The AGM season

After the conclusion of the financial reporting season at the end of April, we have now entered the period when companies with a December financial year-end will be convening their Annual General Meeting.

The AGM season has already commenced and the numerous meetings taking place over the next few weeks will be the main focus across the capital market in Malta. Meanwhile, this will also coincide with the publication of Financial Analysis Summaries by bond issuers apart from the publication of annual financial statements by Simonds Farsons Cisk plc and Trident Estates plc taking place by the end of May since these companies have a January financial year-end.

AGM’s are important events for companies and also for shareholders. They enable companies to communicate their vision, strategy and performance to shareholders and other stakeholders. On the other hand, these formal gatherings allow shareholders to exercise their rights, voice their opinions and possibly try to influence the company’s decisions.

Although the local capital market has been in operation for over 30 years, it may be worth highlighting the importance of the AGM season and the key roles played by companies as well as shareholders.

Since local companies do not organise other shareholder meetings throughout the year (in certain countries, companies also have a Capital Markets Day providing an opportunity to create a better and deeper understanding of parts of the business and also discuss strategic initiatives in detail), this is the only forum that companies have to explain their strategy, vision and financial performance other than via company announcements.

Companies in Malta generally deliver a detailed presentation on their financial performance and key business highlights throughout the year before proceeding with the formal part of the meeting related to the resolutions on the agenda. In most cases, the customary resolutions are typically presented such as the approval of the financial statements, appointment of auditors, approval of any dividend recommendations, board members, etc.

Although an AGM formally approves the audited financial statements for the previous financial year, it would be good practice for all companies to also dedicate time to present some key highlights on the new financial year. After all, the AGM is normally held almost mid-way through the new financial year and shareholders should be more interested in gaining insight on current performance rather than on historical financials.

It would be also good practice for companies to issue a formal announcement after an AGM (apart from the customary announcement confirming approval of resolutions and the new board of directors) to update those shareholders not physically present at the meeting, and also the investing community who may be contemplating an exposure to a company, by summarising the key highlights of proceedings including any discussions during question time.

Shareholders play several crucial roles during an AGM that are fundamental to the governance and oversight of a company. Although most companies in Malta have large shareholders that have effective control, minority shareholders are also entitled to vote on the various resolutions presented at the AGM. Shareholders can indicate any concerns and grievances via the votes taken which can influence corporate governance practices and the strategic decisions made by the board.

One of the most important roles for shareholders is during the Q&A session. AGM’s provide shareholders with a platform to ask questions directly to the board of directors and senior management team regarding the company’s performance, its governance and future strategy. This serves as an important check on the board and management, ensuring transparency and accountability. Unfortunately, the Q&A session during the AGM’s in Malta is not always very fruitful with concerns mainly directed towards the use of the Maltese language during such proceedings or other trivial requests for certain companies to extend their shareholder loyalty programmes.

Instead, shareholders should focus on questioning companies how they are refining their strategies and navigating the inherent risks in their business while positioning themselves to take advantage of potential opportunities in their core business areas.

Shareholders can also use AGM’s to exercise their legal rights, such as proposing resolutions that are generally not part of the customary items on the agenda.

Internationally, some AGM’s are dominated by activist shareholders that use the forum as an opportunity to express their concerns and ensure the alignment of interests between management and shareholders.

In Malta, we need minority shareholders to take on an activist role. Ideally, this would also be done by institutional investors who can exert added influence due to their significant shareholdings and fire power. It is clear that the main institutional investors in Malta are hardly ever present and therefore do not participate in AGM’s. Institutional investors are key stakeholders in such meetings and their active participation including during the Q&A session is crucial for the oversight and strategic direction of companies.

Given the very weak investor sentiment that continues to prevail across Malta with an increasing number of retail and institutional investors becoming increasingly frustrated at the low level of trading activity on the Malta Stock Exchange, the lack of responsiveness to a company’s financial performance and in certain instances also the weak governance across some companies, the AGM season is the perfect forum for shareholders to air their grievances and call for actions to improve shareholder value.

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