Preamble
As Countries across the world continue to take drastic measures to tackle the spread of the covid-19 pandemic currently ravaging the world, companies are faced with the threat of the negative impact to business continuity. Strategies currently being advocated and enforced in a bid to curb the spread of the disease causing virus include the restriction of large gatherings and social distancing. In view of this, the Annual General Meetings of Companies have been affected because typically a public company would have thousands of shareholders who are all entitled to attend meetings either in person or by proxy.
A few public companies whose Annual General Meetings (AGM) fell within the window of the end of first quarter and the beginning of second quarter of 2020 have had to either cancel or reschedule the meetings as a result of the covid-19 pandemic. However, a notable tier-1 Nigerian bank blazed the trail recently when it decided to proceed with its AGM on the 30th of March, 2020 largely by proxy attendance having obtained regulatory approval to do so. This became necessary due to the need to comply with the maximum number of persons authorized to be in a public gathering in Lagos State[1], the State with the highest incidence of covid-19 cases so far in Nigeria. A few other public companies have now rescheduled their AGMs which they intend to conduct by proxy as well within the limits of the number permitted by the Authorities. This article seeks to highlight possibilities for future general meetings of public companies in Nigeria especially in this digital age.
General Meetings of Public Companies
There are two main decision making organs of a company namely the Board of Directors and the Shareholders in a General Meeting which is the highest decision making organ of the company. Three types of general meetings are prescribed by law for public companies operating in Nigeria namely: the statutory meeting, the annual general meeting and the extra-ordinary general meeting[2]. The statutory meeting is expected to be held within six months from the date of incorporation of the company. It is the initial meeting of the company whereat members have the opportunity to get information on shareholding structure; details of directors, auditors, secretary and managers, if any; total amount of cash received for shares allotted; particulars of pre-incorporation contracts, etc.
The annual general meeting is a yearly meeting (as the name implies) which affords shareholders the opportunity to assess the performance of the company and to take legally prescribed decisions which are crucial to the operations of the company. By law[3], the business to be transacted at an AGM of a company include declaration of dividend, presentation of financial statements and reports of the directors and auditors, election of directors to replace retiring directors, appointment of auditors and audit committee and fixing of remuneration of auditors.
The extra-ordinary general meeting may be convened on a needs basis to discuss issues that require such meeting to be convened.
Statutory provisions and guidelines on proxy attendance at company general meetings vis-à-vis the interest of the shareholder.
The law is that every member of the company is entitled to receive notice of meetings of the company and also to attend the meeting either in person or by proxy[4]. Thus, proxy attendance at general meetings of public companies is not a new phenomenon. It is believed that the idea behind the use of proxy at general meetings is to afford every member to chance to exercise the right to attend meetings and this is critical since the general meeting is the only platform where the shareholder can engage with fellow shareholders and management and also make contributions.
Furthermore, Principle 21 of the Nigerian Code of Corporate Governance, 2018 on general meetings provides that:
“General Meetings are important platforms for the Board to engage shareholders to facilitate greater understanding of the Company’s business, governance and performance. They provide shareholders with an opportunity to exercise their ownership rights and express their views to the Board on any areas of interest”.
In this regard, the code recommends that the general meeting should be conducted transparently and allow for free discussions especially ensuring that minority shareholders participate fully and contribute effectively at such meetings. Also, the venue of general meetings should be accessible to shareholders to ensure that they are not disenfranchised on account of the choice of venue.
On the 26th of March 2020, the Corporate Affairs Commission (CAC) issued a “Guideline on holding of annual general meetings using proxies”. The guideline reads as follows:
The following should guide the companies on the procedure and conduct of the AGM:
● The approval of the Corporate Affairs Commission (CAC) shall be obtained before such a meeting is held. The application can be submitted to the Head Office in Abuja or any of the branch offices in any of the States.
● CAC shall send representative(s) as observer(s) to the meeting.
● The meeting shall only discuss the Ordinary Business of an AGM as provided in S.214 CAMA.
● Notice of meeting and proxy form shall be sent to EVERY member in accordance with the requirements of CAMA. Companies will be required to provide the CAC with the evidence of postage or delivery of such notices after the meeting.
● All the members shall be advised in the notice that in view of the Covid-19 pandemic, attendance shall only be by proxy with names and particulars of the proposed proxies listed for them to select therefrom. The invitation shall be issued at the companies’ expense as well as the stamp duties which shall be prepaid by the company. The proxies need not be members of the company.
● The company shall be guided by the provisions of its Articles or CAMA as regards to a quorum. However, for the purpose of determining quorum, each duly completed proxy form shall be counted as one.
The guideline further advised companies to send in applications for approval to conduct AGMs by proxy via e-mail to the Registrar-General of the Commission.
It has been argued[5] and I agree that the guideline issued by the CAC is devoid of legal backing because the Commission does not have the power to make such far reaching directives which tend to vary and contravene the provision of the extant law on the subject. Some shareholders have challenged the action of the Commission raising genuine concerns of disenfranchisement[6].
