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Navigating Attendance of Annual General Meetings in the Time of COVID-19

by Oluwajoba Odefemi

As mid-year 2020 approaches, many companies are stepping into the end of Annual General Meeting (AGM) season – the period of time between March and June when limited liability companies would typically meet to discuss developments over the course of the previous fiscal year, approve dividends as may have been advised by the directors, ponder on ways to make progress and generally cater for the ordinary businesses of an AGM[1] as provided under the Companies and Allied Matters Act (CAMA).

However, these are no ordinary times. The outbreak of the novel Coronavirus (COVID-19) and its subsequent spread across the world has altered how different aspects of society are organized, particularly the business world. Companies have had to adopt novel means of carrying on their usual activities, or in some cases, putting a total stop to business, in the wake of various governments’ lockdown of non-essential movement and introduction of social distancing measures.

While public companies registered in Nigeria are required to hold their AGM within nine (9) months from the end of their financial year[2] or within such extended period as may be approved by the Corporate Affairs Commission (CAC), no such rule applies to private companies save that a maximum period of 15 months is allowed between one AGM and the next.

In the wake of the global pandemic, Companies have the primary responsibility to map out ways to organise their AGMs for the year 2020. However, this must be within the bounds of the law, CAMA in particular. Failure to organize AGMs within the confines of the law may expose a company to possible court actions by disgruntled shareholders, which will invariably render the AGM (and the resolutions therefrom) void.

Section 216 of CAMA makes it mandatory for all statutory and general meetings (in this case AGMs) of companies registered in Nigeria to be held in Nigeria. However,  there is currently in place a restriction on movement of international flights into Nigeria in line with the directives of the Nigerian Civil Aviation Authority (NCAA)[3] with the exception of emergency and essential flights. This restriction was extended from April 23 to May 7, 2020, via a Circular issued by the NCAA on April 20, 2020[4].

On May 6, 2020, the Federal Government further extended the closure of Nigeria’s airspace and ban on all commercial flight operations for an additional period of four (4) weeks[5]. Clearly, companies whose shareholders were outside the country at the time the restriction was placed will not be able to comply with the provisions of Section 216 of CAMA as shareholders cannot return to the country.

There is also the restriction on intestate movement imposed by the Federal Government in March 2020[6]. The effect of this on shareholders who are potential attendees of AGMs is the inability to be physically present at such AGMs, except they are resident within the State where the AGM is being held.

The foregoing has raised questions on the best way(s) to comply with the mandatory requirement of holding AGMs while ensuring that the rights of shareholders and all stakeholders (to attend and participate) are protected.

Appointment of Proxy

One available option is provided explicitly in CAMA-appointment of proxy. Section 230 of CAMA provides that shareholders of a company unable to attend meetings may appoint other persons to attend and vote on their behalf. The said provision vests on proxies all the rights ordinarily exercisable by a shareholder entitled to attend a meeting, including voting and speaking at meetings. So long as a quorum is duly formed in line with the Articles of Association of the company or Section 232 of CAMA, any business deliberated upon and resolutions reached at such meeting is valid.

The foregoing provisions of Section 230 of CAMA have been further emphasized by regulatory agencies during this period of uncertainties. CAC[7] and the Securities and Exchange Commission have published advisories  emphasizing the provisions of Section 230 of CAMA while providing further guidance on compliance.

It would appear that the above provision of CAMA and the Guidelines issued by CAC solve two challenges confronting shareholders at this time- the inability to attend AGM owing to travel restrictions (both international and local travels) and complying with government directive on social gatherings[8].

Deferring the AGMs

Another option is for companies to apply to CAC for an extension of time to hold their AGMs. While CAMA provides a maximum period of fifteen (15) months between one AGM and the next, CAMA gives CAC power to extend the time for the holding of AGM, by a period of not more than three (3) months9.

Companies exploring this option will be doing so with the hope that the pandemic would have become a thing of the past and normalcy restored to the world has returned to normal.

