Dividend payout delays as coronavirus stalls AGMs

KBA chief executive Habil Olaka
KBA chief executive Habil Olaka. FILE PHOTO | NMG 

Investors will wait longer for dividends and change of directors in companies after regulators started freezing annual shareholder meetings (AGMs) due to the coronavirus outbreak.

The Sacco Societies Regulatory Authority (Sasra) has directed all savings and credit cooperative societies (saccos) to suspend AGMs for the next 30 days, with the country on high alert since confirming the first coronavirus case last Friday.

The number of confirmed cases have risen to four after Health Cabinet Secretary Mutahi Kagwe announced one more Tuesday.

The suspension of the shareholder meetings are in line with the State directive that prohibits mass gatherings such as meetings, weddings and funerals to contain the spread of the coronavirus.

“We must all be in compliance with government directive in order to protect lives.


“All AGMs have been suspended for the next 30 days and thereafter, we shall be able to review based on the developments thereafter,” Sasra CEO John Mwaka told the Business Daily in a phone interview yesterday.

“We have communicated with the affected deposit-taking saccos. The commissioner for cooperatives has also communicated to non-deposit taking saccos as well.”

Listed firms that normally hold AGMs between April and May look set to be affected by the directive, with the State expecting the deadly virus to be put under control from the end of June.

The postponements of the shareholder meetings mean shareholders will not be able to vote on resolutions such as dividend payments, changes to directorship, approval of accounts, share splits and bonus issues.

Kenya’s top nine banks paid a combined dividend of Sh42.1 billion last year from the 2018 performance, reflecting the impact of delayed payouts to shareholders.

The dividend payments are key to putting money in the pockets of small shareholders who require cash to meet personal expenses that ultimately boost demand in an economy where workers have complained of reduced cash flow.

“Dividends will be the biggest hitch in the postponement of the AGMs because the firms cannot pay interim dividends given the accounts have been audited,” said Bernard Kiragu, managing partner of Scribes Services, a company secretary and corporate governance consultancy firm.

Mr Kiragu said even though several companies amended their articles of association to allow for virtual meetings, low investment in technology may hamper adoption of electronic voting.

In the West, online voting at AGMs has taken root since the coronavirus outbreak as investors shun large gatherings because of travel restrictions or fear of infection, Swiss tech firm Sherpany said.

The company, which counts Swiss giants Novartis, Nestle and Zurich Insurance among its 300 clients worldwide, provides a secure Internet platform, which lets shareholders vote on motions until the day before AGMs.


In a move to contain the coronavirus, Western nations temporarily banned events with more than 1,000 people, which has made planning difficult for companies as the AGM season kicks off in earnest this month.

Technology giant Samsung Electronics on Monday also adopted electronic voting for the first time ever for this year’s AGM set for today, urging shareholders to use it to help curb the spread of the virus.

Kenya has so far recorded four cases of the coronavirus, prompting the State to issue fresh measures to limit social contact, including suspending travel from any country with reported Covid-19 cases and closure of schools and universities.

It also asked telecom firms to waive transaction costs on mobile money transfers and banks to remove charges for customers who move money between their mobile wallets and bank accounts to promote cashless payments.

The measures are to remain in place until June 30, leading analysts to believe the State is forecasting to contain the virus within the three months.

Section 310 of the Companies Act 2015 provides that a public company is statutorily compelled to hold an AGM within six months from its financial year-end.

This means that firms whose financial year end in December, have till end of June to hold the shareholder meetings.

But traditionally these firms host the meetings in April and May.

The law puts a fine of up to Sh1 million for failing to hold the AGM on time.

However, Muthomi Thiankolu, a partner at Muthomi & Karanja Advocates, said the law cannot be blind to the threat posed by the coronavirus.

“The makers of law never envisioned such a situation. The prevailing context does not permit compliance and so I don’t think any penalty can flow for non-compliance in this case,” he said.

Kenya Bankers Association (KBA) chief executive Habil Olaka said the timing of this year’s AGMs will be influenced by the spread of the virus and its containment.

“Banks will have to align AGMs with the generally agreed approach of minimising infections like social distancing by avoiding public gatherings,” said Mr Olaka.

He said the virus had put to test the current law and listed firms may have to think of possibilities of virtual meetings.