Corporate Accountability and the ‘Virtual Agm’

The COVID- 19 pandemic continues to evolve, demanding that the required health and safety protocols remain for a further period of an uncertain time. Sri Lanka having largely contained the pandemic and consequently revised its COVID-19 policy with a ‘return to work’ protocol within the parameters of strict measures for prevention of the disease to include sustained emphasis on ‘Social distancing’. Thus, notwithstanding a perceiving ‘business as usual’ feel in the new normal sphere, businesses continue to be challenged in one way or another, to include maintaining standards of corporate compliance.
COVID-19大流行病仍在继续发展,要求在今后一段不确定的时间内继续执行必要的健康和安全规程。 斯里兰卡已在很大程度上遏制了这一大流行,因此在预防疾病的严格措施参数范围内以“重返工作”方案修订了其COVID-19政策,其中包括持续强调“社会隔离”。 因此,尽管在新的正常领域中有一种“一切照旧”的感觉,但企业仍在以一种或另一种方式面临挑战,包括维持企业合规标准。

The Companies Act No.7 of 2007 (the ‘Act’) makes mandatory the holding of an Annual General Meeting (‘AGM’) within a specified time line, with non-compliance constituting a strict liability offence on the part of the Company and its Directors.
科伦坡证券交易所(CSE)认识到需要在遵守COVID-19健康和安全协议的同时支持公司合规并促进股东参与,因此制定并发布了一份“知道说明”,说明在科伦坡证券交易所上市的企业在因大流行病而受到限制的情况下举行年度股东大会时可以考虑的替代方法。 该指导说明是对科伦坡证券交易所规则的补充,并规定:

Recognising the need to support corporate compliance and facilitate shareholder participation whilst adhering COVID-19 health and safety protocol, the Colombo Stock Exchange (‘CSE’) formulated and has issued a ‘Guidance Note’ on alternate approaches that maybe considered by companies listed on the Colombo Stock Exchange in the conducting of AGM’s amidst the restrictions in place due to the pandemic. The Guidance Note is supplemental to the Rules of the CSE and provides for: -

  1. A Postponement of the AGM:

    An Entity which has not issued its Notice convening an AGM may choose to delay its issuance of the notice or having already issued a Notice it may choose to postpone its AGM. In such event, a disclosure of postponement being required to be made to the CSE and publication of a notice in the newspapers. The newspapers not all being circulated in the print media form as yet but available in electronic form with no subscription charge
    尚未发出召开股东周年大会通知的企业可以选择延迟发出通知,或者已经发出通知的企业可以选择延迟举行股东周年大会。 在这种情况下,需要向科伦坡证券交易所披露延期事宜并在报纸上刊登公告。 报纸还不是全部以印刷媒体形式分发,而是以电子形式提供,不收取订阅费

    On a postponement of an AGM, the payment of a final dividend, already announced by the Entity, requiring the approval of the shareholders at such AGM, would also stand postponed; with the option of the payment of an interim dividend in lieu of the final dividend being available provided compliance with times lines of adequate notice to the market is possible prior to the payment.
    在股东周年大会推迟时,实体已经宣布的、需要在该股东周年大会上获得股东批准的末期股息也将被推迟;如果在支付前能够遵守时间线并向市场发出充分通知,则 可以选择支付中期股息来代替末期股息。

    All notices pertaining to the postponing of an AGM being deemed to have been given if in electronic form (Subject to specific legal advice) with such notice also being provided to the CSE for dissemination.

  2. Virtual AGM’s: Subject to there being no restriction contained the Articles of the Association of the Entity and subject to legal advice -

    An Entity may choose to proceed with holding its AGM using technology to include electronic and teleconference mechanisms with no corresponding physical meeting.

    Additionally, an Entity may consider the options set out in Section 144 of the Act which provides for a Resolution in lieu of holding a meeting, in writing signed by not less than 85% of the shareholders who would be entitled to vote on that resolution at a meeting of shareholders, who together hold not less than 85% of the votes entitled to be cast on that resolution, shall be as valid as if it had been passed at a meeting of those shareholders, thus, circumventing the requirement of holding the AGM.

  3. Vote by Proxy:

    An Entity may choose to include specific provisions in the Notice of Meeting encouraging shareholders to vote by Proxy. In such instances, the shareholders may be presented with the option of authorizing an independent director to attend and vote at the AGM on their behalf.
    实体可以选择在会议通知中加入特定条款,以鼓励股东通过代理投票。 在这种情况下,股东可以选择授权一名独立董事代表他们出席股东大会并投票。

  4. Questions by shareholders prior to the AGM:

    Shareholders may be permitted to submit questions related to the business of the AGM, directly to the Entity prior to the date of the AGM with the responses from the Board of Directors and management to substantial queries and relevant comments from shareholders to be included in the minutes of the AGM.

  5. Alternative arrangements for venues to facilitate the AGM:

    The Entity may choose to segregate shareholders across various venues, ensuring that there will not be large groups of people together, with Video-links provided to allow shareholder participation at each venue, with advance notice to shareholders on the accommodation capacity in each venue and a pre-registration requirement.

As provided in the ‘Guidance Note’ the practical application of the suggested alternatives would however be subject at all times to the provisions of the Act to be implemented in consultation with the Office of the Registrar of Companies (ROC) vested with authority over statutory Corporate filings.

