A virtual reality

On 18 April 2020, the Securities Commission Malaysia (SC) issued a Guidance Note on the Conduct of General Meetings for Listed Issuers (Guidance Note) and stated that listed issuers shall only conduct fully virtual general meetings during the Movement Control Order (MCO) period. For fully virtual general meetings, the Guidance Note states that there should not be more than eight essential individuals physically present at the broadcast venue, which includes the Chairperson of the general meeting, and may also be joined by the Chief Executive Officer, the Chief Financial Officer, the company secretary, the auditor and those providing audio-visual support. However, the SC stressed that listed issuers should try to conduct the fully virtual meeting with as few individuals present at the venue as possible. Those present must observe all social distancing guidelines.

Kasturi Nathan, KPMG’s Head of Governance and Sustainability, shares her views about SC’s guidance note pertaining to holding virtual general meetings:

In line with Practice 12.3 of the MCCG, companies are called upon to have transparent and regular communication with shareholders, including leveraging technology to promote shareholder participation. As stated by the SC in its Guidance Note dated April 18, 2020, listed issuers in the intervening period of the MCO should conduct general meetings in a fully virtual manner (i.e. having only a broadcast venue with the chairman and a maximum of seven other essential persons being present at the main physical venue) unless the listed issuer’s constitution explicitly prohibits otherwise.

In a post-MCO period where safe distancing requirements remain, listed issuers should conduct their general meetings in a fully virtual or hybrid manner (i.e. physical presence in the general meeting with the option of remote participation for shareholders). SC has further added that where a listed issuer’s constitution expressly prescribes the requirement for a physical meeting venue to conduct its general meeting, such listed issuer is advised to defer the conduct of its general meeting by submitting an application for extension of time to the Companies Commission of Malaysia (CCM) until circumstances permit the use of a physical venue for hybrid general meeting.

So far, from January 2 to April 17, our analysis showed that 85 general meetings [covering Annual General Meetings (AGMs) and Extraordinary General Meetings (EGMs)] have been conducted, representing a decrease of 23% compared to last year. We expect this trajectory to continue, unless companies undertake the path of fully virtual or hybrid general meetings. A simple arithmetical analysis on shareholdings of the top 100 companies by market capitalisation in Malaysia proves that on average, a large company has over 15,000 shareholders (based on an analysis by KPMG in 2018).

Given that fully virtual or hybrid general meetings have the potential to turbocharge the shareholder participation rate which has traditionally been low for physical AGMs, companies should take advantage to establish an accessible platform with available technology to engage with shareholders near and far. This can serve to communicate and deliver transparency in performance, whilst keeping cost of general meetings minimal but meaningful.

In facilitating the conduct of the fully virtual or general meetings, companies may draw reference from AGM Best Practice Guide for Listed Issuers (released by the Malaysian Institute of Chartered Secretaries and Administrators with the support of Bursa Malaysia Bhd) and the AGM Checklist released by SC in February. These documents are premised on considerations relating to pre-AGM, during AGM and post-AGM.

Simply put, in crisis-proofing the AGM proceedings, it is imperative for companies to accord due attention to the entire gamut of proceedings, as advocated by KPMG with the moniker of PROOF (PR – pre-AGM preparation; O – observing the proceedings and OF – officially finalising). In terms of procedural matters arising from the deployment of technological means, companies should ensure that the online registration process is authenticated.

Shareholders should be availed to presentational materials, accorded with sufficient time to cast their votes, and there should be mechanisms to filter the questions raised as well as avenues for shareholders to subsequently revisit a detailed account of the AGM proceedings, if needed.

In the near future post the Covid-19 pandemic, companies can consider having fully virtual AGMs, interspersed with hybrid AGMs once every three or five years. This will assist companies to lower the cost of hosting a AGM, reduce the administrative burden and better engage with a wider pool of shareholders to glean feedback and formulate action plans.

As stated in Section 340(2) of Companies Act 2016, AGMs for public companies need to be held within six months of the company’s financial year end and not later 15 months from the preceding AGM date.

In accordance with the powers accorded under Section 340(4) of Companies Act 2016 and upon application by companies affected by the MCO, the Companies Commission of Malaysia can grant an extension of time up to three months for companies to hold an AGM post-MCO. Delayed or ineffectively run AGMs will inevitably give rise to the potential delays in the announcement and approval of final dividends, election and re-election of retiring directors, approval of directors’ remuneration and share buybacks, if any.

Companies may also be in “technical breach” over selected matters due to cut-off issues as a number of resolutions commonly passed at AGMs are drafted so as to expire at the following AGM, or at a long-stop date thereafter. Examples of such resolutions include share buyback authorities as well as approval of directors’ fees and benefits payable.

To elucidate further, if the AGM in 2020 cannot be held until after the expiry of the long-stop date in the 2019 AGM resolutions, the company may not have any valid authority in these areas.

This interview was first published in Focus Malaysia on 20 April 2020. Read the full article here.