Despite the nationwide 21 day lockdown, it is expected that social distancing measures, restrictions on travel and the ban on major public gatherings will continue well beyond these three weeks. In a time of uncertainty, and with the advent of self-isolation, panic buying and remote working, companies throughout the country are having to rethink their approach to normal business operations.
Annual General Meetings (AGMs) are a crucial event in any company’s financial year. It is one of the few opportunities in which shareholders may question the board, hear the views of other shareholders and engage directly with management. In South Africa, AGMs must initially be convened no more than 18 months after a company’s date of incorporation and thereafter, once in every calendar year, provided that they are not held more than 15 months apart.
What do companies do, in the face of COVID-19, if they are due to hold an AGM in the upcoming weeks or even months?
AGMs via electronic communication
The South African Companies Act allows for shareholder meetings, including AGMs, to be held electronically, subject to certain requirements being fulfilled which would ensure reasonable accessibility by participants to the meeting. In other words, an AGM may be held entirely by electronic communication provided it enables concurrent discussion and reasonable participation from all members attending. Before seeking to hold an AGM electronically, a company must ensure that their memorandum of incorporation does not expressly prohibit the holding of shareholders meetings electronically.
If a company seeks to hold an AGM electronically, it is important that the AGM notice informs shareholders of this intention and provides necessary information in order to enable shareholders, or their proxies, to access the available medium or means of electronic communication (for example, dial in details need to be provided and that shareholders must have access to a computer or smart device in order to join the online meeting). Employing electronic communication, and the access to it, is for the expense of shareholders, except to the extent that a company determines otherwise.
Although fully electronic shareholder meetings are mostly unprecedented in South Africa, a general shareholder meeting of Alexander Forbes was held through an online platform made available to them by the JSE and its development partner, The Meeting Specialist, on 27 March 2020 being the first of its kind in South Africa. This meeting will hopefully pave the way for other companies to hold their shareholder meetings, including AGMs, entirely online while the participants are working remotely. The JSE has announced that this platform is being launched to cater for all meetings, including both virtual AGMs and electronic voting, and can be booked at: firstname.lastname@example.org.
Practical points for companies to consider
Ensure that online platforms can handle increased numbers of participants and remote working facilities are readily accessible. Companies must make sure that their online systems are equipped to host an AGM in an online format. Consideration should be given to audio and visual capability of electronic systems and remote testing of these systems should be undertaken ahead of any meetings.
Keep up to date with advice from governments, regulators and public officials. Companies planning to hold their AGM in the next few months need to keep abreast of advice from the government regarding the lockdown, as well as any other regulations imposed.
Use of poll voting. Any company that does not ordinarily use a poll voting system should consider doing so, if authorised to do so in terms of their memorandum of incorporation. This will ensure that votes of shareholders not present at the AGM are counted on the required resolutions.
Encourage early return of proxies. To ensure most or all shareholders are able to vote on the resolutions at an AGM, even those that are not present, each shareholder should be reminded to send their proxy appointment as soon as possible ahead of the meeting.
Questions from shareholders. Companies should provide means for shareholders to raise questions prior to an AGM, thereby allowing those not in attendance the opportunity to raise issues which can then be dealt with at the AGM. The questions and answers covered in the AGM should, following the meeting, be published on the company website.