This guide is for Sri Lankan companies on the procedure, timelines, and key components of holding an Annual General Meeting and post Annual General Meeting compliances.
What is an Annual General Meeting?
An Annual General Meeting (commonly reffered to an AGM) is a mandatory annual meeting of a company’s shareholders and board of directors to review the company’s financial performance and accounts for the financial year, and to vote on important decisions related to the company’s management such as re-electing directors, appointing an auditor, and declaring dividends.
Which Companies Required to Hold an AGM?
As per section 133(1) of the Companies Act No.7 of 2007, it is compulsory for all companies whether they are private or publicly listed, to hold an AGM each calender year.
Can a company be exempt from holding an AGM?
There are only two situations which can exempt a company from the legal obligation to hold an AGM.
Exemption from AGM in the year of incorporation
The first exception is soon after a company is incorporated, it is not required to hold it first annual general meeting in the calender year of its incorporation, but must hold that meeting within 18 months of its incorporation.
For example, ABC (Pvt) Ltd was incorporated on 10th August 2024. The company is not required to hold an AGM in the calendar year of incorporation. However, it must hold its first AGM within 18 months of the date of incorporation. The company must hold its first AGM on or before 10th February 2026, even if it doesn’t hold an AGM in 2024 or 2025.
Written resolution in place of AGM
The second exception applies when a company makes a written resolution instead of holding an AGM as per section 144 of the Companies Act.
According to section 144(3), it is not necessary to hold an AGM of shareholders if everything required to be done at that meeting by resolution or otherwise is done by resolution in lieu of meeting.This written resolution must be signed by at least 85% of the shareholders entitled to vote, and these shareholders must together hold at least 85% of the voting rights on that resolution.
This option is especially designed for one-person companies and smaller private ltd companies to dispense with the cumbersome procedure of calling an AGM and sending out notices.
First Annual General Meeting (AGM)
Although a newly incorporated company doesn’t need to hold an AGM in the same calendar year it was incorporated, it must hold its first AGM within 18 months from the date of incorporation. This extended period is granted in order to give the company sufficient time to get organized and settle into its post-incorporation compliance obligations.
Timeline for holding an annual general meeting
The board of a company must call an AGM of shareholders once every calendar year, not earlier than 6 months after the company’s balance sheet date and not later than 15 months after the previous AGM.
For example, if ABC (Pvt) Ltd’s balance sheet is dated March 31, 2024, and the last AGM was held on July 15, 2023, the next AGM must be held after September 30, 2024 (which is 6 months after the balance sheet date) and before October 15, 2024 (which is 15 months after the previous AGM).
Procedures for holding an Annual General Meeting (AGM)
A company should follow the procedures under the Companies Act, 2007 to conduct its AGM. There are three main steps to holding an Annual General Meeting.
Convene a board meeting
Before holding the Annual General Meeting (AGM), the board of directors should first meet to set the date, time, venue, and agenda for the AGM. The board also needs to review and approve the draft notice of the AGM and authorize the Company Secretary or another officer to send out the notice.
Notice for Annual General Meeting
The notice for the AGM must be sent out in writing or electronically at least 15 working days before the meeting to all company shareholoders, including legal representatives of deceased shareholders and assignees of insolvent shareholders, the statutory auditor(s) of the company, and all directors of the company.
However, an AGM can be called with less than 15 working days’ notice if all shareholders entitled to attend and vote agree to the shorter notice.
The notice must include,
- venue of the meeting
- date, day, and time of the meeting
- agenda
- date the notice is issued
- signature of the person convening the meeting.
Ensure Quorum for the AGM
Before AGM begins, you must ensure that a quorum is present including the presence of the Chairperson. Without a quorum, shareholders cannot pass resolutions or transact any business.
The Companies Act is silent on the number of shareholders required to constitute a quorum, so the company should specify a quorum in its Articles. Usually, in one-person companies, a single shareholder constitutes a quorum. In a company that has adopted the Model Articles, a quorum is present if the shareholders or their proxies would be able to exercise a majority of the votes to be cast at the meeting.
If a quorum is not present, the meeting should be adjourned within thirty minutes of the originally appointed meeting time, to the same day in the following week at the same time and venue, or to another date the directors may decide.
