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COVID-19, South Africa’s prohibition on public gatherings and the impact on shareholder meetings

18 March 2020
– 3 Minute Read


As part of the South African Government’s response to the COVID-19 epidemic, President Cyril Ramaphosa declared a state of disaster on 15 March 2020 and announced a number of measures to combat the spread of the virus. These measures include prohibiting gatherings of more than 100 people.

Although the precise meaning of gatherings is still to be settled in terms of the relevant regulations, recognising the purpose of these measures, this prohibition should be taken to include shareholder meetings of more than 100 people. Even where less than 100 people are expected at such meetings, additional precautions are worth considering.

Our Companies Act does permit the holding of entire shareholder meetings by electronic communication (i.e. virtual meetings) as opposed to more traditional physical meetings but there are some key parameters. In particular, the electronic communication must allow shareholders to communicate concurrently and to participate effectively in the meeting, and the notice of the relevant meeting must inform shareholders of the availability of that form of participation, including necessary information.

Companies also need to consider the provisions of their constitutional documents to check for any provisions that prohibit the company from conducting virtual meetings, despite the enabling provisions of the Companies Act.

Where notices convening a physical meeting have already been issued, companies might wish to consider converting that meeting to a virtual meeting, and may need to issue an announcement or fresh notice to shareholders postponing the meeting to a later date and providing details on how shareholders may access the meeting (at that later date) electronically.

Various permutations apply here, and it is important to get the right advice, and to be mindful of the jurisdiction of any relevant regulators, including the Companies Tribunal (in respect of potential Companies Act breaches), the JSE (for listed companies) and the Takeover Regulation Panel (where an affected transaction is involved).

There are a number of service providers who provide virtual meeting platforms which enable a meeting to be conducted entirely through electronic means, including over the internet. Companies would do well to start the process of selecting the appropriate service provider and testing the suitability of that service provider’s technology for the company’s needs.

In choosing a suitable virtual meeting platform, a board will have to consider the nature of its shareholder base and whether its shareholders are likely to have the resources to meaningfully participate through the chosen platform. For instance, if a company wishes to employ a virtual meeting platform that requires high speed internet access, it is important to consider whether the majority of the company’s shareholders are likely to have access to the internet at the optimal speed required by the platform in question.

Ultimately, companies will need to balance their obligations to conduct shareholder meetings in a manner that complies with their duties under the law, on the one hand, and, on the other hand, to protect the health and safety of their shareholders and other members of the community in the context of the COVID-19 outbreak.