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Who needs to have an AGM?
An annual general meeting (AGM) is a meeting of members or shareholders, and its usual function is to elect the board, hear the reports on the activities and plans of the organisation, and view the annual financial statements (AFS).
For a non-profit which has members, the AGM is a fundamental part of the governance routine allowing the members a regular opportunity to receive information, and to exercise their basic function of holding the board to account and electing board members.
For a non-profit which has no members (a trust or a no-members non-profit company (NPC)), an AGM is not required, as the board has no-one to report to.
For a voluntary association, which has to have members in order to exist as a legal structure, an AGM is certainly required.
For a with-members NPC, the provisions of the new Companies Act are somewhat confusing as:
- Section 61(7) makes an AGM mandatory only for public companies, and NPCs are not public companies under the new Act.
- However, with-members NPCs are required, in terms of sections 30(1) and 30(3) of the Companies Act to present the AFS to an annual general meeting.
Our view is that the requirement that the AFS be presented at an AGM probably does make the AGM mandatory for all companies with members or shareholders or, at the very least, an annual effective engagement of some sort where all of the members are presented the AFS.
Also, for NPCs with members, the members should be gathered together (in a room or virtually) at least once a year to play their basic role of holding the directors to account. If this annual routine is not followed, then the board is in danger of forgetting who the members are, and the members themselves might think that their services are no longer required.
If it is worth having members, then one needs to keep them up to date and engaged. We too often see organisations which have neglected to follow the membership routines and the members drift away and cannot be called upon to play their role when needed.
Reprinted with acknowledgement to https://ngolawsa.co.za. Email email@example.com