How to Prepare for Your AGM: A Step-by-Step Guide for Kenyan Companies
The Annual General Meeting (AGM) is one of the most important events in the lifecycle of any company. For companies, especially SMEs, an AGM is a chance to review financial performance, approve key decisions, and foster investor confidence.
In Kenya, AGMS are mostly held during the first quarter or the second quarter of the year after the end of the financial year. The timing largely depends on the company’s financial year-end and the statutory requirements under the Kenya Companies Act, 2015.
The Process of Preparing for your AGM
Understand the Legal Requirements for Holding an AGM
According to the Kenya Companies Act, 2015, all companies (except single-member companies) must hold an AGM. Section 280 of the Companies Act mandates that:
The first AGM must be held within 18 months of the company’s incorporation.
Subsequent AGMs must be held at least once yearly and within 15 months of the previous AGM.
Failure to hold an AGM is against the Companies Act and could lead to penalties or a winding-up order.
For private companies, while the Act allows for certain informalities in calling an AGM, public companies and those listed on the Nairobi Securities Exchange (NSE) have more stringent requirements.
2. Setting the AGM Date and Time
Setting the right date and time for your AGM is critical for attendance and participation. Companies should:
Provide sufficient notice of the AGM. The law requires that notice be sent at least 21 days before the meeting. This gives shareholders adequate time to prepare, ask questions, and review the agenda.
Schedule the AGM at a convenient time for most shareholders to attend, physically or virtually.
The meeting location should be accessible to all shareholders (consider holding it virtually or hybrid-style if you have shareholders in different locales).
3. Prepare the Agenda and Documents
The AGM agenda should outline the key issues that will be discussed. Common agenda items include:
Approval of financial statements: Shareholders review the company’s financial performance for the past year, as presented by the directors.
Election of directors: If applicable, new board members may be elected or re-elected.
Declaration of dividends: The company may propose dividends, which shareholders approve.
Appointment or reappointment of auditors: Shareholders may decide to retain or appoint new auditors.
Approval of any special resolutions: This could include changes in the company's structure or business operations, like a merger or amendment of the company’s articles of association.
In preparation, the company secretary will help you ensure that all necessary documents are prepared, including:
The annual financial statements.
Minutes from the last AGM.
A proxy form for shareholders who cannot attend.
A notice of the meeting, including the agenda, must be sent to all shareholders and directors.
4. Communicate with Shareholders
All shareholders must receive a clear, detailed notice of the AGM. This notice should be sent to shareholders via email, post, or hand delivery. The following should be included in the notice:
Date, time, and location of the AGM.
Detailed agenda, including all items that will be voted on.
Proxy forms, if applicable (for shareholders who cannot attend).
Any other relevant documents that shareholders should review before the meeting.
5. Quorum Requirements and Voting Procedures
Ensure you understand the quorum requirements for the AGM as set out in the company's Articles of Association. The quorum is the minimum number of shareholders present for the AGM to be valid. Typically, this is set at two shareholders, but it can vary.
The voting procedures should be clearly defined:
Show of hands for simple resolutions (such as approval of the minutes).
Poll voting for major resolutions (like the election of directors or approval of financial statements).
Ensure that proxy voting is allowed for shareholders who don’t attend in person, and confirm that proxy forms are submitted on time.
6. Preparation of Minutes and Documentation
Minutes of the AGM must be recorded and maintained as part of the company’s statutory records. These minutes should include:
A list of attendees (or proxies).
A summary of the discussions.
Resolutions passed, including votes cast.
Any questions raised and responses provided.
It is important to note that the minutes must be signed by the chairman of the meeting. Once approved, they should be made available to shareholders.
7. Post-AGM Actions
After the AGM, the following actions are typically required:
Filing the resolutions: If any special resolutions (such as amendments to the Articles of Association) were passed, they must be filed with the Registrar of Companies within 14 days.
Issuing the financial statements: Companies must file their annual financial statements with the Registrar.
Follow-up on shareholder concerns: Concerns raised during the AGM and not addressed can be followed up in writing.
Importance of Holding AGMs
Legal Compliance: Holding an AGM is a legal requirement for most companies under the Companies Act. Non-compliance could result in fines, penalties, or, in extreme cases, winding-up orders.
Transparency and Accountability: AGMs provide shareholders with an opportunity to hold the board of directors accountable for the company’s performance. They allow for open discussions on the company's financial health, business strategy, and corporate governance.
Investor Confidence: Regular AGMs show investors and stakeholders that the company is committed to transparency and corporate governance, which can attract new investments.
Decision-Making: AGMs offer shareholders a chance to vote on important decisions like electing directors, approving financial statements, and making major changes to the company's structure.
Conclusion
Preparing for an AGM can be a complex process, but it is vital for ensuring your company meets its legal obligations and fosters a healthy relationship with shareholders. A company secretary is a key figure in ensuring that your AGM is properly organized, compliant with the law, and run efficiently. By following this step-by-step guide, you can prepare for a successful AGM and ensure your company stays on the right side of the law while maintaining shareholder trust and confidence.