CONVENING PUBLIC COMPANY GENERAL MEETINGS DURING THE COVID-19 CRISIS
The COVID-19 pandemic engulfing the world and the resulting restrictions on gatherings of people has thrown into disarray arrangements for general meetings of companies in Kenya, as elsewhere. The reasons for this are the restrictions on gatherings of more than 20 people, the need for social distancing, curtailed movement, and the possibility of a lock-down on all movements in Kenya. This means that the traditional method of holding general meetings at a venue to which all shareholders are invited is either impracticable or impossible for the time being.
With no clear visibility on when things will return to ‘normal’, it is therefore important for companies to now think about what can be done to meet their legal and regulatory obligations and to facilitate shareholder actions such as holding general meetings to approve annual financial statements, elect directors, approve dividend payments and other matters that in law are the preserve of shareholders at a general meeting.
Public companies that are listed on the stock exchange, or listed and non-listed public companies that are regulated by statute, such as financial institutions and insurance companies may have additional obligations. Other forms of corporate institutions such as retirement funds, co-operatives and Saccos also have specific requirements to meet. Most private limited companies are not caught in the dilemma because they are guided only by the requirements in their Articles of Association (such as the almost universal ability to hold ‘paper’ meetings through circulation of written resolutions signed by each shareholder). Special types of company meetings, like scheme meetings, creditors meetings and the like should also take these factors into consideration.
This note provides some guidance to board members and company secretaries about how to hold meetings in the current climate. We should stress that there is no ‘one size fits all’ solution and you should contact your relationship partner at Bowmans for detailed advice, in addition to conferring with whichever regulator may be applicable.
The calling of general meetings and their conduct is governed by:
- The Companies Act (No. 17 of 2015)
- The Articles of Association of the company
- Any other regulatory or legal obligations applicable to the company concerned e.g. CMA for listed companies.
However, at present Kenyan law does not prescribe detailed procedures for holding meetings that are not taking place at a single venue and to which every member is allowed to attend. In law, a meeting is required to be held physically at a pre-notified venue.
Section 280 of the Companies Act does provide for a situation where it is impracticable for a company to hold a meeting in the manner prescribed by law or the Articles. The High Court has powers to order for a general meeting to be convened where:
- it is impracticable to convene a meeting of the company in any manner in which meetings of that company have been held; or
- it is impracticable to conduct the meeting in a manner required by the Articles.
No application under section 280 has been made, so far as we are aware. Even if one is made it is not clear if this would be company-specific or applicable to all forms of corporate entity that need to hold members’ meetings. The law implies that an application is made by each company affected.
There may be a few companies that have amended their Articles of Association to allow virtual meetings, but these are the exception. A virtual meeting is an online meeting conducted in accordance with detailed rules set out in the Articles.
Capital Markets Authority measures
In Kenya, the Capital Markets Authority has extended the timeline for filing reports by listed companies and on 3 April 2020 the CMA along with the NSE and CDSC, issued a statement that boards of companies should declare and pay dividends to their shareholders, subject to the company’s own dividend policies and make available to the CMA, NSE the audited financial statements, including publishing them on the company website, and for dealing with the appointment and remuneration of auditors. All decisions would then be ratified at the next company general meeting. While these measures are pragmatic it leaves out things like the appointment of directors or what happens if the company has special business, such as major transactions or share or securities issues that need approval in company law in order to be valid. More importantly, we do not think that the CMA can change the rules affecting public limited companies established under company law in this way – that can only be done by legislation. While the regulator may be willing to allow these concessions they do not, with respect, have a basis in company law.
Furthermore, the CMA cannot make rules for other companies that are not subject to its regulatory jurisdiction. For this reason we think the Office of the Attorney-General (BRS) needs to work with the CMA, other regulators and interested stakeholders to find solutions that work for all forms of affected corporate entity.
Key considerations and suggestions
Here are some suggestions on what companies that need to hold general meetings should do:
- Adapt the basis on which the general meeting is to be held
- Postpone the general meeting if it has not been called yet
- Adjourn the general meeting if it has been called but is yet to be held
- Hold a hybrid general meeting (see below).
- Communicate with shareholders through press releases and information on the company website – especially by notifying them that public gatherings are prohibited by law and so they should not attempt to attend in person
- Revise the standard notice of the general meeting to give instructions on what is to be done
- Include a comprehensive proxy with the ability to vote on individual resolutions – making sure the appointee is the chairman of the meeting
- Pre-register attendees – if applicable
- Change the venue of the meeting - if practicable
- Allow live streaming of the proceedings of the meeting
- Encourage the use of proxies for shareholders
- Publicize that attendance is restricted to the barest minimum – for example the chairman, company secretary and the number of shareholders required to make up the quorum in the Articles
- Cancel all non-essential services at the meeting such as transport and refreshments
- Encourage shareholders to submit their questions via the company website in advance of the meeting
- The quorum for attendance can usually be set by the attendance of members in person or by proxy
- Consider who among the officers and directors must attend the general meeting.
In all of these instances careful checking on what the law provides and what the Articles of Association allow is necessary.
If a company general meeting has to be held then companies could consider adopting a hybrid meeting format – a combination of a physical meeting and an online meeting. In this situation a meeting notice is issued, a physical meeting is held that is quorate, and all shareholders and non-essential people for the meeting (such as the auditors, board directors etc.) can attend by means of an online streaming service. This process requires careful planning and comprehensive communication to shareholders. It also requires the technology systems to be made available to every shareholder, whoever and wherever they may be.
Other countries are in the course of making official changes to their laws to enable company meetings to be held. We must hope that the Kenyan government does the same very soon.
This note should not be taken a constituting legal advice and companies are strongly advised to consult their usual contact at Bowmans Kenya for specific advice.
This note is issued on 6th April 2020. Care should be taken in adopting the suggestions herein because the situation with the COVID-19 pandemic may change by the day and these changes may impact the ability to act – for example if there is a complete or partial lock-down imposed in Kenya.