Question

Q.1)CHM Limited is a long established company who has been dealing with the financial services sector. The company’s shareholding is widely disbursed although there is a majority shareholder who holds 30% of the shares in issue. During the last year, management was very busy with a new demanding project and decided that it was not important to have an AGM as there were no significant matters to be discussed. One of the minority shareholders (holding of 1%) has filed a petition demanding for an AGM to be held. The company’s management objected on the grounds that the person filing the petition does not hold a minimum of 10% of the shares.

Required:

Explain whether an AGM should be held or whether management can overlook the holding of an AGM

Answer 1

AGM is annual gathering of the company's shareholder and director wherein following matters are discussed

- Financial statement

- Ratification of director's action

- Election of board of director

Other special matters can also be discussed in the meeting

This requirement of AGM is regularory in nature and hence compulsory. Management cannot decise to not to hold AGM as ther is nothing important to discuss. Further it is immaterial whether share holder holds less than 10% of shares or more as holding AGM is mandatory by law

Thus CHM Limited Must hold AGM and contention of director's are not acceptable