Utilizing technology to overcome challenges of conducting AGMs during times of crisis

July 23, 2020

Restrictions placed by the Hong Kong government on public gatherings pose hurdles in efficient conduct of AGMs during this time of COVID-19 pandemic, and therefore require modern hybrid meeting solutions and meticulous planning for hassle-free implementation.

Impact of COVID-19 restrictions on Annual General Meetings (“AGMs”)

The COVID-19 pandemic has posed unprecedented challenges for companies including barriers to conducting AGMs as scheduled. The Prevention and Control of Disease (Prohibition on Group Gathering) Regulation (Chapter 599G) (the “Regulation”) introduced by the Hong Kong Government places strict restrictions on the number of people that can gather in a public place to minimize social contact.

The Hong Kong Companies Ordinance allows Hong Kong incorporated companies to hold hybrid meetings, unless otherwise prohibited by the company’s articles of association (“AoA”). The Hong Kong Institute of Chartered Secretaries (“HKICS”) has been promoting hybrid meeting methodologies in the past years. In addition, both the Securities and Futures Commission (“SFC”) and the Hong Kong Exchanges and Clearing Limited (“HKEX”) encouraged listed issuers on HKEX to explore and assess measures to reduce physical attendance and utilize e-meeting technologies (permissible under the laws of their place of jurisdiction) to hold their general meetings.

Understanding the provisions of the Regulation
The Regulation prohibits gatherings in a public place subject to various exceptions.  One of the exemptions avails to shareholders' meeting of a listed company that is held in accordance with any ordinance or regulatory instrument, subject to no food or drinks being served; and in the case of a group gathering of more than 20 persons, measures are in place for separating them in different rooms or partitioned areas, each accommodating no more than 20 persons. The number of persons allowed in a room or partitioned area has just been tightened from 50 to 20 according to the latest amendment to the Regulation effective from 15 July 2020. The increasingly tightened measures will certainly pose greater challenges to listed issuers organizing their AGMs and other general meetings.

Typically, the schedule of the AGM is determined by the Companies’ Law where the listed issuer is incorporated, the AoA or bye-laws governing the company, or equivalent constitutional documents. However, in case the companies’ shares are listed on HKEX, they are obligated to comply with the Listing Rules. If there is a delay in the audit and dispatch of annual reports in time for the AGM, listed issuers may seek a waiver from HKEX for compliance with the relevant listing rules and postpone the AGM beyond the regulatory deadline. This does not apply to Hong Kong incorporated issuers who are required to hold AGM within 6 months after the financial year end under the Hong Kong Companies Ordinance. Granting of such a waiver will result in contravention of the Companies Ordinance. Listed issuers should therefore observe the relevant requirements under the laws and regulations in their jurisdictions and their own AoA or bye-law and schedule their AGMs during the COVID-19 pandemic accordingly.

The COVID-19 outbreak has brought in many challenges and concerns about holding a traditional AGM. Risk of infections, travel restrictions, and restriction on the number of attendees all pose a dilemma to listed issuers. Amongst the many issues to be addressed is the venue, precautionary measures, and whether it is a physical meeting or a hybrid e-meeting. It is recommended that listed companies should consider an e-AGM solution so as to counter challenges in holding physical AGM by utilizing a hybrid meeting format.

Advantages of e-AGM solutions and how they help

A good e-AGM solution, ranging from e-proxy, hybrid meeting and e-voting system, helps facilitate conducting of the AGM and can bring great value to your company. Leveraging on advanced technologies, a hybrid meeting is a combination of physical meeting and virtual meeting. Shareholders are given two options on the hybrid meeting: either attending and voting at the meeting in person or viewing a live webcast and voting online in real time (via online platform or app).

Hybrid meetings are especially helpful in these pandemic times and facilitate increased shareholders’ participation and encourage social distancing to combat COVID-19. They are an easy way to deal with the challenge of travel and health-safety restrictions. The hybrid meetings also help the board of directors to manage better communications with shareholders.

Some of the key benefits of hybrid meetings include:

  • Seamless integration of e-voting, e-proxy, online attendance, and live streaming functions with shareholder voting system
  • Cost and time savings through reduced physical hosting requirements and effort in counting votes
  • Enhanced data integrity resulting from reduced interfacing and data sharing risks between multi-layers of service vendors

Hybrid meetings take the best of both physical meeting and virtual meeting and creates a more efficient and effective way for members to attend meetings. It offers significant advantages of traditional AGMs, particularly in pandemic times.

A comparison of Hybrid AGMs and traditional AGMs

Capabilities

Traditional AGM

Hybrid AGM

Physical attendance

Required

Optional

Virtual participation

Unavailable

Available

Social distancing

Requires special seating arrangement

Available

Video interfacing

Requires arrangement

Available on demand

Shareholder participation

Low

High

Instant document sharing

Unavailable

Available

Online voting

Unavailable

Available

Vote counting

Manual

Electronic

Cost-effectiveness

Low

High

Record management

Difficult

Easy

The importance of AoA in determining the way forward

To ensure that hybrid meetings can be implemented as a preferred solution in pandemic times, companies are advised to review their AoA or bye-laws. It is important to ensure that there are provisions to facilitate electronic meetings and communication. It will also be necessary to bring the existing provisions in line with modernized laws, regulations and best practices. The amendments can include (but not limited to) the following:

  • removing provisions which directly or indirectly prohibit the holding of meetings by electronic means;
  • including provisions which expressly permit a hybrid meeting or virtual meeting;
  • providing that votes shall be taken by poll for hybrid meeting as electronic participation will generally mean voting taken by poll; and
  • adding provisions to address the issues and power of adjournment in case there is technological break down.
It is also necessary to make a market announcement regarding the board’s decision to hold forthcoming shareholders’ meeting in a hybrid meeting format.

Measures to be taken for conducting hybrid AGM
In conclusion, listed issuers will need to ensure that they implement all necessary precautions in compliance with the rules and regulations, and update shareholders on conducting hybrid AGM via a circular or announcement. To ensure smooth implementation, AoAs and bye-laws must also be amended. Measures to be taken are:

  • Pre-registration: Encouraging shareholders to register in advance will help with planning and implementing measures to manage the number of physical attendees at a single venue. These include use of multiple meeting rooms or venues linked by telecommunication facilities.
  • Vote by proxy: Encourage more shareholders to appoint the Chairman as proxy and vote either by proxy or through HKSCC Nominees Limited.
  • Hybrid meeting: Conduct a hybrid meeting to improve participation, reduce physical contact, save on room rentals, maximize directors’/shareholders’ participation, and facilitate vote taking.
  • Webcast the event: If shareholders or attendees are to be accommodated in different rooms/partitioned areasthe company will need to facilitate live streaming and interaction between the rooms/partitioned area.

With over 20 years of experience servicing thousands of AGMs for our clients and as your share registrar, Tricor can help set up hybrid meeting solutions for your AGMs and implement precautionary measures. As your company secretary, Tricor assists companies in attending to the formalities of amendment of AoA and preparing and reviewing meeting documents. With our hybrid meeting solution, SPOT, we offer you an advanced and seamless hybrid AGM platform. You can rely on us to ensure that your AGMs are conducted smoothly and with minimum effort even in this COVID-19 crisis situation.

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