The Annual General Meeting (AGM) season is getting underway in Nigeria for companies with 31st December year-ends. Section 213 of the Companies and Allied Matters Act (CAP. C20 LFN 2004), (“CAMA”) mandates every company to hold general meetings every year. The AGM provides one of the few opportunities shareholders have to question the board on its performance, engage directly with management, and hear the views of other shareholders.
However, the outbreak of the Coronavirus disease is causing companies to rethink their arrangements for 2020 AGMs in light of the recent bans on large gatherings, travel restrictions and the risk that venues selected for the meetings may cease to be available due to unexpected closures.
The problems faced by companies are exacerbated by the fact that there is a statutory requirement for public companies to file their annual returns before the 30th day of June every year. This means that companies must hold an AGM within a specified period following their financial year-end for the approval of their financial statements which must be filed along with their Annual Returns in order to meet the statutory deadline. Most choose to hold their AGM well before the six-month deadline, but some may elect to push the date back further where practicable. In doing so however, they incur the risk of having to postpone again and possibly running out of time before the expiration of the statutory deadline.
This guidance offers suggestions reflecting Nigerian law; however, companies will need to consider their individual circumstances, including their articles of association.:
Postponement or adjournment of the AGM Companies should consider whether, legally, it can postpone its shareholders’ meeting. In the United Kingdom, for instance, this is possible if the company’s articles permit. However, should there be any requirements to hold an AGM within a fixed period after the financial year-end, postponement will be a limited option if Coronavirus-related restrictions make it difficult to hold the AGM within that period
Similar issues may arise in the case of an AGM adjournment. In Nigeria, a company’s articles often provide the power to adjourn a shareholders’ meeting, although even without that power, the chairman of the meeting can adjourn in certain circumstances. However, an adjournment requires a physical meeting to be opened with the requisite quorum met, before it can be adjourned. This may not be practicable due to the restrictions placed on large gatherings by the government. Furthermore, this option may be of limited value if there is a risk that the reconvened AGM may not be held within the applicable statutory window. Whilst a number of public companies have announced the cancellation of their AGMs until further notice, shareholders who were expectant of dividend payments may wish to note that the postponement does not affect the payment of interim dividends. Under S.379(2) of CAMA, the Board is empowered to declare and pay a dividend to its shareholders.
It should also be noted that S. 213(1) (b) of CAMApermits the Corporate Affairs Commission to extend the time within which an AGM may be held by a period not exceeding three months.
Virtual AGMs Virtual meetings occur when people, irrespective of their physical location, attend meetings via teleconference and videoconference (video, text and audio) and are placed in the same virtual space. Virtual AGMs are common in the United States of America; however, they are less common in other jurisdictions.
In Nigeria, there is legal uncertainty as to whether holding a purely Virtual meeting would satisfy legislative requirements that apply to shareholders’ meetings. In addition, Nigerian Company law does not at present support Virtual-only meetings. As a result, even for those companies that have included provisions in their articles permitting them to hold a virtual-only AGM, such meetings may be held to be invalid.
Hybrid AGMs In order to hold a hybrid AGM (whereby shareholders may participate electronically in the AGM in conjunction with a physical meeting), companies may need to incorporate requisite provisions in their articles. Those that have such provisions, if they have not already dispatched their AGM notices, may wish to consider migrating the meeting to a hybrid model in order to reduce the number of persons attending the meeting venue such as recently done by Tier 1 bank, GT Bank Plc. Whilst the CAMA does not permit virtual meetings, it does not expressly prohibit them either. However, the hybrid AGM will require, amongst other things, engaging a technology provider, adapting the AGM documentation to meet new reporting obligations and incurring additional associated costs.
Furthermore, for a company to hold a hybrid AGM, consideration will need to be given to what changes need to be made to the usual form of notice of general meeting, in particular:
- The notice should contain clear instructions on how to access, speak and vote at the meeting;
- The notice should make it clear that all votes will be taken on a poll; and
- There should also be a helpline number to the registrar or technology provider, or both, for those shareholders who may need assistance with using the technology before or during the meeting.
The CAC has in reaction to the pandemic and its effects on forthcoming AGM’s recently issued the following guidelines on the holding of Annual General Meetings using proxies:
- The approval of the Corporate Affairs Commission (CAC) shall be obtained before such a meeting is held. The application can be submitted to the Head Office in Abuja or any of the branch offices in any of the States.
- CAC shall send representative(s) as observer(s) to the meeting.
- The meeting shall only discuss the Ordinary Business of an AGM as provided in S.214 CAMA.
- Notice of meeting and proxy form shall be sent to EVERY member in accordance with the requirements of CAMA. Companies will be required to provide the CAC with the evidence of postage or delivery of such notices after the meeting.
All the members shall be advised in the notice that in view of the Covid-19 pandemic, attendance shall only be by proxy with names
- and particulars of the proposed proxies listed for them to select therefrom. The invitation shall be issued at the companies’ expense as well as the stamp duties which shall be prepaid by the company. The proxies need not be members of the company.
- The company shall be guided by the provisions of its Articles or CAMA as regards to a quorum. However, for the purpose of determining quorum, each duly completed proxy form shall be counted as one.
The guidelines, are commendable and should resolve the quagmire many companies scheduled to hold their AGMs during the period of the pandemic, find themselves. Companies should also consider the following points in relation to the above guidelines:
- Keep abreast of advice from the government, regulators, public health bodies and others – Companies planning to hold their AGM in the forthcoming weeks will need to keep abreast of advice from the NCDC and other relevant bodies which will determine whether or not the AGMs can be held as planned.
2.Communication with shareholders – When sending out meeting notices, shareholders should be reminded to monitor the company’s website for any changes to AGM arrangements. Companies should announce any changes as soon as possible to give shareholders time to return their proxy forms prior to the meeting, particularly given that discouraging physical attendance is likely to be appropriate. In the event that the AGM goes ahead, shareholders should be encouraged, before attending the AGM, to heed advice from governments, public health bodies and other relevant parties
3.Encourage early return of proxies – This is to ensure that shareholders are able to vote on the resolutions at the AGM, even if they do not attend in person, they should be reminded to return their proxy forms or register the appointment of their proxy electronically (where provision is made) as early as possible prior for the meeting.
4. Use of poll voting at AGM – Any company that does not usually call a poll on votes at the AGM should consider doing so at its 2020 AGM to ensure that the votes of those shareholders not present at the AGM are counted on the resolutions.
5. Questions from shareholders – Companies should provide the means for shareholders to raise questions prior to the meeting, either in writing or electronically, so that those not attending still have the opportunity to raise questions which can then be dealt with at the AGM, and included in a Q&A on the company’s website after the AGM.
6. Consider live-streaming of meeting – If a company does not usually live-stream its AGM, it should consider the costs and logistics of doing so as a means of enabling shareholders to watch (but not participate in) the meeting.
In all, we believe the outbreak of the pandemic will certainly lead to changes in company law regulations surrounding the conduct and the holding of statutory meetings in the future. The unprecedented state of affairs offers the Regulators and the entire corporate ecosystem the opportunity to address the gaps exposed by the extended lockdown on the populace, most especially the shareholder community.
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