Private Companies Allowed to Hold Virtual Annual General Meetings (AGMs) During The Covid-19 Pandemic Period
Every company, except a single member company, is required to hold an AGM under the Companies Act. Failure to hold an AGM is an offence which attracts a fine of KShs.100,000. However, the ongoing Covid-19 pandemic and the Government’s public health directives to contain the spread of the virus such as cessation of movement, restrictions on public gatherings and social distancing measures have affected the operations of companies, specifically posing a challenge to the holding of general meetings.
It is worth noting that the Companies Act, 2015 allows companies to pass written resolutions in lieu of holding physical meetings with the exception of certain resolutions. Most companies, through their Articles of Association, also allow for the holding of meetings through audio visual tools thereby eliminating the need to conduct physical meetings. Prior to the ruling in Miscellaneous Civil Application No. E721 of 2020, for a company to utilize any of these alternatives, the Articles of Association of the company needed to expressly provide for the same.
The High Court of Kenya in an effort to mitigate the effects of the pandemic on the operations of companies, issued an order in the Miscellaneous Civil Application No.E721 of 2020 made by the Kenya Private Sector Alliance (KEPSA), on the 15th day of June 2020 allowing any company to hold and conduct virtual general meetings in the event that it is impracticable to conduct the same as required by its Articles of Association due to the above-referenced directives imposed under the Public Health Act due to the pandemic.
The High Court Order states that:
- Any company which finds it impracticable to conduct its general meeting in the manner required under its Articles of Association and the Companies Act 2015 due to the ongoing Covid-19 pandemic and subsequent public health restrictions instituted by the Government may convene the general meeting by use of virtual/electronic technology or any other hybrid means necessary to facilitate the running of general meetings; and
- The holding of such general meetings virtually is subject to the compliance with the provisions of the Companies Act 2015 and the regulations and the Guidelines on the Conduct of Hybrid and Virtual General Meetings by Companies issued by the Registrar of Companies (the “Virtual Meetings Guidelines”).
A meeting convened, held and conducted in accordance with the High Court Order shall be taken for all purposes to be a general meeting of the company properly convened, held and conducted.
The Virtual Meetings Guidelines allow companies to leverage on technology to hold general meetings provided that the company’s Articles of Association allow for it. The general meeting can either be a hybrid meeting in which some of the members attend a physical in person meeting (subject to the current restrictions on public gatherings) or wholly remote or virtual general meetings in which the meeting is conducted solely through audio visual media without anyphysical meeting of the members.
The guidelines set out for the conduct of virtual meetings include the following:
- The technology to be used should be appropriate and reliable so as to ensure that members participate, cast their votes on time and proper record keeping is done.
- Members with no access to the internet can cast their votes via proxy forms appointing the Chairperson or any other member to vote on their behalf.
- The Company should provide guidance on the means of access, method and other voting requirements and circulate the rules of procedure to the members.
CM Advocates LLP has a fully-fledged Company Secretarial and Corporate Governance Advisory Business Unit that offers a vast range of company secretarial; corporate governance and tax advisory services. Our highly qualified and experienced personnel will assist with all your company secretarial and corporate governance matters and ensure that your business is compliant with the relevant legal requirements. We are available to assist in reviewing and amending your company’s Articles of Association to ensure that it provides for the conduct of a virtual or hybrid general meeting and assist in the conducting of virtual or hybrid meeting for your company.
Kindly get in touch with us for assistance on the above.