Summary Guidance For Conducting Virtual And Hybrid Meetings
The Covid-19 pandemic has affected different Kenyan businesses and sectors in diverse ways. Faced with various unprecedented challenges and the absence of a clear legal framework, many of the businesses so affected have resorted to novel and innovative methods of progressing their key operations.
The restrictions on movement and public gatherings as part of the measures towards combating the spread of the virus have presented unforeseen challenges within the corporate space. Faced with the Public Health (Covid-19) Restriction of Movement of Persons and Related Measures) Rules, 2020 many public listed companies had to deal with a dilemma as to the manner of holding their shareholder meetings.
This is because most of their constitutive documents as drafted as well as other sector-specific regulatory obligations under which they operate only envisioned meetings which shareholders would attend physically at locations to be duly notified. The main responses towards dealing with the crisis include judicial, regulatory, and institutional interventions, some of which are highlighted below:
- Miscellaneous Application No. E680 Of 2020
WPP SCAN Group filed the above-captioned application to invoke the court’s mandate under section 280 of the Companies Act 2015 (hereinafter “the Act”) seeking to be allowed to hold an extraordinary general meeting through electronic means. The High Court has power to allow a company to hold a general meeting in circumstances where it is impractical for the company to comply with the provisions of its articles of association. The Capital Markets Authority (hereinafter “CMA”) was enjoined as an interested party since it is the regulator entrusted with the protection of the rights of shareholders.
The Court granted WPP SCAN Group their prayers and further allowed public listed companies on the Nairobi Stock Exchange (NSE) to hold their meetings using alternative means subject to fulfillment of the following conditions:
- Obtaining No Objection in written from the CMA 14 days before issuing to its shareholders a notice of a general meeting.
- Giving details of how it intends to hold the general meeting including how the electronic technology or any hybrid means will be applied.
- The companies in their notices must demonstrate that the shareholders will be given among other things, a notice of the meeting in accordance with the Act and any relevant regulations; sufficient information to make informed decisions on any resolutions placed in the meeting; sufficient opportunity to ask questions and seek clarifications; and an opportunity to vote.
- Miscellaneous Application Number E 756 of 2020
While the Court in Miscellaneous Application Number E680 OF 2020 discussed above was moved by a public listed company with the CMA enjoined due to its role as a regulator and therefore it issued orders limited to public listed companies,Â Miscellaneous Application Number E756 of 2020 involved Victoria Commercial Bank Limited, a public (but non-listed) Bank. In the matter, the High Court issued guidelines for holding of virtual general meetings by non-listed public institutions.
- Capital Markets Authority (Circular No. CMA/MRT/005/2020)
The circular was issued on the 27th May 2020, providing requirements for convening and conducting virtual general meetings by issuers of securities to the public.
Issued pursuant to the Capital Markets Act, Section 11(3) [d], the Act, Section 280 and a High Court Order delivered on the 29th April 2020, under Miscellaneous Application No. E680, the requirements apply to companies whose articles of association do not prescribe for virtual meetings.
The High Court directed that companies be allowed to hold general meetings through virtual or electronic means. The companies are required to request for a No Objection from CMA. The application for the No Objection must indicate the following specific details;
a) The notice of the general meeting as provided for in the Act;
b) Sufficient information to enable the shareholders to make informed decisions on any resolution;
c) Sufficient opportunity for the shareholders to ask questions and seek clarification;
d) The registration and voting procedure for the shareholders; and
e) Any other details that may be deemed appropriate in the circumstances.
The application for No Objection must meet the conditions set out by the High Court Order, the company’s articles and the Act in respect of dates, time, resolutions, arrangements for shareholders to participate and full disclosures on costs especially for shareholders using USSD logins.
There are specific requirements for the system to be used as follows:
a) It must be user friendly with specific instructions to the shareholders on how to navigate it;
b) It must allow for the attendance of observers such as the CMA;
c) It must cater for prior identification and registration of shareholders;
d) It must allow the use of various gadgets;
e) It must be secure with security features confirmed and reviewed by the CMA; and
f) It must be reliable, verifiable voting system; allowing for real time tabulation of voting.
The CMA has fourteen (14) days from the date of receipt of the request, to process and make a determination on the request for No Objection. Once the CMA has issued the No Objection, the company can proceed to issue a twenty-one (21) days statutory notice of the general meeting to its shareholders.
The circular directs that the CMA will review all shareholders questions raised before and during the virtual general meetings, as well as the explanations received from the directors and or management. This is to ensure that the rights of all shareholders have been upheld.
- Guidelines by the Business Registration Services
The Business Registration Service (BRS) Guidelines on the Conduct of Hybrid and Virtual General Meetings are issued pursuant to section 875 of the Act on the Registrar’s power to make rules and is applicable to the holding and conduct of General Meetings of all companies registered under the Act.
