The Companies Act 2015 mandates all firms, except those with single members, to hold annual general meetings (AGM) at least once a year.
Some flexibility is, however, provided for private companies, which can pass written resolutions in place of a physical AGM, if this is allowed in the articles of association.
However, Section 310 of the Companies Act 2015 mandates firms listed on the Nairobi Securities Exchange (NSE) to hold a physical AGM “within six months from and including the day following its accounting reference date in each year, whether or not it holds other meetings during that period.” Listed firms that fail to do this risk running afoul of the law.
AGMs serve as a vehicle through which shareholders exercise their voting interest in the way a company is managed.
The annual meetings also provide an avenue for enhancing the accountability of directors and senior managers towards shareholders.
They enable shareholders to engage company executives in real-time and receive instant answers to some of their most pressing concerns.
This is unlike other forms of accountability discharged through reporting in the financial statements and annual reports, among other corporate publications, where answers to shareholders’ queries may take several days or even weeks to be answered.
The above notwithstanding, concerns have been raised previously about the poor attendance of AGMs in Kenya.
This problem has been noted to affect mainly the minority shareholders, relative to institutional investors and other large shareholders.
This is however not peculiar to Kenya, as research evidence shows that minority shareholders occupy a marginal position in the corporate governance landscape of many developing countries.
Retain hybrid AGMs for post-Covid-19 posterity of corporate governance
The High Court decision, through an order issued by Justice David Majanja on June 9, 2020, to allow companies to hold virtual or hybrid AGMs, presents a significant opportunity to bring minority shareholders from the periphery to the core of the corporate decision-making process.
The inexpensive nature and convenience associated with virtual AGMs can help to increase shareholder participation in the corporate governance process.
Indeed, one of the silver linings from the ongoing covid-19 pandemic might be the invention of virtual AGMs.
However, the order Justice Majanja issued only applies during the ongoing Covid-19 pandemic.
The relevant regulators should consider introducing changes to existing capital market laws to allow companies to continue holding virtual or hybrid AGMs for many shareholders to take part in AGMs, devoid the of traditional logistical constraints many investors face.
Ramp up shareholders education
Several NSE listed companies published on their websites, a list of the questions they received from shareholders concerning virtual AGMs conducted in 2020 and 2021.
Closer scrutiny of these questions provides a unique window into the minds of many minority shareholders. A majority of the questions appear to be queried about the disbursement of dividends to individual shareholders.
There are very few questions about other important corporate governance issues such as director nominations, board or committees composition, top management pay, future financial prospects, work of external auditors and climate-change strategy, among others.
These are crucial matters that shareholders must ask during the AGMs if they are to play a supportive role in the corporate governance process.
These observations further show that more needs to be done to promote effective investor education and financial literacy in Kenya. For the CMA and government, your work is cut out.
Ensure compliance with the data protection law
Companies that collect personal information in the process of organising virtual AGMs should avoid divulging details such as shareholder names, mobile phone numbers, ID numbers, and CDSC or member numbers on their websites.
It appears that some companies may have unwittingly failed to adhere to the data protection law, with eight such companies noticeable in 2020 and another 10 in 2021.
Kenya passed a personal data protection law in 2019 — Data Protection Act — to protect personal data from misuse. It is, therefore, important that companies ensure that they adhere to this Act while executing virtual AGMs.
Danson Kimani, is a lecturer in accounting, and co-ordinator at the Centre for Accountability and Global Development, University of Essex, United Kingdom