AGMs proceeding amid uncertainty, legislative fix awaited
Listed companies not among the sixteen that got special approval from the Supreme Court to include an electronic component in their annual general meetings are weighing options, including amendments to articles of incorporation, to meet their obligations to shareholders without breaching coronavirus protocols.
A more permanent fix is expected to come from the promised amendment to the Companies Act for the hosting of virtual and hybrid AGMs that the Ministry of Industry, Commerce, Agriculture & Fisheries is expected to bring to Parliament.
But expectations are the legislation won’t be introduced before the end of the year.
There are 19 more AGMs scheduled up to October, only three of which were among the 16 companies that got the special order from the court in the JSE-led application to hold hybrid meetings, those being Victoria Mutual Investments Limited; Jamaica Stock Exchange Limited, JSE; and FosRich Company Limited.
The upcoming meetings include offshore registered companies, which do not face the same restrictions.
PanJam Investments Limited, which did not participate in the JSE-led court case, is convening its AGM on September 1. At that meeting, shareholders will be asked to vote on an amendment to the articles of incorporation to include the holding of general meeting by electronic and/or other hybrid means.
“We will have a full discussion about the proposed amendments at our annual general meet, the notice for which will go out in the next week or two,” the property and investment conglomerate told the Financial Gleaner.
The approval from shareholders would give PanJam the go-ahead to include a virtual component to its 2021 AGM in the event that COVID-19 restrictions still stand.
Currently, the Companies Act permits company directors to convene and hold meetings electronically, but companies may only convene general or shareholder meetings by electronic means if granted approval by the shareholders.
However, the statute is silent on whether or not companies can hold a general meeting by electronic means. Accordingly, the prevailing legal view is that they are not.
The amendment to the Companies Act, which is still in draft form, seeks to permit companies to hold general meetings electronically – either wholly or partially – but only if their articles of incorporation explicitly permit it.
Corporate attorney Matthew Hogarth describes the proposal as “problematic and circular”.
“Why? Because of the prevailing view that the Companies Act does not permit companies to hold AGMs electronically in the first place,” Hogarth told the Financial Gleaner.
“I can close my eyes and say that most, if not all, of the articles of companies in Jamaica do not allow the companies to hold their AGMs electronically precisely because of the interpretation of the Companies Act, and if we are already having a problem holding an AGM physically, how then are companies going to amend their articles if such an amendment to the articles, in and of itself, requires the holding of a general meeting and the approval of the shareholders?” he said.
Until the law is amended, the other options available to a company would be to either hold a physical AGM under conditions that comply with orders issued under the Disaster Risk Management Act, or seek an order from the Supreme Court to permit the AGM by electronic means.
Companies such as Kingston Wharves and Jamaica Producers Group opted not to restrict how shareholders could participate in their AGMs held in June, while also providing virtual channels for those who preferred not to attend in person.
Now, the raising of the limit on gatherings at AGMs to 50 persons has given some companies even more breathing room. But the uncertainty won’t abate without the legislative changes, especially since listed companies have hundreds and thousands of shareholders.
“I understand that the Government is working feverishly to have the Companies Act amended to address this issue and others. So, if that amendment is proclaimed into law before the date fixed for an AGM, then that may save the company. But if the proposed amendments remain in their current iteration, which provides that a company’s articles must specifically permit general meetings to be held electronically, then that’s not very helpful,” said Hogarth.
The corporate lawyer has since proposed that the wording currently employed in the Companies Act in relation to the convening and holding of directors’ meetings electronically, be adopted for the holding of general meetings.
“If the amendment adopted the spirit of the preface of Section 141 of the Companies Act, then that to me would be the best resolution. That is, the amendment should provide that ‘ Unless the articles of a company otherwise provides ...’, then a company may convene and hold its general meetings, either wholly or partially, by electronic means,” said Hogarth.
“Further, the discretion to do so should lie with the directors. This would allow companies to immediately hold their AGMs electronically without the need to take the onerous steps required to amend their articles.”
SSL Venture Capital, which intends to host its in-person AGM on July 30, says it has chosen to do so at a large hotel, Jamaica Pegasus, so that social-distancing protocols, requiring spacing of at least six feet apart can be observed. Meeting attendees will be required to wear masks, and subjected to temperature checks.
“Additionally, we are hosting the meeting at a hotel which is bigger than our usual venue and one that also has its internal protocols, so together we believe the measures will meet the standard of test for those kinds of events,” Chief Operating Officer of SSLVC, Anthony Dunn, told the Financial Gleaner.
The meeting will not be live-streamed.
As for next year, SSL Ventures, like other listed companies, is hoping for introduction and passage of the legislative amendments to the Companies Act before its next AGM.
“In the event that such amendment is not gazetted in time for the next AGM, we will … engage our shareholders via an extraordinary general meeting to seek their approval to hold such meetings virtually,” Dunn said.