Court allows listed companies to hold online AGMs

Nairobi Securities Exchange (NSE). FILE PHOTO | NMG 

By BRIAN NGUGI
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Summary

• Listed companies whose internal rules do not provide for virtual Annual General Meetings (AGMs) have been allowed to hold online shareholder meetings, unlocking frozen company deals.
• This follows court approval of a deal between Nairobi bourse-listed ScanGroup and Capital Markets Authority (CMA) allowing for online voting on decisions that require shareholder approval.
• CMA had frozen shareholder meetings in line with the State directive that prohibits mass gatherings like meetings, weddings and funerals to contain the spread of the Coronavirus.

Listed companies whose internal rules do not provide for virtual Annual General Meetings (AGMs) have been allowed to hold online shareholder meetings, unlocking frozen company deals.

This follows court approval of a deal between Nairobi bourse-listed ScanGroup and Capital Markets Authority (CMA) allowing for online voting on decisions that require shareholder approval.

CMA had frozen shareholder meetings in line with the State directive that prohibits mass gatherings like meetings, weddings and funerals to contain the spread of the Coronavirus.

The regulator also advised firms to hold virtual meetings, in effect freezing deals that required shareholder approval in companies whose articles of association do not provide for online AGMs.

ScanGroup was unable to proceed with the sale of part of its business for Sh5 billion while Kenya Airways was also derailed from seeking shareholder approval for an undisclosed transaction.

Justice David Majanja on Wednesday allowed listed firms to hold virtual shareholder meetings during the coronavirus period despite the internal rules not expressly providing for online voting.

The order cushions Nairobi Securities Exchange (NSE)-listed firms from court action should a shareholder or interested party challenge decisions reached through the virtual meetings.

“Most of the listed companies were restricted by their Articles of Association to hold virtual general meetings, for example, Scangroup and Kenya Airways, who notified CMA of the restriction and their intention to seek court orders to allow them to hold virtual AGMs,” said CMA in a statement yesterday.

“The court’s decision will benefit all listed companies that could not hold virtual general meetings due to the Articles of Association restrictions. Listed companies will apply to the Capital Markets Authority for a ‘no objection’, to proceed as directed by the court.”

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 allows shareholders to vote on motions until the day before AGMs.

Technology giant Samsung Electronics in March also adopted electronic voting for the first time ever for this year’s AGM held March 18.

Even though several companies amended their articles of association to allow for virtual meetings, many have opted to suspend AGMs over adoption of electronic voting.

“Thus far, CIC Insurance has been allowed to proceed with sale of its assets transaction subject to a virtual circular. Co-operative Bank, Kakuzi and BAT have been allowed to pay dividends,” says CMA.

The regulator has allowed firms listed on the NSE to pay dividends without holding AGMs and directed boards to seek approval from investors when the shareholder meetings are held at a later date.

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 hit by effects of coronavirus.

To stem the disease’s spread, Kenya has suspended commercial flights in and out of the country, imposed a dusk-to-dawn curfew and banned public gatherings.

Section 310 of the Companies Act 2015 provides that a public company is statutorily compelled to hold an AGM within six months from the end of its financial year. This means that firms whose financial year end in December have till end of June to hold the shareholder meetings. Traditionally, many of these firms host the meetings in April and May.