The Annual General Meeting (AGM) is the annual review of a company’s activities and financial performance. It is also Shareholders’ opportunity to elect and reappoint the Board of Directors.
The initial election of a Director
An individual may be proposed for election as a Director prior to the AGM, nominated by the Board of Directors or by a group of Shareholders under Section 338 of the Companies Act 2006.
The Board of Directors (where allowed by the company’s Articles of Association) may have already appointed a new Director to fill a vacancy left by a departing Director or appointed an extra Director to bring further skills and expertise to the Board. If the Board has appointed a Director, then the Director will be up for election by the Shareholders at the first AGM or GM following their appointment.
Any not yet appointed Directors, and all newly appointed by the Board Directors, will usually be elected via a vote at the meeting. Shareholders will have the opportunity to approve or reject the nominee, usually by a simple majority vote. Information about the proposed Directors may be circulated to the Shareholders in advance of the meeting to assist with decision-making.
If the nomination is accepted, the Director will be formally appointed; if they are not elected, no appointment will be made. If the Shareholders do not approve the newly appointed Director’s appointment at the meeting, the individual will be removed as a Director.
After the Director is appointed, they are typically expected to take on specific duties and responsibilities, and their appointment or removal will be reflected in the company’s public filings at Companies House.
The re-election of a Director
Reappointment of an existing Director, who the Shareholders have already appointed at a prior AGM, is the process by which an incumbent Director’s term will be extended. The Articles of Association will govern how many and often Directors need to be re-appointed, either after a certain period of time or dictate that a certain percentage of the board must be re-elected by Shareholders at each AGM. Reappointments, however, are not automatic.
As defined by the UK Corporate Governance Code, best practice is for all Directors to stand for election at every AGM. This practice enhances accountability and ensures that Directors are held to the highest standards of corporate governance.
The process for reappointment is the same as for the initial appointment. Shareholders will have the opportunity to approve or reject the Directors’ re-election, usually by a simple majority vote. If the Director is re-elected, their term is renewed for another cycle.
Preparing for the AGM
When preparing for the AGM, the Company Secretary must undertake careful planning and ensure legal compliance to facilitate Directors’ smooth election and re-election. This includes ensuring that all newly appointed Directors are presented for election and that the requirements set out in the company’s Articles of Association for re-election of Directors are met. The Company Secretary plays a key role in reviewing the Articles of Association to confirm proper procedures, notifying Shareholders of the election process, and preparing the resolutions for the AGM. By fulfilling these responsibilities, the Company Secretary helps ensure the integrity of the governance process and compliance with legal and corporate requirements.
Conclusion
The appointment and reappointment of Directors during an AGM are essential components of corporate governance. For the initial appointment, companies must ensure that the selected individual brings valuable skills and fits the company’s needs. In the case of reappointment, Directors are subject to Shareholder scrutiny, which keeps them accountable and aligned with the company’s interests. Whether appointing a new Director for the first time or renewing the term of incumbent Directors, these decisions are fundamental to the Company’s continued success.