the shares.
The other rights listed: right to inspect documents related to company workings, right to legal recourse in case of mis-management or wrong disclosure, and sometimes Anti-dilution rights, which give an investor the right to maintain the same percentage ownership in a company by purchasing a proportional amount of shares in future when securities are issued.
And not every shareholder wants the say. Retail investors, and to a great extent HNIs, are more interested in the returns... rather than in the control and management of the company, while large stake holders and institutional shareholders actively participate in the affairs of the company.
2.A 20 per cent dividend declared on a face value of Rs. 10, where the market price is Rs. 120, translates into a dividend payout of:
- a)Rs. 2.00
- b)Rs. 24.00
- c)Rs. 20.00
- d)Rs. 12.00
Show the answer
Answer: (a) Rs. 2.00
Dividend is computed as a percentage of the face value of the shares.
Twenty per cent of Rs. 10 is Rs. 2.00.
Option B is the trap — 20 per cent of the market price of Rs. 120. Market price plays no part in computing the dividend.
The workbook's own illustration: a 40 percent dividend declared by a company will translate into a dividend of Rs. 4 for a share with a face or par value of Rs. 10 (i.e. 1040/100), Rs. 2 for a share with a face value of Rs. 5 (i.e. 540/100).
The same percentage, different rupee amounts — because face value differs.
Why face value is the base: it represents the book value of the share and always remains fixed. Face value of a share helps in calculating the dividend pay-out to the investors when dividends are declared by the company.
Market price enters only at the next step. When the dividend received by an investor is compared to the market price of the share, it is called the dividend yield of the share. Here that yield would be 2 ÷ 120 × 100, about 1.67 per cent.
The workbook's Example 4 shows both: a company declares a dividend of 60 percent on its shares which have a face value of Rs. 2. The market price of the share is Rs. 80. In this case, the dividend amount is Rs. 1.20 per share. The dividend yield is 1.5 percent.
And SEBI has fixed the confusion for real investors: to ensure clarity for investors, SEBI has mandated that listed companies declare the dividend in terms of rupee per share.
Nothing about the dividend is assured, though. It is not pre-fixed in terms of the percentage of the dividend or the period when it will be declared; the board decides and shareholders approve such dividend in an annual general meeting.
3.The Investor Education and Protection Fund is funded by unpaid dividends remaining unclaimed for at least:
- a)Seven years
- b)Five years
- c)Eight years
- d)Ten years
Show the answer
Answer: (a) Seven years
Unpaid / unclaimed dividends, matured debentures and deposits, application and call money due for refund and interest on them shall form part of the fund, provided such money has remained unpaid and unclaimed for a period of 7 years from the date they were due for payment.
Seven years, counted from the date the money was due — not from the date it was noticed.
Option C names a different eight-year period that recurs elsewhere in this chapter: RTAs must maintain proper books of accounts and records for a minimum period of 8 years, the structured digital database is preserved for a period of not less than 8 years, and the 2018 circular requires records for period not less than 8 years after completion of the relevant transactions.
What else funds the IEPF: the fund is created out of contributions from the central government, state government, companies and institutions, plus all the resultant benefits arising out of shares held by the IEPF Authority, all grants, fees and charges received by the IEPF Authority, other sums the Central Government decides, and all income earned by the Authority in any year.
And interest travels with principal: in case of term deposits and debentures of companies, due unpaid or unclaimed interest shall be transferred to the Fund along with the transfer of the matured amount.
The company must track the seven years annually, filing Form No. IEPF-2 within 60 days after the holding of Annual General Meeting (AGM) or the date on which it should have been held... whichever is earlier, covering each of the previous 7 financial years.
Then the shares move within thirty days to the IEPF demat account.
Who runs it: the IEPF is a fund created by the Ministry of Corporate Affairs, with the Authority established on 7th September, 2016, under section 125(3) of the Companies Act, 2013.
Where this is taught
Free preparation for NISM Series II-ARelated terms
- Change of addressThe investor service request to update the address on a folio — signed by the first named holder, backed by PAN and a fresh address proof, and confirmed to both the old and the new address.
- E-votingCasting a shareholder vote electronically instead of by postal ballot — the RTA sets up the platform, sends notices 25 days ahead by post or 21 by email, and closes the voting site at 5 p.m. the day before the AGM.
- Stop transferA freeze an RTA marks on physical securities reported lost, or under a court restraining order, so they cannot change hands — lifted if no FIR arrives within 21 days of the notice of loss.
- Ownership rightsThe rights an equity shareholder gets as a part-owner of the company: ownership in proportion to shares held, one vote per share, and a claim on the residual profits after all expenses and provisions.