BRS Guidelines highlight the key requirements under Act for conducting annual general meetings. Section 275A of the Act imposes a statutory requirement for annual general meetings for all companies, except single member companies. Subject to their Articles of Association, the Companies Act permits private companies to pass written resolutions having effect as if passed by the Company in a general meeting.Â Public Companies are required to hold an annual general meeting within six months from and including the day following its accounting reference date in each year, whether or not it holds meetings during that period.
The BRS Guidelines provide companies with the following options regarding the conduct of annual general meetings:
Delaying or Postponing the AGM
The Act grants the Registrar power to extend the period within which a company is to conduct its AGM. This can be either on the application of the company or for any other reason that the Registrar thinks fit. Against this backdrop, and in view of the restrictions in place, Companies which may wish to delay or postpone their AGM may thus apply electronically to the Registrar for an extension of the period within which to conduct their AGM through email@example.com.
The applicant company should consider the potential effects of such delays or postponement, how the same shall affect their business and also the interest of all the shareholders. This is because such a postponement means that the company will not be able to pass resolutions which can only be passed at a general meeting.
Hybrid and Virtual Meetings
A hybrid meeting is one in which there is simultaneous physical attendance and virtual participation. The Act does not provide for the conduct of hybrid or virtual meetings. This means the company’s articles will take precedence.
Article 42(2) of the model articles for public companies provide that for attendance at general meetings, two or more members can be in attendance while in different places. Thus companies may leverage on technology during this pandemic period and conduct virtual or hybrid meeting based on this provision and model articles that provide for the same.
Public companies can exercise this option if their articles permits, where the quorum requirement does not exceed the maximum number as per the Government directions. Listed companies should comply with the orders of the court issued under Miscellaneous Application Number E680 of 2020 and keep the Registrar in copy.
While conducting such meetings, companies need to put into place certain considerations that will ensure everything is in check. Appropriate technology should be put into place to allow all members to participate fully in the meeting. BRS guides that, all protocols and rules should be circulated to all members and shareholders prior to the meeting. The company should implement measures for attendance authentication and verify quorum during the meetings. Where voting shall take place, measures should be put into place and allow for voting by proxies where other members or shareholders cannot attend to the meeting.
- Governance Guidelines for Virtual Meetings by the Institute of Certified Secretaries
Effective 29th May 2020, the Institute of Certified Secretaries (hereinafter ICS) issued the Guidelines for the purpose of providing guidance for the conduct of the virtual meeting for the board, shareholders or members of a company to promote effective decision making, professionalism, uniformity and consistency. This is line with the COVID-19 containment measures and directions issued by the Government.
Organizations can hold either virtual meetings or hybrid meeting. The virtual meetings must be conducted in accordance with the law and the constitutive document of the organization. If the organization’s articles do not provide for convening of virtual meetings, the organizations through the Board may use the ICS Guidance to formulate the same while being guided by directions issued by any Court or regulatory bodies such as the CMA.
The company must have in place policies and procedures governing the nature of meetings that may be held virtually, the maximum number of meetings that may be held during any specified time and the management of the questions arising from the agenda of the meeting. Recall that vide its Circular CMA/MRT/005/2020 discussed above, the CMA shall review the questions raised before and after the virtual meeting as well as the responses to these questions.
Technology plays a pivotal role in virtual meetings. Therefore, all factors should be in place to ensure that the technology is available. The company must also take into account the sophistication of the participants, the number of participants, the needs of the participants and the company during the meeting as well as the affordability of the technology equipment to the company. As part of preparation and planning, the Guidelines provide for pre-meeting, meeting and post-meeting coordination between the secretary, the chairperson of the organization and the participants to achieve a seamless process.
Pre-meeting coordination ensures that everything is set before the virtual meeting is conducted. That all the participants have been duly and adequately informed through notices on the where and when the meeting shall be conducted, the manner in which it shall conducted and the manner of voting if there shall be voting, and that all necessary approvals have been obtained for the virtual meeting to be conducted.
The Guideline provides for the meeting-coordination, on how the meeting shall be coordinated on the material day. The secretary should have a script or program how the meeting shall run, item to item and from the beginning to the end. Quorum threshold shall be in accordance with the relevant laws and/or the constitutive document of the organization, and attendance should be noted for record purposes. Any matters or motions requiring resolution shall be passed in accordance with the law and the constitutive documents of the organization. Voting shall be as per the guidelines issued prior to the meeting and shall take into account the use of proxies.
Post-meeting coordination ensures for finalization of any matter that could not happen during the virtual meeting. The Guideline provides that where the secretary and chairperson are not located at the same venue, signing of minutes of previous meeting as well as resolutions made at the current meeting maybe executed by way of appending e-signatures by the chairperson of the meeting or by sending physical copies of the documents to the chairperson for signature. The Guidelines have appendices providing a Virtual Meeting Checklist and Etiquette.
It is commendable that the judicial and regulatory response has been swift enough to support virtual and hybrid meetings and to provide guidance for companies as they navigate these unchartered waters. We will continue to track these developments and provide further updates.