What is a Company’s Duty to its Shareholders?

For many companies, raising capital often marks a major milestone. With increased sources of capital, the company can grow, hire new employees, and develop new products that can leave a lasting impact on the world. With the continuing developments of exemptions like Regulation A+ and Regulation CF, companies have a powerful mechanism to raise this needed capital without the costly expense of going public through an IPO.


However, this increased access to capital does not come without great responsibilities. Any company taking investments from shareholders are obligated to carry out their duties to their shareholders.


By definition, shareholders own a portion of the company depending on how much they have invested. With that ownership, shareholders are granted rights such as voting, access information, and participate in meetings. As a company that has taken investments from these individuals, the company must ensure that these rights are maintained.


First, companies are required to hold an annual general meeting, sometimes called an annual shareholder meeting. During these meetings, companies must present information on the company and allow shareholders to vote on company matters. It is the company’s duty to shareholders to conduct this meeting within 150 days of the end of their fiscal year, notifying shareholders no less than 20 days before and no more than 50 days before the meeting is scheduled to be held. If a shareholder is not able to attend, they should be able to cast their vote by proxy.


Additionally, companies must allow shareholders to access the information they are permitted to view. Such information includes the company’s articles of incorporation, bylaws, financial statements, meeting minutes, and corporate stock ledgers. The company must provide this information to its shareholders when requested.


Beyond these duties, it is also the duty of the company, its directors, and leadership to make business decisions with good judgment. In transactions, the directors should not personally benefit from any decision at the company’s expense. Officers should also conduct themselves the same way, decisions should be made so that they are in the best interest of the company.


Any company with shareholders is responsible for conducting business in the best interest of the shareholders and the company itself. Shareholders must be required to vote on significant decisions, while the company must provide shareholders with important company information they are permitted to have access to. Maintaining these duties is essential to good and legal business practices.

How often do I need to hold an AGM?

Every year, Warren Buffet hosts the Berkshire Hathaway Annual Shareholders Meeting. This meeting is an Annual General Meeting (AGM), widely viewed with many people in attendance. The reason for this is that it is often more than the typical AGM, which we will detail below, as Buffet often talks about more than just Berkshire Hathaway. This year, on Saturday, May 1st in Los Angeles, Buffet was joined by, as Yahoo Finance reported, “Vice Chairman Charlie Munger and both shared their unscripted views on Berkshire Hathaway, the markets, the economy, corporate governance, and a lot more.”


This example is only one of what an AGM can be. First, these meetings are required by regulations imposed by the Securities and Exchange Commission (SEC). An AGM, as the name suggests, is a meeting held every year for shareholders. This is the time for a company’s board of directors to present information to the shareholders and a chance for shareholders to exercise their right to vote, given to them by owning a share, after hearing the vision and direction of the company.


Some specific requirements are defined by each state in which a public or private company is incorporated, however, they follow a general set of what should happen at each. This variance comes from the company’s articles of incorporation, bylaws, and state requirements. The typical AGM breaks down as follows: 


  • Reading and approval of the minutes of the previous meeting 
  • Financial statements
  • Ratification of the director’s actions
  • Election of the board of directors
  • Concerns and questions from Shareholders


While shareholders are the focus of this meeting, they are not always available for the meeting. For this reason, they can vote by proxy via an online avenue or by mail. In addition, the SEC requires public companies to make meeting information available online for shareholders, so that they can be informed of their votes. Meeting information is also submitted to the SEC for regulatory compliance and sets the specific date and time for the meeting. These reporting requirements are a means to provide transparency for shareholders and the accountability of company management. 


The question of how often to hold an annual general meeting is every year. More specifically, from Cornell Law:


“An annual meeting of the shareholders of the subsidiary holding company for the election of directors and for the transaction of any other business of the subsidiary holding company shall be held annually within 150 days after the end of the subsidiary holding company’s fiscal year.”


Shareholders will also need to be notified a minimum of 20 days and a maximum of 50 days before the event. Outside of this yearly meeting for shareholders, if there is an action that the company needs shareholder votes for and cannot wait for the next annual meeting, they can call an Extraordinary General Meeting. EGMs are meant for urgent matters that cannot wait.

What is a RegA+ Annual Shareholder Meeting?

With Regulation A+ allowing companies to raise up to $75M USD, the regulation enables many great investors to support an issuer’s journey. From the everyday person to accredited investors, people can claim their stake in companies they foresee to be long-term successes. However, with shareholders come significant responsibilities issuers must uphold to maintain compliance with securities regulations. One such requirement is holding an AGM.


An Annual General Meeting, or simply AGM, is a meeting of shareholders that companies are required to hold once per year. The purpose is to provide shareholders with an update on the company and what plans lie ahead. During these meetings, the company’s directors will present annual reports to shareholders that are indicative of its performance. AGMs are a critical component of upholding the rights of shareholders, ensuring that they are provided all necessary information to make the right decisions regarding their investments. Typically, these meetings should be held after the end of the company’s fiscal year, giving shareholders adequate notice to attend or attend by proxy.


A company’s articles of incorporation and bylaws will outline the rules for an AGM, however, they typically include a review of the minutes from the previous AGM, financial statements, approval of the board of directors’ previous year actions, and election of directors. AGMs held by private companies do not require any regulatory filings but require them to check or change their bylaws to ensure that the meeting can be held online and information can be distributed digitally.


Before any AGM, shareholders will receive a proxy statement, which outlines the topics to be discussed at the meeting. The statement will include information on voting procedures for shareholders with voting rights, board candidates, executive compensation, and other matters that are important to a shareholder. The company will typically send shareholders a package containing this information by mail or over the internet if that is their preference. For shareholders that have invested directly in the company and their name is in the company’s official records, they are entitled to attend the meeting in person. For shareholders that have purchased shares through a broker-dealer or investment bank, they can request information on how to attend the meeting and cast their votes. Shareholders with the option to eVote can satisfy SEC requirements. Since 2007, “notice to access” rules enable companies to send a one-page notice to inform shareholders that materials are available online rather than being mailed a full copy of all reports.


AGMs are essential for the success of any private company, ensuring that shareholders are well-informed about company decisions and can exercise their voting rights. KoreConX offers our clients an all-in-one AGM planner as part of the REgA+ end-to-end solution. Our solution helps our clients maintain full compliance with securities laws, manage AGMs end-to-end, distribute circular materials, allow shareholders to securely vote online, and enable everyone to participate. We recognize that your shareholders are an important part of your company and strive to simplify the process of managing your relationships with them.


Annual shareholder meetings for RegA+ offerings are an essential part of compliance. Issuers are required to hold this meeting annually, empowering their shareholders to be active participants. Contact KoreConX to learn more about our AGM planning solution.