convening of annual general meetings (“AGM”) of public companies in the wake of covid-19

  • public listed companies are planning to hold their annual general meeting as we are now in the second quarter of the year
  • with a large number of shareholders/members, physical meeting without possible social distancing is not only discouraged but it raises public health safety questions
  • REX discusses below how public companies can convene and hold their respective general meetings in compliance with the requirements of the Companies Act, Cap 212 and other regulatory compliance requirements

the Covid-19 pandemic has disrupted, globally, the way we do business. Because it spreads through contact and interaction of people and very fast, the response to the pandemic by Governments has been extraordinary including total lockdowns in many countries with severe restrictions on movement of people and human to human contacts. Even where companies may be permitted to hold meetings, they feel responsible for the public health safety of their employees and would have the same concerns for their shareholders with regard to the holding of annual general meetings.

public companies must hold a general meeting of all shareholders/members annually. The practice has been a physical meeting where all members convene in one large hall interacting for a whole day or even longer. However, with Covid-19 the Tanzania Government has restricted meetings involving large numbers of people or unnecessary travel. The World Health Organization has recommended avoiding close contact by maintaining a distance of one meter/three feet (social distancing), between persons. Current size of meeting halls makes it impossible to comply with the WHO guidelines. Public listed companies must therefore consider alternative options for holding of their general meetings in the wake of Covid-19.

mandatory provisions for holding annual general meeting:

the Companies Act Cap. 212 and the Capital Markets and Securities Act, 2004 require public listed companies to hold general meeting of all shareholders/members annually. Every shareholder/member is entitled to receive notice, to attend the meeting and to vote thereat. While it is common for articles of associations to provide for meetings by circular resolution or virtual meetings, there are few with provisions for circular meetings of shareholders or even virtual meetings. Section 147 of the companies Act provides for an annual general meeting to be held by circular resolution signed by all the members or in their behalf in lieu of a general meeting and, in the event, may decide on anything save the removal of a director.
this poses practical problems for public companies that have thousands of shareholders for each one of them to sign the resolution or to get each shareholder to appoint proxy. Further, the Companies Act does not provide for who may sign a resolution on behalf of all shareholders and thus take decisions on their behalf. Yet good governance practices require all members to participate in decisions of required to be taken at the level of shareholders/members. Articles of association may provide for who may sign a circular resolution on behalf of all members and limit such decisions only to regulatory compliance decisions that are time sensitive. Thus article 147 of the Companies Act does not fully respond to the challenges posed by Covid-19, which should give every shareholder access to and to participate in the annual general meeting.

virtual annual general meeting:

the world is turning to virtual meetings during the Covid-19 pandemic. Even though virtual meetings were happening before, the extraordinary circumstances brought about by Covid-19, have made it almost the only viable option for meetings involving large numbers of people. Virtual meetings via digital connection is becoming the norm during Covi-19 pandemic. Regional and global organizations have been forced to do virtual meetings, e.g., African Union heads of state Zoom meeting recently, chaired by President Cyril Ramaphosa of South Africa, to discuss among other things Covid-19.

where Articles of Association have no provision for virtual annual general meeting:

if the Articles of Association do not provide for virtual directors’  nor members’ meetings, the directors being few in number, may meet physically, while observing the recommended social distancing, to among other things, adopt a resolution proposing changes to the Articles of Association to provide for virtual meetings both at the level of the Board and the shareholders/members. Standard article providing for virtual meetings may contain wording closely similar to the following:

“the Company may conduct board, shareholders or committee meetings entirely by electronic communication or provide for participation in a meeting by electronic communication…”

subject to the notice requirement as indicated below, the board will propose to the members to meet virtually and adopt as their first substantive agenda item the proposed special resolution changing the Articles to provide for holding of meetings virtually. The resolution should address the protocol to be put in place by the Company to enable all members to participate and the recording of the minutes. Once adopted, the meeting will proceed to the other requisite substantive agenda of the general meeting.

the provisions for virtual meetings should allow for members to meet physically if they wish, at venues provided by the Company whereat they can easily electronically access to and participate in the meeting while meeting the social distancing guidelines. The Company Secretary should facilitate such venues with appropriate platforms with the necessary electronic communication devices.

where a company’s Articles of Association provide for virtual annual meeting:

where a company’s Articles of Association contain provisions permitting virtual meetings the board may proceed to convene the general meeting virtually. The notice convening the general meeting must clearly state that the meeting will be held virtually and that the Company is making arrangement for the requisite electronic communication platform to enable members to access the meeting either via zoom or webinar or the like. It may be necessary to also state who will pay for the cost of the electronic communication. If it is the practice for shareholders/members to pay for their own costs, it can be assumed that they will meet the costs without so stating n the notice.

the notice convening the virtual general meeting:

the notice convening the meeting must be of 21 days as required by the Companies Act especially where a special resolution is being considered as is with the case of amending the Articles of Association. If notice has not being issued as appropriate the required majority for passing the resolution will be 95% of shareholders/members entitled to receive notice and attend the meeting which may not be tenable. As such the notice period is critical. In addition, the agenda intended to amend the Articles must be indicated as a special business because any business conducted at an annual general meeting which is not specified under the Companies Act, is considered special business.

the shareholders/members must also be informed in the notice convening the meeting of the ability to participate in the meeting virtually and how to access the meeting and shall provide any necessary information to enable shareholders/members or their proxies to access the available medium or means of electronic communication. If the shareholders/members or proxies shall pay the cost of accessing the media for communication, it should also be stated in the notice convening the meeting.

for companies that will have adopted articles of association provisions providing for virtual annual general meetings, the Secretary to the company must make sure that the resolutions are  filed with the Registrar of Companies within the time limits provided in the Companies Act and for companies such as banks requiring  prior regulatory approval that such prior approval are obtained before  the meeting.

Given the challenges presented by Covid-19, the regulatory approval of the resolution to amend the Articles of Association may be presented together with the nocte under a certificate of urgency and no doubt the regulatory agency will respond as appropriate.

conclusion:

the world is going virtual. It was already but Covid-19 has hastened the process and now companies have no choice but to adopt. There is no excuse, companies must comply with the statutory requirement to convene the annual general meeting and virtual meeting is the tenable option.

For further enquiry please contact our Amb. Mwanaidi Maajarm.maajar@rexattorneys.co.tz and Dr Alex Ngulumaa.nguluma@rexattorneys.co.tz.