Information Circular

What Is an Information Circular?

An information circular is a document for a company's shareholders framing important issues on the plan at the annual shareholders' meeting or a special shareholders' meeting. The information circular additionally solicits proxy votes and gives procedures to voting on key issues.

A few companies call an information circular a "Management Information Circular," a "Notice of Annual Meeting of Shareholders and Proxy Statement," or a "Notice of Special Meeting of Stockholders."

Grasping an Information Circular

The information circular might cover matters, for example, the election of the board of directors, conceivable mergers and acquisitions (M&A), or the requirement for new financing. This document acts as a "fair warning" to shareholders planning to go to the annual meeting, setting them up to examine major issues and cast their votes on the heading of the company. It likewise gives key information to shareholders who will not be going to the annual meeting. Frequently companies will deliver this document in electronic form by means of a connection shipped off current shareholders.

Illustration of an Information Circular

In May 2020, Brookfield Asset Management Inc. distributed an information circular ahead of its annual shareholders' meeting. The company listed these key things on the plan that would be talked about during the meeting:

• The association's consolidated financial statements for the fiscal year ended Dec. 31, 2019 (counting the outside auditor's report)
• The election of new directors, who will serve for a one-year term
• The arrangement of another outer auditor to likewise serve a one-year term and the compensation for this job
• The consideration and the possible passing of an advisory resolution on executive compensation
• The consideration of two extra shareholder recommendations

Executive Compensation

Of particular interest to numerous investors are insights about executive compensation and board of director compensation that are incorporated as part of the information circular reporting the company's annual meeting. Typically, this information will incorporate such subtleties as base salary, bonuses, stock awards, for example, restricted stock units (RSUs), non-equity incentive compensation, and any remaining forms of compensation.

For instance, the 2020 Annual Meeting of Shareholders and Proxy Statement for Apple Inc. incorporated an executive compensation table summing up the compensation received by the company's top executives north of a three-year period. In 2019, Chief Executive Officer Tim Cook received an annual base salary of $3 million and non-equity incentive plan compensation of roughly $7.7 million. A separate table listing outstanding equity awards shows the market value of shares or units of stock held by Cook that poor person vested was roughly $276 million as of Sept. 28, 2019.

Form 14A (otherwise called the "conclusive proxy statement") is a publicly accessible form the Securities and Exchange Commission (SEC) expects companies to file when a shareholder vote is required. Analysts and activist investors study this statement with an end goal to discover key insights about a company's governance and its possible future profitability.

Information Circular and Annual Shareholders' Meeting

For bigger companies, the annual shareholders' meeting is typically the possibly time during the year when shareholders and executives interface. Many states require both public and private companies to hold annual shareholders' meetings (additionally called annual general meetings or AGMs) albeit the rules will quite often be more severe for publicly traded companies. On the off chance that a company needs to determine a problem between annual regular gatherings, it might call a extraordinary general meeting.

The information circular is critical in planning shareholders on points to be examined. A few provisions detail how far in advance shareholders must receive notice of where and when the AGM will happen and how to vote by proxy.

In many wards, the AGM must talk about the accompanying things by law:

• Minutes of the previous year's AGM (which must be introduced and approved)
• Annual financial statements (which are introduced to shareholders for endorsement)
• Endorsement of directors' activities (in which shareholders support the board of directors' choices from the previous year, frequently including the payment of dividends)
• Election of the board of directors for the impending year

Features

• Publicly traded companies use information circulars to give their shareholders important information with respect to a forthcoming annual shareholders' meeting or a special shareholders' meeting.
• Typically, an information circular will incorporate the impending meeting's date and time, plan, voting guidelines to choose directors for serve on the board of directors, a corporate governance disclosure, and executive compensation information.
• Companies will frequently call the information circular a "Notice of Annual Meeting of Shareholders and Proxy Statement" or a "Management Information Circular."