Holding AGMs by Listed Companies during COVID-19 Pandemic

Capital Markets Regulators across the world, and where the legal and regulatory frameworks of certain jurisdictions allows, Stock Exchanges, have being issuing Guidance Notes for listed companies on hosting of Annual General Meetings for 2020 taking into consideration the challenges faced by the Listed Entities regarding the hosting of the upcoming Annual General Meetings (AGMs) in light of the COVID-19 pandemic.
The context — Certain Listed Entities on the Dar es Salaam Stock Exchange (DSE) have expressed concerns regarding the upcoming Annual General Meetings (AGMs) of such Entities in light of the Covid-19 pandemic. Holding physical meetings comprising of large number of shareholders may add to the risk of spreading the disease.
Under these circumstances, certain listed companies have requested guidance from the Regulator as well as the DSE on possible alternative mechanisms which could be adopted in hosting AGMs with a view to circumvent the risks associated with the Covid-19 pandemic.
The Listing Rules of the DSE do not contain specific provisions relating to how or the date on which an AGM is to be hosted by listed companies. As such, companies will be required to comply with the applicable provisions set out in the Companies Act (‘Cap 212 R.E 2008’) and the Articles of Association of the Company in this regard, as well as the guidance from the Capital Markets Regulator.
In view of the aforesaid, this article is not meant to be a guidance note in any way but my own views, given my research of how other jurisdictions are handling this statutory and compliance matter, and hence possible approaches that may be adopted by companies in hosting the AGMs amidst the restrictions brought about by the Covid-19 pandemic.
And so, this is purely for information purposes and should not be construed as a guide. It is imperative that listed companies obtain appropriate legal advice in determining the most appropriate arrangement regarding the conduct of an AGM in the current context.
As I stated in my last week’s article, the coronavirus pandemic requires a rethink by listed companies, regulators and policy makers —for example, we continue to observe policy makers and regulators in some jurisdictions putting in place emergency legislation to allow virtual meetings — and by companies amending their memorandum and articles of associations to reflect the same.
But, even before such emergence legislature, some companies are already moving on and acting with what they consider to be practical approaches given the circumstances. Recently, Warren Buffett’s Berkshire Hathaway announced that it is going online this year, as have Amazon, Johnson & Johnson, Bayer, Commerzbank, BMW, etc. Same applies to some companies here at home which have announced virtual AGMs, while some have decided that for now they will just postpone their meeting, and some, like the DSE PLC have opted for a hybrid of physical and virtual AGMs. For companies which are yet to decide – the following measures/factors can be considered with regard to convening AGMs:
Postponement of the AGM — in adopting this approach a listed company should consider the following: (i) if a company has not issued its Notice convening an AGM may choose to delay its issuance of notice; (ii) for a company which has already issued an AGM Notice may still choose to postpone its AGM — in such event, a disclosure should be made to the Regulator and the DSE regarding the postponement of the AGM and preferably a notice may be published in the newspapers as well; (iii) on Dividend payments – if the AGM is postponed, the payment of dividend, if already announced by the company, and which requires the approval of the shareholders at the AGM, would also be postponed; (iv) in view of the postal disruptions (just in case there are), the listed company may choose to serve/issue communications relating to its AGM through electronic means, subject to obtaining legal advice. In such event, a notification shall be made to the Regulator and the DSE for dissemination. In addition, the company should host such communications on its website; (v) any postponement of the AGM will be subject to the timelines specified in the Companies Act; and (vi) in the event the company is unable to comply with the same, please consult the Business Registrations and Licensing Agency (BRELA), under legal advice.
Virtual AGM: Listed companies may choose to proceed with holding their AGM using technology (unless restricted by the Articles of Association and subject to obtaining legal advice) to comply with the restrictions imposed by the Covid-19 pandemic. This may include electronic and teleconference mechanisms to host the AGM such as Facebook Live, WEB Ex, Zoom, Webinar. Virtual AGM seems like a preferable route across the world, it may have its own challenges and risks – but they can be manageable.
Hybrid AGM: A ‘hybrid’ AGM can be hosted concurrently, both at a physical location as well as a virtual location. The utilization of a hybrid AGM will enable the companies to conduct its AGM with minimal physical presence of its shareholders. If the Notice of Meeting has already been dispatched to the shareholders, it may be advisable to issue a Supplementary Notice, setting out the instructions. A disclosure in this regard must be made to the Regulator and the DSE, to be disseminated to the market. For this to happen, however, listed companies will need to implement temperature and health screening measures, allowing the companies to turn away shareholders who fail to satisfy the health screen measures.
Vote by Proxy: under these circumstances, this will be highly encouraged. Listed Entities may choose to include specific provisions in the Notice of Meeting encouraging shareholders to vote by Proxy. In such instances, the shareholders may be presented with the option of authorizing an independent director to attend and vote at the AGM on their behalf. Apart from individuals, a shareholder may appoint his or her Stockbroker, a custodian bank, or any of the share registrars as his or her proxy during the AGM.
Questions by shareholders prior to the AGM: As I indicated in my last week’s article, for the case of activist shareholders who likes throwing difficult questions at the Board and executives during AGMs making meetings combative and drawn out affairs – a virtual AGM and online platform may not save the purpose — but could be an acceptable challenge to them. I would, however, suggest that shareholders be permitted to submit questions related to the business of the AGM, directly to the Listed Entity prior to the date of the AGM. The Listed Entity may include responses from the Board of Directors and management to substantial queries and relevant comments from shareholders in the minutes of the AGM.

