Most market rules dictate that a company’s Annual General Meeting must be held within a certain period after the financial year ends. How these are held is directed by the company constitution. For example, in Africa and Middle East the conduct of shareholder meetings and management of transfer secretarial practices are often not addressed in trade or settlement regulation but are left to be addressed in company law regulations.
The current restrictions due to COVID-19 make it almost impossible to meet the physical attendance requirements of an AGM. We have seen transfer secretaries lag behind in their ability to adapt their people, processes, systems, and solution configurations to enable them to continue providing critical services under national lockdown and movement restriction orders.
Some markets have responded by allowing the postponement of meetings or the extension of deadlines by which a meeting must be held. For example, on 21 February 2020, Thailand’s Securities and Exchange Commission (SEC) announced that companies could seek a delay in submitting their financial statements. In addition, a request for delay could be sought if a company’s operations or the travel plans of the board of directors has been impacted by the COVID-19 outbreak to the point that the board is unable to hold a meeting to approve its financial statements. On 30 March 2020, the SEC issued the notification for all listed companies affected by the COVID-19 situation that they could consider postponing Annual General Shareholders' Meetings (AGM) by submitting the declaration letter to the registrar.
While postponement is the simplest response, many markets are now only starting to slowly reopen and deadlines continue to be extended creating a situation of uncertainty.
An alternative solution is to allow the hosting of virtual meetings (fully online meetings) or hybrid meetings (a combination of virtual and in-person).
A virtual meeting of shareholders is one that takes place using online technology. It can either be a 'virtual-only meeting', which is held exclusively online, without a corresponding in-person meeting, or a 'hybrid meeting', which is held in-person at a physical location with the ability to allow online participation.
There are challenges to this as many corporate constitutions may not have the provisions allowing for virtual attendance. The other important consideration is whether the technology required is available in each market.
Benefits of a virtual meeting include better shareholder accessibility, increased shareholder participation, reduced costs and disruption, and a reduced carbon footprint. Potential concerns of virtual meetings include a decrease in the quality of shareholder participation, challenges with meeting management, perceptions around the effectiveness of communication, IT issues and legal uncertainty as to whether holding a purely online meeting satisfies all legislative requirements that apply to shareholder meetings.
As part of this acceleration towards digital methods, we are seeing some markets utilise electronic voting platforms rather than requiring physical attendance at a shareholder meeting in order to vote, making the proxy voting process more efficient.
Electronic proxy (e-proxy) voting, where shareholders can vote on corporate issues remotely from computer terminals has been rapidly gaining global popularity over the past years. These electronic mechanisms have the benefit of providing timely voting outcomes and providing greater efficiencies by reducing the need to appoint a proxy, as well as providing environmental benefits by reducing printed communications.
In Taiwan, e-proxy voting is available. All listed companies have adopted the electronic transmission as one of the methods for exercising the voting power since 1 January 2018.
In Indonesia we have seen an acceleration of the e-voting initiative as a result of the pandemic. Indonesia’s regulators had planned to allow electronic proxy and electronic voting in shareholders’ general meeting for a while now. In view of the COVID-19 outbreak, Indonesia’s Central Securities Depository (KSEI) has expedited the system’s launch: eASY. KSEI is expected to support current government efforts to mitigate the impact of the COVID-19 outbreak by avoiding mass gatherings such as general shareholders’ meetings. Accordingly, all general shareholders’ meetings called after 20 April 2020 are required to use the e-proxy platform. The Otoritas Jasa Keuangan (OJK) – Indonesia’s financial services authority – had also extended the deadline for reporting and holding a General Meeting of Shareholders (GMS) for Capital Market Industry participants in a response to the emergency conditions due to the COVID-19 situation in Indonesia.
In Jordan, e-voting and e-proxy voting have been allowed as temporary measures. The resolution released temporarily suspended a few provisions of the Companies Law relating to the requirements and formalities of the general assembly. Board meetings of public, private shareholding and limited liability companies can be held via electronic means, and proxy voting will be allowed under the temporary rules on remote meetings provided the normal procedures for appointing proxies are adhered to. Each company will provide an invitation link where voting steps via proxy will be shown.
Overall, many asset servicing, shareholder meeting and voting practices have been temporarily adapted through regulatory relaxations that allow the conduct of remote meetings and grant time extensions for submission of statutory disclosures. The approach has been piece-meal and its temporary nature remains unsatisfactory given the health and safety risks associated with existing practices. Wholesale reform towards digital solutions is an imperative if operational resilience is to be attained. In the interim we observe increased interest in e-voting and e-proxy voting from among policy makers, service providers and clients.