There being no precedent of hosting an AGM in electronic form by Listed Entities pre-COVID, with no enabling provision the Act nor in the Articles of Association of most Entities. The Regulator seeking to however allow consideration for the use of technology, unless otherwise expressly prohibited or prevented in terms of the Articles of Association of the Entity. This being a progressive step and in line with the Government’s general initiative to move towards a more digitalized society. COVID being the catalyst in an acceleration of the program.
在COVID之前,没有任何上市公司以电子形式召开年度股东大会的先例,该法案或大多数实体的公司章程中都没有启用条款。 但是,监管机构寻求允许考虑使用技术,除非以实体公司章程明确禁止或阻止。 这是一个渐进的步骤,符合政府向数字化社会迈进的总体倡议。 COVID是程序加速的催化剂。

The importance of an AGM inter-alia is that it affords all shareholders an opportunity for a face to face interaction with management allowing for the freedom of inquiry from the management to satisfy themselves that the management has their best interests at hand whilst holding the management accountable at all times for decisions taken.

The fact however is that global focus is on ‘health and safety’ which fact is best acknowledged by all of us sooner than later. COVID -19 IS altering our personal and work patterns to sync with restrictions of freedom of movement, strict social distancing policies, closures and limitations of work and work spaces resulting in corporates being compelled to rethink their AGM strategy.
但事实是,全球关注的焦点是“健康与安全”,这一事实早已为所有人所认可,COVID-19正在改变我们的个人和工作方式,以限制行动自由,严格的社会距离政策 ,工作空间和工作空间的封闭与限制,导致企业不得不重新考虑其年度股东大会战略。

In this background we are witnessing Regulators universally offering regulatory flexibility on how meetings are held with the option of the ‘Virtual AGM’ – namely, that which is conducted wholly electronically with no physical location including in Sri Lanka. Availing of this option a few leading Licensed Commercial Banks have successfully concluded virtual AGM’s post COVID.
在这种背景下,我们见证了监管机构普遍为选择“虚拟股东周年大会”的方式如何举行会议提供了监管灵活性,即虚拟会议完全以电子方式进行,没有实际地点,包括在斯里兰卡。 利用此选项,一些领先的持牌商业银行已成功完成了COVID后的虚拟股东大会发布。

Considering that AGM’ have been postponed or unable to have been convened due to the health and safety protocols currently prevailing the proposed new forms of AGM’s in the way of a hybrid or virtual meeting would be welcomed by a wide spectrum of shareholders in Sri Lanka varying, from high net worth institutional investors to rural to self- funded retirees and small retail investors, for reasons of greater accessibility with no requirement for long distances of travel and costs attached and convenience of time, particularly with the many restrictions imposed on public transport of all forms. Notwithstanding, Shareholders have expressed concern of losing the ‘in – person’ experience and consequently being apprehensive that Corporates may use the opportunity to their advantage to be less transparent and justify the use of such forms of meetings to avoid the discomfort of having to face difficult and otherwise probing questions and concerns in a ‘real’ public forum.
考虑到由于目前普遍存在的健康和安全规程,已被推迟或无法召开的股东周年大会,以混合或虚拟会议的方式召开的新形式的股东周年大会将受到斯里兰卡众多股东的欢迎。 从高资产净值机构投资者到农村再到自筹资金的退休人员和小型散户投资者,由于无需长途旅行和附加费用且时间便利,尤其是在对各种形式的公共交通施加了许多限制的情况下,更加方便。 尽管如此,股东们对失去“亲临现场”的体验表示担忧,因此担心企业可能会利用此次机会降低透明度,并为使用这种形式的会议辩护,以避免在“真正的”公共论坛上探讨问题和疑虑时面对困难而感到不适。

Virtual meetings are a first in Sri Lanka and so untested. These meetings not being always provided for in a company’s Articles and as such may be disputed as not ‘constituting a valid meeting’. The CSE acknowledging and providing for the alternatives in the form of the ‘Guidance Note’ cautions the user by qualifying itself by providing that the implementation of such form of meeting will be ‘Subject to the Act, consultation with the ROC and obtaining legal advice’. It maybe thus, implied that unless provision has or is made for use of remote meeting technology, resolutions passed at a Virtual AGM maybe affected for a lack of legal validity.
虚拟会议在斯里兰卡尚属首次,因此尚未经过测试。 这些会议并不总是在公司的章程中规定,因此可能会被质疑为不构成“有效会议”。 科伦坡证券交易所以“指导说明”的形式承认并提供了替代方案,提醒使用者注意,规定这种会议形式的实施将受该法约束。与公司注册处协商并获得法律意见。” 因此,这可能意味着,除非有使用远程会议技术的规定,否则在虚拟股东年度大会上通过的决议可能会因缺乏法律效力而受到影响。

The CSE provides for the ‘hybrid AGM’ and it is opined that it may be considered to be a safer option allowing for investors to participate virtually, in conjunction with a physical meeting that meets the number of participants required for a quorum and so constituting a ‘valid AGM’.
科伦坡证券交易所提供了“混合年度股东大会”,并认为这是一种更安全的选择,允许投资者以虚拟方式参与,同时与符合法定人数的实际会议相结合,从而构成 “有效的年度股东大会”

Whilst conceding that Companies globally are facing many different challenges, it is imperative that companies in Sri Lanka move away from traditional practices and at this difficult time, work towards facilitating for investors a platform for a meaningful engagement and interaction that they would customarily expect at an AGM which is its primary purpose, regardless of the daunting restrictions on account of the Pandemic. Communication and open dialogue with shareholders arguably being needed most with hitherto unknown difficulties faced by people today. It is commendable that Sri Lanka has issue the ‘Guidance Note’ providing inter –alia for the ‘Virtual AGM’ and it is hoped that Companies along with the CSE would collaborate further to make necessary amendments to constitutional documents such as the Articles of Association to expressly permit virtual AGM’s or the Hybrid AGM, create a technical model suitable for Sri Lanka essential to a Shareholder exercising all her rights otherwise exercised with no impediment and other aspects, thereby acknowledging the function and importance of the AGM in corporate governance in Sri Lanka serving the best interests of both the Company and the Investor shareholder.