Conducting Annual General Meeting (AGM) during COVID-19 Pandemic

Under normal circumstances this period of the year, the months of between April and June is when most listed companies hold their Annual General Meetings (AGMs), as statutorily required by the Companies Act and Capital Markets Regulations. However, this year it is different, organizing and physically holding AGMs is not an option at present. However, to offer a practical solution for this challenge, some companies have set some options for holding AGMs: Option 1: holding the AGM, but without physical attendance and with the possibility for shareholders and members to exercise their voting rights or ask questions. Under such circumstances the Directors of the company are expected to implement remote participation, possibly combined with proxy voting, where Boards/shareholders could nominate one person who can act as proxy holder. Option 2: is the postponement of the AGM until the situation has returned to normal, even if invitations have already been sent. Shareholders and members will of course have to be duly informed of this.
Across the world, legal and investment management experts, urges companies to opt for online AGMs, rather than postpone, if possible. Under this circumstance, it is assumed that, as it seems to the fact, the corona crisis may be with us for a little longer and may become a catalyst to modernize meetings and AGMs for that matter, going forward. After-all, we seem to be learning that as is in other aspects of holding meetings, holding an in-person meeting after-all could be relatively expensive. We also are learning that with an online meeting, there is lower cost and lower complexity. However, we further learn that holding online meetings have their own complexities, especially for bigger groups such as AGMs. How?
With activist shareholders who likes throwing difficult questions at the Board and executives during AGMs, where shareholder meetings are usually combative and drawn out affairs – virtual shareholders meeting and online platform may not save the purpose — online AGMs will be quite different, stealing the opportunity for such affairs for well-meant activist shareholders. However, unfortunate for them, whatever may, the change of procedure of holding AGMs, from physical to virtual, is necessary in response to restrictions on travel and mass gatherings that aim to slow the spread of coronavirus. With regulators and policymakers taking similar actions in many countries – of discouraging physical meetings, shareholders are expected to participate online where AGMs are also expected to be more efficient, albeit with far fewer heated words than usual.
While virtual meetings have been commonplace in some developed countries for years, with blue-chips from Microsoft to Ford hosting them, however, companies all across many other parties of the world had, until now, almost universally stuck with the traditional format. In some jurisdiction, there are also doubts about whether online-only AGMs are legal and concerns about lawsuits by shareholders over potential procedural mistakes. There are some concerns from lawyers also that if virtual meetings are done wrong, they may create significant risks to companies. But then, what are options? Almost none, except learning the best way to manage and mitigate potential risks.
Furthermore, the coronavirus pandemic is forcing a rethink by regulators and policy makers —for example, we have started to see and may continue to observe policy makers and regulators putting in place emergency legislation to allow virtual meetings — and by companies amending their memorandum and articles of associations to reflect the same. But whatever it turns out to be, if Regulators and Policy makers delays in providing guidance response, as it were, companies would move on and act with what they consider to be the practical approach under the circumstances. Recently, Warren Buffett’s Berkshire Hathaway has announced it is going online this year, as have Amazon, Johnson & Johnson, Bayer, Commerzbank, BMW, etc. As in cases in these other parts of the world, here at home some companies have announced virtual AGMs while some other companies have decided that for now they will just postpone their meeting, but I expect many more will simply move their AGM online.
As for the case of shareholders actively participating into these virtual AGMs, it may be an acceptable challenge for now that their desires may not be met, this is the case despite the fact that investors and shareholders’ rights activists have mixed feelings about this. Some are adamant that shareholder meetings without shareholders can only be a stop gap during the corona crisis, arguing that AGMs are not just about decision making but also about the dialogue between the company and shareholders.
The above is so because otherwise what shareholders new to virtual meetings might expect? (1) no investors attending in person, (2) questions may have to be submitted in writing, and (3) the company may not answer all of them; and (4) even if they are answered there may be no much possibility to ask follow-up questions.
Smaller shareholders and retail investors could be the most to lose out in particular. Many institutional investors have access to company boards throughout the year, but for retail investors annual meeting is the only time they have an opportunity to ask questions. If it is a physical AGM, it is very hard not to give the microphone to someone who seems insistent on asking the tough questions.
For institutional investors participating in a virtual AGM, it is much easier to manage, while also they have access to other get-together meetings where shareholders can speak to their specific representative to the boards of directors. Whichever way this is looked at AGM is a really important arena for shareholders – so even if it is migrated from physical to virtual platforms, the same context should be at the fore.
So, a big challenge for any virtual AGM is how to set up a fair and efficient process for shareholders to ask questions and note objections. In a physical AGM, every shareholder can just walk up to the podium and speak. Similarly, for an effective on-line AGM there needs to be an equivalent, this is what shareholders and regulators should expect from companies.