|2020-03-31||COVID-19 – Annual General Meetings (AGMs) pandemic concerns|
COVID-19 – Annual General Meetings (AGMs) pandemic concerns
We all have to do our part to help prevent the spread of COVID-19, which is a global pandemic that is affecting our daily lives and economic activities. An immediate concern for governance professionals in Hong Kong is how to deal with the upcoming AGM season for listed companies, with many meetings required to be held by 30 June 2020.
Recent Regulation not Applicable
The recent Prevention and Control of Disease (Prohibition on Group Gathering) Regulation (the Regulation) gazetted by the HKSAR Government and which came into force on 29 March 2020 limits a public gathering to no more than four persons. It has no application to AGMs because of exemption #11 to the Regulation which exempts a: ‘group gathering at a meeting of a body that must be held within a specified period in order to comply with any Ordinance or other regulatory instrument that governs the operation of the body or its business’. The emerging view of regulators is that EGMs and SGMs would likely be covered by this Regulation (as their timing is not governed by an Ordinance) and would therefore be subject to the four-person limitation, but that AGMs would be exempt.
The current situation in respect of arrangements for AGMs poses unprecedented challenges for governance professionals. From a social responsibility perspective, the carrying out of AGMs could potentially create a significant risk in terms of the spread of the COVID-19 pandemic because of large crowds coming together. This is especially the case given the age group distribution of shareholders commonly attending Hong Kong AGMs.
Even if the cited Regulation which limits a public gathering to no more than four persons were to be extended to AGMs, the Regulation is only currently valid for 14 days, and many AGMs are scheduled for May/June. There is also the issue of a booked AGM venue potentially cancelling for quarantine or other contractually justifiable reasons, leading to non-compliance with the law, the articles of association and/or Listing Rules. We have reflected all these concerns to the Government for their further deliberation and provided them with a number of solutions for consideration.
In the meantime, we can only provide some suggestions as to how to handle the upcoming AGM season, on the assumption that AGMs need to be held.
Irrespective of your listed company’s place of incorporation and/or articles of association, there is likely to be the option for shareholders to vote by way of proxy. In the best-case scenario (one of our suggested solutions), the Government can direct that all 2020 AGMs should be held as proxy only meetings. In any event, even where there is no Government direction, you should strongly encourage your shareholders not to attend the AGM in person and to vote by way of proxy instead.
The Institute has been promoting hybrid AGMs for a number of years. This is where the physical meeting is held in tandem with an online webcast of the meeting (with facilities for shareholders to vote). This could help to limit the number of physical attendees, as some shareholders will attend the AGM online. However, not all companies are permitted (by law or by their articles of association) to hold a hybrid meeting and there are also other practical considerations, for example, the availability of technology providers and cost concerns.
In any case, even with a hybrid approach, a physical meeting is still required. While companies planning to hold a hybrid AGM could (and should) encourage shareholders to attend virtually, there is currently no legal basis for companies to turn away shareholders who seek to attend the physical meeting in person.
As the situation currently stands, it therefore appears that listed companies will have to hold a physical meeting to conduct their AGM. We would therefore like to share the following mitigation measures which you might like to consider implementing to reduce the risk of spreading the COVID-19 pandemic. These measures can be included in your AGM Circular or made known by way of subsequent announcement:
As mentioned above, we are in discussion with the Government to see if there can be a general direction, under law, to prevent people coming together for AGMs. We will issue further advisories as and when appropriate as these discussions develop.
In case you have any suggestions, please provide them to Samantha Suen, FCIS FCS(PE), Chief Executive and/or Mohan Datwani FCIS FCS(PE), Senior Director and Head of Technical and Research at email@example.com. We value your suggestions.