Holding the AGM
Once quorum is confirmed, the AGM can be formally convened. The Chairperson for the meeting is typically appointed by the board of directors. However, if the company’s Articles of Association specify a Chairperson, that individual will preside. If no Chairperson is appointed or the designated person is unavailable the shareholders present may elect one among themselves to chair the meeting.
At the AGM, shareholders have the right to attend, participate, and vote on matters on the agenda. Voting can take place by a show of hands, acclamation, ballot, or poll. Shareholders may also appoint proxies to represent and vote on their behalf. A proxy must be appointed in writing using a proxy form signed by the shareholder. Where the shareholder is a company, the proxy form must be signed and sealed by an authorised signatory of the corporate entity.
Key components of an Annual General Meeting
The Annual General Meeting (AGM) gives shareholders a formal opportunity to review the company’s financial performance and interact directly with its management by voting on important matters like declaring dividends, electing or re-electing directors, and appointing auditors.
Presentation of financial statements
The board of directors must present the board’s report and the company’s financial statements, including the profit and loss account, balance sheet, changes in equity, cash flow statement, notes, and the auditor’s report, showing how it performed financially over the past year.
Appointment of Auditor
A company’s board of directors can appoint an auditor before its first AGM. However, if the board did not appoint an auditor, the company must appoint its auditor and determine auditor’s remuneration at the annual general meeting.
Composition of board of directors
Shareholders choose the individuals who sit on the board to represent their interests. If shareholders have concerns or are unhappy with how the company is being run, they can request changes to the board’s composition by removing or adding directors.
Declaration of dividends to shareholders
If the company has made a profit during the past financial year, at the AGM, the board and shareholders would need to agree on the dividend payouts proposed by the board. If the company has made a loss, it is not obligated to declare or pay any dividend for that financial year.
Compensation to the management
At the AGM, shareholders have the opportunity to review the remuneration packages of company’s top executives such as the CEO, CFO, COO, and directors and propose changes to their remuneration based on the company’s performance.
Compliance procedures after conducting an AGM
After conducting an Annual General Meeting a company must follow certain compliance steps. Below is a checklist of the post-AGM compliances.
Annual return filing (Form 15)
Following the Annual General Meeting, every company must file the details of the AGM using Form 15 with the Registrar of Companies, signed by both a director and the secretary of the company. The annual return must be submitted within 30 working days from the conclusion of the AGM. In the absence of an AGM, if the company has passed a written resolution in lieu of holding the Annual General Meeting, the details of the resolution, including the date on which it was passed, must be reported in the Annual Return.
Minutes of Annual General Meeting (AGM)
As per Section 147, every company must ensure that the AGM proceedings, including the events and resolutions passed at the AGM, are entered in the minute book after the meeting. The Company Secretary is responsible for recording the minutes. If no Company Secretary is present, the Board or the Chairperson can appoint another person to record the proceedings.
The minute book must be maintained at the company’s registered office or at another location approved by the Board. Directors or shareholders can inspect the minute book by giving reasonable notice, without charge. If the company fails to make the minutes available or provide a certified copy, it can be fined up to LKR 200,000, and every company officer in default can be fined up to LKR 100,000.
What happens if a company fails to hold an AGM?
If a company defaults in holding its Annual General Meeting within the required timeframe, the Registrar of Companies will direct the company to hold the AGM either on its own or upon application by a shareholder.
Failure to conduct the AGM can result in penalties for both the company and its officers. The company may be fined up to LKR 100,000, and each officer of the company may face a fine of up to LKR 50,000.
How can we help you comply with the annual requirements for Sri Lankan company?
Counselit (PVT) LTD, as your trusted one-stop corporate legal services provider helping hundreds of small business owners and startups successfully launch and manage their businesses in Sri Lanka, can help you
- register a company in Sri Lanka,
- open a business bank account in Sri Lanka
- apply for Sri Lanka business licenses,
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- handle all your tax compliance needs, timely eROC anual filings and more.
Ensure your company stays fully compliant. Contact the Counselit team today at +94760011066 or book a free 30-minute consultation to discuss your annual compliance requirements in Sri Lanka.
