4th Jun 2020
In the unprecedented conditions resulting from the COVID-19 pandemic, companies have to rethink the arrangements for their 2020 Annual General Meetings (“AGM”). Travel restrictions and the lack of suitable venues for the meetings create a number of challenges for companies seeking to hold their 2020 AGMs in the coming months. Some considerations and issues arising from alternative AGM arrangements are discussed below.
Virtual or hybrid AGMs
The Companies Law, Cap.113 (the “Law”) permits Cyprus companies listed in regulated markets to conduct general meetings via electronic means. In addition, all Cyprus companies, whether listed or otherwise, may convene general meetings via teleconference, or any other means which enables the participants to hear and be heard during the meeting. Whilst it is standard practice for the Articles of Association of Cyprus companies to provide for this form of “virtual” meeting, it is quite uncommon and at such meeting, all persons participating via such means are considered to be present and counted for quorum purposes.
A ‘hybrid’ AGM (whereby shareholders may participate electronically in the AGM in conjunction with a physical meeting), is also, in practice, quite uncommon but will no doubt increasingly be seen to be adopted by companies listed in regulated markets, so as to reduce the number of people attending the physical location.
Companies holding a ‘virtual’ or ‘hybrid’ AGM will require, among other things, to engage a technology provider, adapt the AGM documentation sent to shareholders, to clarify how the shareholders will connect, speak and vote at the general meeting and incur additional associated costs.
Delay, Postponement or adjournment of AGMs
One potential solution to the current situation would be for companies to delay the holding of an AGM until all restrictions are relaxed or lifted. However, this may not be feasible due to legal constraints as to when AGMs have to be held (both generally and due to time limits on laying financial statements before a general meeting) and given the uncertainty as to whether the situation will improve or get worse as the year progresses.
In the event that the notice for an AGM has already been circulated, companies may consider whether they can postpone their AGM, to the extent permitted by their Articles of Association and the Law. However, postponement will be a limited option if Coronavirus-related restrictions make it difficult to hold the AGM within that period. Similar issues would also arise in the case of an AGM adjournment. The Articles of Association of most companies provide the power to adjourn an AGM, however, adjournment to a later date first requires a physical meeting to be opened, with the necessary quorum requirements met, before the meeting can then be adjourned to a later date. Once again, this will be of limited value if there is a risk that the reconvened AGM could not be held within any applicable statutory window.
In the event that either the postponement or adjournment routes are followed, there will be implications on the resolutions to be proposed at the AGM. A number of resolutions commonly passed at AGMs, for example, share allotment and disapplication authorities, are drafted so as to expire at the following AGM, or at a long-stop date thereafter. Companies may therefore run the risk that they will not have valid authority on these matters if the 2020 AGM cannot be held until after the expiry of the long-stop date in the 2019 AGM resolutions.
Encourage the return of proxies and organise a back- up venue
In the event that companies are unable to delay, postpone or adjourn their AGM, it is important to encourage their shareholders (through the AGM notice and/ or other announcements) to appoint a proxy, rather than attend in person. So as to ensure that shareholders are able to vote on the resolutions at the AGM, even if they do not attend in person, they should be reminded to return their proxy forms or register the appointment of their proxy electronically (where provision is made) as early as possible prior to the meeting. It is advisable for the Chairman of the AGM to act as proxy holder for several shareholders and for such shareholders to dictate to the proxy holder how he should vote.
As part of contingency planning, companies should also consider the feasibility of organising an alternative venue for their AGM in case the original venue becomes unavailable; noting that any change of venue will need to be communicated to all shareholders in good time.
It is advisable for companies planning to hold their AGM in the next few weeks or months to keep abreast of the evolving restrictions and advice released by the government, regulators and others which may affect their decision to delay holding an AGM or the possibility of holding an AGM as planned. At present, the Department of Registrar of Companies and Official Receiver in Cyprus has announced that, among other measures, no penalties for late filings of annual returns for the year 2020 shall be imposed until 28 January 2021.
[This article was prepared by partner Anna Rossides]
The above is intended for general information purposes only. If you would like to discuss any issues regarding your company’s 2020 AGM, please get in touch with your usual contact at Dr. K. Chrysostomides & Co. LLC.