A valid observation made by concerned shareholders recently is that compelling them to appoint proxies (in order to comply with the directives on public gatherings) was an infringement on their right to attend meetings physically as provided by the law[7]. Moreover, the guideline issued by CAC stated that proposed proxies should be listed for shareholders to choose from. Again, it means that the freedom of a shareholder to choose who to represent him/her (including a person who is not a member of the company[8] ) is at risk of being infringed. Thus, important decisions such as election of a director to replace a retiring director and selection of members of audit committee will be left to a few to decide which may not be acceptable to other shareholders who were unable to attend. Moreover, the principle of democracy which is the bedrock of company decisions in such meetings would have been undermined. Arguably, this is a breeding ground for infringement of the rights of minority shareholders of a company.
Looking ahead – remote/virtual meetings as a viable option for public companies
Over the years, minority shareholders of public companies in Nigeria have suffered a considerable deal of deprivation. Many public companies opt to hold annual general meetings in Lagos, the commercial capital of Nigeria year after year and this singular action deprives a considerable number of local shareholders who would otherwise wish to participate in the meetings but are constrained by distance. It is suggested that companies should consider rotation of meeting venues in various parts of the country, or simultaneously hold meetings remotely in other parts of the country to enable more shareholders participate.
The country could conveniently be divided into either Northern, Eastern and Western zones or six geo-political zones: North Central, North East, North West, South South, South East and South West with selected venues where the meetings could hold. One of the greatest lessons of the covid-19 pandemic is that technology can be harnessed to achieve far more than we have done in the past and the sooner this tool is deployed, the better. Remote working and virtual meetings which have become the main alternative amid the covid-19 induced lockdown have shown that our lives and businesses do not have to grind to a complete halt when physical movement is restricted.
One question that would readily come to mind is the validity of a remote/virtual meeting and decisions reached thereat. The Companies and Allied Matters Act, Cap. C20 LFN 2004 (CAMA) is silent on remote/virtual meetings but states that a meeting must be held in Nigeria[9]. It is strongly recommended that the proposed amendment to the CAMA which includes a provision for electronic (virtual) meetings for private companies should be reviewed to capture public companies before the law is passed. In order to ensure compliance with the extant law, a hybrid meeting[10] is recommended. This means that there would be participants at a physical location while people at other remote locations would participate via technologically enabled means. Voting by show of hands[11] can also be undertaken at the remote venues. Insofar as the meeting is duly convened[12] and conducted[13] in line with the law, resolutions reached thereat will be valid. Ideally the articles of association of the company should provide for virtual meetings as a basis to forestall any question as to the validity since there is currently no express provision of the law. A useful tool to aid the planning and organization of a hybrid meeting is the guideline recently released by the Nigerian Stock Exchange though targeted at Board, Committee and Management meetings[14].
Conclusion
Obviously, the covid-19 pandemic has provided an opportunity to review the mode of conducting general meetings by public companies in Nigeria in a manner that balances all interests while complying with statutory and regulatory provisions. As with several other aspects of human endeavor, there is need to harness technology for a more efficient and robust relationship between companies and shareholders. This is a fundamental parameter of assessing corporate governance compliance level of public companies.
[1] Erezi, D. ‘Coronavirus: Lagos State bans public gatherings of more than 20 persons’ The Guardian 2020 available at https://guardian.ng/news/coronavirus-lagos-state-bans-public-gatherings-of-more-than-20-persons/ accessed on 22nd April, 2020.
[2] S. 211, 213 and 215 CAMA
[3] S. 214 CAMA
[4] S. 230 CAMA
[5] Ijaodola, L. and Kazeem, D. (2020) “New CAC Guidelines on AGMs of Public Companies: Valid or not?” available at https://www.gelias.com/images/Newsletter/THOUGHTS_ON_NEW_CACS_GUIDELINES_ON_AGMS_OF_PUBLIC_COMPANIES.pdf accessed on 22nd April, 2020.
[6]Helen Oji ‘Shareholders want regulators to review proxy AGM arrangement’ The Guardian 2020 available at https://guardian.ng/business-services/shareholders-want-regulators-to-review-proxy-agm-arrangement/ accessed 22nd April, 2020.
[7] S.81, 227 and 228 CAMA
[8] s. 230 CAMA
[9] S.216 CAMA
[10] Sheehan, A. and Stuckey, D. ‘The Best Practices Committee for Shareowner Participation in Virtual Annual Meetings’ Harvard Law School Forum on Corporate Governance 2018 available at https://corpgov.law.harvard.edu/2018/05/31/principles-and-best-practices-for-virtual-annual-shareowner-meetings/ accessed on 22nd April, 2020.
[11] S.224(1) CAMA
[12] In compliance with statutory requirement for notice. See s. 221 CAMA
[13] In compliance with statutory requirement for quorum. See s. 232 CAMA
[14] Guidelines on Companies’ virtual Board, Committee and Management meetings available at file:///C:/Users/Accord%20Legal%205/Documents/NSE%20Guidance%20note%20on%20Virtual%20Board%20meetings.pdf accessed on 22nd April, 2020
Author’s note: This article was also published on Lawyard
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