Welcome To The Era Of Virtual Annual General Meetings
“Extraordinary times call for extraordinary measures. This saying rings true at this particular time when the world is facing the Covid 19 pandemic which has changed the way we do things,” says lawyer Derek Ndonye.
The restrictions on movement as well as large public gatherings have also affected the way companies do things. Annual General Meetings (AGM) for instance, an important corporate governance tool, had been rendered impracticable in the current circumstances.
According to Mr. Derek Ndonye, AGM’s are mandatory under the provisions of section 275A of the companies Act as read with the respective memarts of a company.
At the Annual General Meeting, shareholders consider, discuss, and pass resolutions on important issues such as audited accounts, dividend approvals, election and removal of directors among others.
Luckily, the technological innovations of the 21st century have equipped us with tools that were not available in decades past. Web-based Video technology apps and platforms have existed for a while now.
However few companies or organizations had incorporated the use of virtual platforms on to their memorandums and articles of association. It is therefore clear that while necessity is the mother of invention, the challenge posed in embracing the use of technology has been the lack of legal grounding.
It is with this backdrop that companies have turned to the provisions of section 280 of the Companies Act 2015 to seek leave of the court to convene general meetings virtually.
The said section provides that in instances where the convening a general meeting has become impracticable, then a member of the company entitled to vote at the meeting, or a director can apply to the court for such orders. The court also has the power to issue such orders on its own motion (Suo moto).
“If my memory serves me well, WPP Scan Group Plc was the first company to obtain such leave vide HC Misc Application No E680 of 2020. In that particular case, the court granted the company leaves to conduct its AGM,” Derek Ndonye added.
More importantly, Justice Majanja invoking the provisions of section 280 (3), granted leave Suo moto to all listed companies that find it impracticable to conduct AGM’s on account of Covid-19 to proceed with the same, subject to receiving a letter of no objection from the Capital Markets Authority (CMA). No objection from CMA was to be received 14 days prior to issuing the notice.
The court directed that company’s in their applications to the CMA must set out in detail the mode, manner, and means by which they intend to use virtual, electronic, or hybrid technologies.
The court went on to set out the preconditions for the grant of the No objection by the CMA to wit that a company must demonstrate:
That members of the company shall be provided with notices compliant with the companies memorandum and articles of association (memarts) and the companies Act
That the members will be furnished with sufficient information to make informed decisions on any resolutions presented at the meeting.
That members shall be accorded sufficient opportunity to ask questions and seek clarifications that they may require from directors.
That members shall be accorded an opportunity to vote with the voting procedure being sufficiently explained to them.
Pursuant to the court’s orders as above the CMA published a circular dated 27th May 2019 setting out in detail the conditions for the grant of a No Objection approval. The CMA requirements focused on ensuring transparency, the integrity of voting processes as well as equal treatment of shareholders. The guidelines also require listed companies to conduct a risk assessment together with their registrar.
The CMA also issued a guidance note on 22nd June 2020 with regard to deferrals. Under this note, the CMA granted companies that may have been or are still unable to conduct AGMs to defer the same up to 31st December 2020.
Having looked at listed companies, the question remains as to whether non-listed companies can proceed to hold AGM virtually. The Director-General of the Business Registration Service on his part issued guidelines on the conduct of Hybrid and virtual meetings by companies.
The guidelines were issued pursuant to the provisions of section 876 of the Companies Act which empowers the registrar to make rules. Under the guideline’s companies were given the following options:
Written Resolutions In Lieu Of General Meetings