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Godknows Hofisi

Business & Law

I have previously written articles on shareholder meetings covering both Annual General Meetings (AGMs) and Extraordinary General Meetings (EGMs). In my article of 20 January 2023 titled “Agenda for a board meeting” I covered agenda items that may be included for a board meeting.

I received several requests to cover agenda items for shareholder meetings. I hereby do.

Difference between shareholders and directors

For the benefit of readers I wish to highlight the difference between shareholders and directors of a company as this is often confused. Shareholders are the owners of the business.

They own shares in a company. They are called “shareholders” because the hold shares in a company. They may or may not be directors in their company.

On the other hand directors of a company are not necessarily shareholders though they may be. “Directors” direct the management of a company. They are appointed by the shareholders.

They are subordinate to the shareholders. The shareholders are the principals or the bosses.

Difference between shareholder meetings and board meetings

Board meetings are meetings held by the directors of the company. It is standard practice to hold such meetings at least once very quarter. Directors of the company, whether executive or non-executive, attend these meetings.

Some members of management may attend by invitation. Some members of management are called “directors” but may not be directors of the company as per the company’s CR6 (formerly CR14). They will not be part of the board of directors.

On the other hand shareholder meetings are held by the shareholders or members of the company. Such meetings are in the form of AGMs or EGMs. They are usually chaired by the chairperson of the board of directors.

Agenda for Annual General Meetings

According to section 167(2) of the Companies and Other Business Entities Act (Chapter 24:31) (COBE Act or the Act) an AGM of a company must be held once in every period of 12 months.

According to section 167(3) of the COBE Act an AGM of a company shall deal with and dispose of all matters required in terms of this Act to be dealt with and disposed of at an AGM and may deal with and dispose of such further matters as are provided for in the articles (of association) of the company, and subject to this Act, any matters capable of being dealt with by any general meeting of the company.

What this means is that when setting an agenda for an AGM reference should be made to the Act and the company’s Articles of Association.

Section 167(5) sets items that shall be included on the agenda of an AGM.

These items include:

Electing members of the board of directors who are to be elected at that time.

Setting or approving the compensation of directors including emoluments, salaries and pension.

Reviewing the report of the board of directors with respect to its responsibilities and activities referred to in section 183 (Statement of financial position and statement of comprehensive income and financial year of holding company and subsidiary and 218 (Board’s role and responsibilities).

In a public company, the report of the audit committee pursuant to section 219 (Audit Committee of a public company).

In a public company, reviewing the board’s “comply or explain” report on the company’s corporate governance guidelines and the current National Code on Corporate Governance is referred in section 220 (Corporate Governance guidelines for public companies).

Reviewing the external auditors report on the audit of financial statements.

Appointing the company’s external auditor and setting its compensation for the following financial year.

Reviewing the board’s recommendations and actions authorizing any distributions or relating to issuance of bonds or other borrowings by the company.

Agenda for extraordinary general meetings

Any meeting of a company’s shareholders other than an AGM will be through an EGM. EGMs are covered by section 168 of the COBE Act, read together with a company’s Articles of Association.

It is common in a company’s Articles of Association to have items reserved for shareholder decision-making (reserved matters). Such matters, depending on the urgency or what the articles of association say, may be resolved by an EGM.

Some of the reserved matters may include:

Mergers and acquisitions.

Major changes in the company’s business.

Issue of shares or change in the rights of certain classes of shares.

Disposal of the business or a major part of the business’ assets.

Dealing with material litigation.

Voluntary liquidation or corporate rescue.

Conclusion

To understand what to include on the agenda of an AGM or EGM one has read sections 167 and 168 of the Act as well as the company’s Articles of Association. It may very well be that AGMs and EGMs are more defined in a company’s shareholder’s agreement, if such exist.

Disclaimer

This simplified article is for general information purposes only and does not constitute the writer’s professional advice. Godknows (GK) Hofisi, LLB(UNISA), B.Acc(UZ), Hons B.Compt (UNISA), CA(Z), MBA(EBS, Heriot- Watt, UK) is the Managing Partner of Hofisi & Partners Commercial Attorneys, chartered accountant, insolvency practitioner, registered tax accountant and advises on deal and transactions. He writes in his personal capacity. He can be contacted on +263 772 246 900 or [email protected]