Welcome To The Era Of Virtual Annual General Meetings

By Soko Directory Team / August 5, 2020 | 8:59 am

“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

In respect to Private companies who are unable to conduct general meetings on account of Covid-19 prevention measures, the Director-General has recommended that companies embrace the use of written resolutions in lieu of general meetings.

Sections 262 to 273 of the Companies Act provide the modalities for circulation and passing written resolutions by shareholders. Companies are however restrained from passing written resolutions with respect to removal of an auditor or a director before expiry of their respective terms.

Delaying or Postponing AGM’s with the Registrar’s consent

The Director-General has advised companies to explore the option of delaying or postponing their AGM’s with leave from the office of the Registrar of Companies. The decision to delay or postpone an AGM should be taken after considering the effects of such a decision on the business of the company as well as the interests of shareholders.

Virtual or Hybrid meetings

The Director-General has encouraged companies to leverage on technology where the memarts allow for the use of hybrid- physical in-person meetings (subject to public health guidelines) together with the option to join in remotely- as well as the conduct of fully virtual meetings.

It is noteworthy that public companies that have adopted the model articles empower them to conduct meetings virtually at different venues.

In further support of the recommendation for virtual meetings, the Director-general issued guidelines that companies embracing virtual means must take into consideration when convening AGM to wit:

Appropriate technology must be in place to allow member participation

Reliable infrastructure enabling members to participate, and the vote must be put in place.

Online voting systems must allow members to cast votes in a timely manner.

Members with no access to the internet can appoint proxies to cast votes on their behalf.

Members should be given guidance on the method and requirements for voting electronically on the chosen platform.

All protocols and rules of procedure must be circulated in advance including timelines, means of voting, and raising questions.

Secure authentication systems should be in place in ensuring that quorum is present and maintained throughout the meeting.

User accessibility, data privacy, and member participation must be given consideration.

For hybrid meetings, the venue should be the registered office or such venue as selected by directors.

From the above, it is possible to hold and conduct an AGM with the assistance of technology subject to compliance with the above measures. It is imperative to note that we have already had several companies such as Safaricom, Britam, and Kenya Airways that have successfully conducted virtual AGM’s. In addition, other corporate bodies such as the Law Society of Kenya have also successfully conducted AGM’s, with the LSK having done so with the leave of the court.

While teething problems have been experienced as is the case with any new ventures, all signs are that virtual and hybrid AGM’s are here to stay.

About The Author

The author is Mr. Derek Ndonye. He holds a Bachelor of Law Honours Degree (LLB) 1993 from the University of Nairobi and is a holder of Diploma in Law 1995, from the Kenya School of Law.

He was admitted to the Roll of Advocates on 11th January 1996 and is a Licensed Advocate of the High Court of Kenya, Commissioner for Oaths, Notary Public and a Certified Secretary.

Mr. Ndonye has specialized expertise in Corporate and Commercial law, and as a Certified Public Secretary he is qualified in Corporate Governance and he advises boards and senior management on corporate governance issues.

He is an accomplished researcher on Legal issues. He has also created various legislation emanating from the Kenyan Constitution.

About Soko Directory Team

Soko Directory is a Financial and Markets digital portal that tracks brands, listed firms on the NSE, SMEs and trend setters in the markets eco-system.Find us on Facebook: facebook.com/SokoDirectory and on Twitter: twitter.com/SokoDirectory

View other posts by Soko Directory Team

More Articles From This Author

Trending Stories

Other Related Articles



  • January 2020 (272)
  • February 2020 (310)
  • March 2020 (390)
  • April 2020 (321)
  • May 2020 (335)
  • June 2020 (327)
  • July 2020 (334)
  • August 2020 (276)
  • September 2020 (192)
  • 2019
  • January 2019 (253)
  • February 2019 (216)
  • March 2019 (285)
  • April 2019 (254)
  • May 2019 (272)
  • June 2019 (251)
  • July 2019 (338)
  • August 2019 (293)
  • September 2019 (306)
  • October 2019 (313)
  • November 2019 (362)
  • December 2019 (319)
  • 2018
  • January 2018 (291)
  • February 2018 (213)
  • March 2018 (278)
  • April 2018 (225)
  • May 2018 (238)
  • June 2018 (178)
  • July 2018 (256)
  • August 2018 (249)
  • September 2018 (256)
  • October 2018 (287)
  • November 2018 (284)
  • December 2018 (185)
  • 2017
  • January 2017 (183)
  • February 2017 (194)
  • March 2017 (207)
  • April 2017 (104)
  • May 2017 (169)
  • June 2017 (205)
  • July 2017 (190)
  • August 2017 (195)
  • September 2017 (186)
  • October 2017 (235)
  • November 2017 (253)
  • December 2017 (266)
  • 2016
  • January 2016 (165)
  • February 2016 (165)
  • March 2016 (190)
  • April 2016 (143)
  • May 2016 (245)
  • June 2016 (182)
  • July 2016 (271)
  • August 2016 (248)
  • September 2016 (234)
  • October 2016 (191)
  • November 2016 (243)
  • December 2016 (153)
  • 2015
  • January 2015 (1)
  • February 2015 (4)
  • March 2015 (166)
  • April 2015 (108)
  • May 2015 (116)
  • June 2015 (120)
  • July 2015 (148)
  • August 2015 (157)
  • September 2015 (188)
  • October 2015 (169)
  • November 2015 (173)
  • December 2015 (207)
  • 2014
  • March 2014 (2)
  • 2013
  • March 2013 (10)
  • June 2013 (1)
  • 2012
  • March 2012 (7)
  • April 2012 (15)
  • May 2012 (1)
  • July 2012 (1)
  • August 2012 (4)
  • October 2012 (2)
  • November 2012 (2)
  • December 2012 (1)
  • 2011