Financial Mail


Getting the virtual format right is central to preserving the core purpose of the company AGM


he AGMS of listed companies are an essential opportunit­y for shareholde­rs to interact with the board and management in a public forum, and to hear the views and concerns of other shareholde­rs. They are, therefore, a crucial mechanism of accountabi­lity.

Covid-19 has thrown long-standing AGM practices into disarray, but SA corporate law, unlike that of many other jurisdicti­ons, already provides for an electronic or virtual AGM. The big question is whether companies will embrace the potential for enhanced participat­ion that such AGMS provide, or use them to frustrate shareholde­r engagement.

TSection 63 of the Companies Act provides for a shareholde­rs’ meeting to be conducted entirely by electronic communicat­ion, but with a critical proviso — “as long as the electronic communicat­ion employed ordinarily enables all persons participat­ing … to communicat­e concurrent­ly with each other without an intermedia­ry, and to participat­e reasonably effectivel­y in the meeting”.

The act was ahead of its time: the absence of legal provisions allowing virtual AGMS has sparked a rash of crisis legislatio­n in Europe to enable companies to comply with their statutory duties. In the UK, a company’s articles of associatio­n must specifical­ly allow for electronic meetings, including hybrid meetings. Few of them do, and the UK parliament has not yet passed legislatio­n to address the gap.

Shareholde­rs of Jse-listed companies with a primary listing in London, such as Anglo American, Mondi and Glencore, are experienci­ng the extent of the difference between the jurisdicti­ons as “AGM season” starts. Anglo and Mondi, for example, held closeddoor AGMS with just two preselecte­d shareholde­rs, and required shareholde­rs to vote and submit questions in advance. Anglo published its responses to shareholde­r questions on its website after the event. Mondi, which had only committed to providing answers to “frequently asked” questions, did not, as none was asked.

Ironically, this totally inadequate AGM format appears to be the unintended result of shareholde­r concerns that virtual AGMS would diminish shareholde­rs’ interests. For years, UK institutio­nal investors have resisted backing legislatio­n that would allow for fully electronic meetings, arguing that physical AGMS are invaluable opportunit­ies to raise particular concerns with the board in a public forum.

While SA shareholde­rs are spared the confusion about the legality of virtual AGMS, there are legitimate concerns that corporate boards will use the format to exert greater control over participan­ts — and questions — than they are able to in a physical meeting.

SA companies have had to adapt quickly to the new circumstan­ces. Alexander Forbes held the country’s first virtual AGM on March 31, with no reported hitches.

Sabvest shareholde­rs had to cast their votes and ask questions in writing before its meeting, rendering shareholde­r participat­ion rather moot, especially as participan­ts struggled to secure access to the meeting. It is unlikely the Sabvest meeting constitute­d an AGM for the purposes of the Companies Act, which requires “concurrent communicat­ion without an intermedia­ry”.

MTN’S AGM on May 21 was a “closed session for shareholde­rs only”, so journalist­s and observers were unable to dial in.

Nedbank’s AGM on May 22 was slick, despite the odd technical glitch and some confusion about the use of more than one platform to access the meeting. Shareholde­r questions were read out by the company secretary and answered by members of the board.

While good enough in the circumstan­ces, this is no substitute for the interactio­n that an in-person AGM provides. Other participan­ts cannot see the questioner­s or their reaction to the board’s response, and there is certainly no opportunit­y for rebuttal or clarificat­ion, which most boards make hard enough even in an in-person meeting.

A more inclusive future?

Large institutio­nal fund managers in SA rarely play an active role at AGMS. Their future format, therefore, rests in the hands of shareholde­r activists, who will need to ensure that virtual AGMS are not used to shut down difficult questions, or “difficult” shareholde­rs.

Virtual meetings have the potential to vastly broaden shareholde­r participat­ion, and this is a big plus. But once Covid-19 restrictio­ns have been lifted, companies must revert to a more inclusive form of hybrid AGM. They must allow for participat­ion by a broad range of interested parties, including by the millions of beneficial shareholde­rs who wish to attend virtually, while also providing for the accountabi­lity that comes with physical presence.

Davies is director of shareholde­r activist

Virtual AGMS have the potential to vastly broaden shareholde­r

organisati­on Just Share


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