It is said that necessity breeds invention. This statement could not be any truer given what corporations have experienced at the hands of company law in the recent past.
Company law—which has been considered a stricter procedural regulation on the processes of convening annual general meetings, declaration of dividends, board attendance, and annual and quarterly financial reports—has recently been subjected to ingenious measures enabling firms to meet their statutory obligations despite the Covid-19 pandemic.
The overall observation is that, given the difficulties or indeed the impossibilities of conducting physical annual general meetings, both the regulators, in reference to public listed companies and the shareholders, have allowed companies to reform towards digitalization.
This is because undertaking what would otherwise be normal operation, such as the convening of annual general meetings to pass resolutions in one location, is now at odds with the government's directives.
The trajectory of companies in Kenya towards a more digitised way of conducting their meetings can best be described by the recent High Court decision allowing companies to set up their meetings virtually; an obvious deviation from the conventional way of convening and holding general meetings.
Section 280 of the Companies Act, 2015 grants the High Court powers to make an order requiring a meeting to be convened, held, and conducted in any manner it considers appropriate. And during this pandemic, the only appropriate way and manner of holding such meetings is through a virtual meeting.
Since an AGM may only be held once the company’s audited statements are available, the crisis has been that shareholders will not be able to vote on resolutions like dividend-payouts, changes on directorships, and approval of accounts.
This conundrum has since been partially resolved considering companies may proceed to hold virtual shareholder meetings.
Comparatively, other countries have proceeded to extend the period within which companies may hold their annual general meetings, with others allowing hybrid AGMs where some shareholders participate in person, even as others exercise their rights electronically. In most jurisdictions, respective regulators had already given companies the green light to conduct virtual meetings.
This was however not enough considering most companies’ articles of association were silent on virtual meetings, thus the qualifier being that virtual meetings were only permissible subject to the articles of association authorising the board to call a virtual shareholders meeting.
It is against this backdrop that I find that although the court granted companies the right to conduct virtual meetings, companies must exercise caution to avoid numerous court cases by shareholders, targeting the conduct and manner of the meeting as well as the resolutions passed.
Some of the ways of exercising caution can be by; - (I) Guaranteeing that shareholders can exercise their voting rights by online voting, video-conference or other telecommunication means where their identity can be verified; (ii) Guaranteeing that shareholders will be accorded the same rights and privileges to participate as they would at an in-person meeting; (iii) Ensure that company resolution and notices have been published on time, and (iv) Ensure that shareholders are provided with a full live transmission of the meeting.
In conclusion, although some measures are temporal, companies should proceed to modernize their articles of associations to allow for the possibility of convening and holding a virtual shareholders meeting.
The same can also be said for the digitisation of board meetings. It is apposite to say that necessity, in this case, has unveiled the need for virtual-only shareholder meetings.
Baston Woodland Managing Partner, BWC & Co. Advocates