Virus is forcing firms to hold tech- driven AGMs

Published on: Tuesday, June 09, 2020

Text Size:

THE Covid-19 pandemic has put the spotlight on decision-making capabilities of registered companies due to the difficulty of convening and attending board meetings and annual general meetings.

According to the Companies Commission of Malaysia (Suruhanjaya Syarikat Malaysia or SSM), there are 1,356,226 public and private registered companies in the country as of April 30 this year.

Physical meetings are impracticable due to the challenges of physical distancing and crowd restrictions for shareholders and directors.

The pandemic could therefore affect shareholders’ participation in corporate decisions.

The Companies Act 2016 (CA 2016), which repealed the Companies Act 1965, regulates the Annual General Meeting (AGM) of companies.

Also applicable to public-listed companies are guidelines issued by the Securities Commission (SC) from time to time.

Section 340(2) of CA 2016 requires public companies to hold its first AGM within six months from the date of its financial year end and not later than 15 months from the date of its last AGM.

Apart from this, the company, board or shareholders may have other valid reasons to convene a meeting.

Among them are the passing of ordinary or special resolutions, new proposals relating to dividend payout, mergers, acquisitions, financial assistance or share buybacks which could be necessary for the benefit of the company or its shareholders.

Notice of meeting may be published in a nationally circulated daily newspaper or may be given electronically via a website.

Pursuant to Section 320, such electronic notice on a website is not valid if members are not notified of the use of such website.

However, the provisions highlighted above are subject to the constitution of the company which can override the Companies Act in certain situations pursuant to Section 31 of the Act.

It is quite clear from the legislation that the SSM has laid the foundation for corporate meetings to be technology-driven.

For public-listed companies, the SC has issued a Guidance Note on Virtual Meetings for Listed Issuers effective from April 18 this year.

It relates to broadcast venue, persons to be physically present and social distancing guidelines during the Movement Control Order (MCO) period only.

Only eight essential individuals can be physically present at the broadcast venue — chairperson of the general meeting, chief executive officer, the chief financial officer, the company secretary, the auditor and those providing audio-visual support.

In light of the measures taken by SSM and SC during the MCO, what are the measures in place for companies to be technology-driven after the MCO?

There is no better time for company secretaries and corporate law practitioners in Malaysia to leverage on the technology-driven provisions in the CA 2016 and guidance of the SC for corporate decisions and company meetings.

What are the likely scenarios for corporate meetings post-Covid-19 in listed companies and unlisted public companies?

For companies without a constitution or memorandum, the provision as set out in the Act becomes applicable.

Another scenario is for companies with clear provision on meetings in its constitution. The company will have to comply with its own constitution to convene or not to convene as the constitution may permit.

Where a registered company decides to proceed with a virtual meeting without complying with its own constitution, the resolutions/decisions passed during the meeting risk being challenged in court by other members.

Listed companies may rely on the Guidance Note on the Conduct of General Meetings for Listed Issuers issued by the SC mandating the conduct of fully virtual general meetings during the MCO period only.

Moving forward, this guidance could be adopted within the company’s constitution to ensure shareholder participation in future.

Dr Sodiq Omoola

Assistant Professor

Ahmad Ibrahim Kulliyyah of Laws

International Islamic

University Malaysia