Other Options- Virtual Meetings

The advancement in modern technology brought in its wake, a new normal for businesses, particularly in developed climes. The world has since moved with the advancement in technology in the last decade. Meetings in developed countries that would otherwise have required long-distance travel are being held remotely with the aid of video conferencing facilities. This global pandemic presented an opportunity for Nigeria to go the way of the developed nations in this regard; unfortunately, this was not explored/considered by CAC in the Guidelines issued. Perhaps, this can be included in the draft CAMA Bill.

It is instructive to note that neither Section 216 nor any other section of CAMA requires that company meetings to be held in Nigeria must be physical meetings. Section 216 simply reads

“All statutory and general meetings shall be held in Nigeria”.

A liberal and most innovative approach to interpreting the provision of the aforementioned section of CAMA would allow for the virtual holding of meetings. It is, therefore, safe to say that while CAMA does not provide for the holding of virtual meetings, it also does not prohibit the holding of same.

Taking advantage of this gap, several companies have already held general meetings remotely on various virtual platforms (such as Zoom, Skype, Microsoft Teams), with some attendees participating from their various locations within the country through dial-in video and audio devices and being recorded as present.

Indeed, this approach accords with recommendations from several corporate associations such as the Institute of Chartered Secretaries and Administrators of Nigeria (ICSAN). In its recent Guidance Note issued on April 24, 2020, ICSAN emphasized the preference for virtual meetings at this time, adding that same is set to become an entrenched practice in Nigeria. It then recommended that companies consider amending their Articles of Association to include provisions for holding of virtual meetings where physical meetings would be impossible. It concluded by recommending that for uniformity, the CAMA Amendment Bill should accommodate the present reality of holding meetings virtually.

While waiting for the amendment of CAMA, perhaps, it is now left for the courts to give judicial backing to the virtual holding of meetings of companies in the event the validity of such virtual meetings convened is challenged by an aggrieved shareholder of a company.


References

[1]Section 214 of CAMA (CAP C20 Laws of the Federation of Nigeria 2004) lists the ordinary business of an Annual General Meeting as declaring a dividend, presentation of the financial statements and the reports of the directors and auditors, the election of directors in the place of those retiring, the appointment and fixing of the remuneration of the auditors and the appointment of members of the audit committee. All other businesses conducted at an AGM are deemed to be special.

[2]Rule 19.4 (d), Responsibility of the Directors/Trustees in Relation to General Meetings, Rulebook of the Exchange, 2015 (Issuers’ Rules)

[3] See Circular issued on March 21, 2020: “Update on Flight Restriction into Nigeria” [Online] Available:  https://ncaa.gov.ng/documents/advisory-circulars/covid-19-advisory/update-on-clarification-on-flight-restriction-into-nigeria-due-to-covid-19-pandemic/

[4] See “Update on Clarification on Flight Restriction” [Online] Available: https://ncaa.gov.ng/media-center/news/update-on-clarification-on-flight-restriction-into-nigeria-due-to-covid-19-pandemic/

[5]See FG extends suspension of flight operations by another 4 weeks Available:https://nairametrics.com/2020/05/06/fg-extends-suspension-of-flight-operations-by-another-4-weeks/

[6]Aljazeera: Nigeria announces lockdown of major cities to curb coronavirushttps://www.aljazeera.com/news/2020/03/nigeria-announces-lockdown-major-cities-curb-coronavirus-200330095100706.html?utm_source=website&utm_medium=article_page&utm_campaign=read_more_links?utm_source=website&utm_medium=article_page&utm_campaign=read_more_links

[7] Guidelines on holding of Annual General Meetings of Public Companies Using Proxies Available: https://www.cac.gov.ng/3956-2/

[8] Premium Times: Coronavirus: Stay at home, Nigerian govt advises Lagos, Abuja residents

https://www.premiumtimesng.com/coronavirus/383490-coronavirus-stay-at-home-nigerian-govt-tells-lagos-abuja-residents.html

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