Navigating Extraordinary General Meetings in Sri Lanka: A Closer Look at the Companies Act
In the intricate landscape of corporate governance in Sri Lanka, Extraordinary General Meetings (EGMs) play a pivotal role in addressing urgent matters that demand the immediate attention of senior executives, the board of directors, and all shareholders. Governed by the Sri Lankan Companies Act of 2007, EGMs offer a platform to deliberate on issues that cannot be deferred until the next scheduled Annual General Meeting (AGM). In this blog, we delve into the intricacies of EGMs, exploring their significance, calling procedures, and distinguishing features from AGMs.
An EGM, also known as a special or emergency general meeting, is convened to discuss and decide on matters of critical importance that cannot wait for the regular AGM. Special resolutions, such as the removal of top executives, often find a place on the agenda of an EGM.
Calling an EGM:
According to Section 134(1) of the Sri Lankan Companies Act, 2007, an EGM can be convened by the board of directors or specific members/shareholders who hold at least 10% of shares at the time of making the request. The meeting must be held within 15 days and before the expiration of 30 days from the date of the request. If the board fails to schedule the meeting within this timeframe, shareholders have the right to convene the meeting within three months from the date of the request. In such cases, the company is obligated to reimburse reasonable expenses incurred by shareholders.
Procedure of an EGM:
Before calling an EGM, the board finalizes the resolutions to be discussed, ensuring that members are informed well in advance. The chairman typically oversees the meeting, presenting resolutions, addressing questions, and overseeing the voting process. Members who cannot attend may delegate their voting power to a proxy. The voting process can be by show of hands or by poll, with each shareholder having one vote.
Distinguishing EGMs from AGMs:
While AGMs are routine annual meetings for regular business, EGMs are convened specifically to address urgent matters. The critical difference lies in the timing and purpose of the meetings. An EGM is a rapid response to immediate concerns, ensuring that necessary decisions are made promptly.
In conclusion, the Companies Act of 2007 in Sri Lanka provides a comprehensive framework for the convening and conduct of Extraordinary General Meetings. Ananda Sirisena & Co (ASAC), a skilled team of professionals, offers expertise in holding EGMs, advising on potential drawbacks, and guiding clients on the best interests of the company and its shareholders. Remember, the guidelines provided in this document are general, and for comprehensive advice, reaching out to professionals is recommended. As the saying goes, prevention is better than cure, and being well-versed in the nuances of EGMs can contribute significantly to the smooth functioning of a company.