Corporate Meetings During Social Distancing20Apr2020
Work-from-home arrangements. Restrictions on travel. No gatherings of four people or more. COVID-19 has changed how we work, live and socialise. The pandemic has also affected how companies conduct their corporate governance. We are now in financial reporting season when companies are convening board and shareholder meetings to approve financial statements and other annual business. The legal and compliance requirements governing companies did not have COVID-19 in mind. Tim Drew and Ivy Chan from the Corporate and Commercial practice group of Tanner De Witt review how to navigate these unusual circumstances for Hong Kong incorporated companies.
Are general meetings of shareholders permitted?
Since 29 March 2020, group gatherings in any “public place” in Hong Kong are prohibited. However, an exemption applies for “any group gathering at a meeting of a body that must be held within a specified period in order to comply with any ordinance or other regulatory instrument that governs the operation of the body or its business”. This exemption can cover annual general meetings of companies. Annual general meetings must take place within a prescribed period under the Companies Ordinance.
Nonetheless, given public health considerations, directors should still consider adjourning or delaying general meetings where possible to prioritise the safety of its directors and members. Alternatively, companies should consider holding meetings using electronic means.
Meetings of a company should be postponed if they are neither time-sensitive nor needed to meet legal or regulatory requirements.
Can shareholder meetings and board meetings be held virtually?
The first step in considering virtual meetings is to check the Articles of Association to review if and how they allow for electronic meetings.
General meetings of shareholders come in two types: an annual general meeting which must follow a prescribed statutory agenda of business, and an extraordinary general meeting which is basically any other general meeting of shareholders.
A Hong Kong incorporated company may hold a general meeting at two or more places using technology (such as teleconferencing) that allows members of the company who are not together in the same location to listen, speak and vote at the meeting. Provisions in most Articles of Association usually support this. Thus, most companies should have the option of conducting virtual general meetings.
Whilst the Companies Ordinance allows for general meetings to be held virtually; it is unlikely to have been drafted with the intention that general meetings would be held entirely virtually. The statutory requirement for notice of a general meeting to specify the principal place of a meeting is one such example.
Thus in practice, where general meetings for companies with large numbers of members are concerned, there is a risk that virtual general meetings may not satisfy legislative requirements as there may be practical issues in relation to the service of notices and voting by a show of hands. In time, we expect that the Companies Ordinance will be updated to reflect lessons we are learning during COVID-19. Where virtual general meetings would be neither practical or feasible, we recommend companies should take a cautious and traditional approach when making arrangements for physical general meetings, and ensure appropriate measures are taken to reduce health risks to individuals to a minimum.
The Articles of Association will dictate whether directors can meet virtually for board meetings. Most Articles of Association will provide that it is irrelevant where a director is and how they communicate with each other for board meetings.
Enough people to hold the meeting?
Quorum requirements must be met for all meetings – regardless of whether the meeting is held virtually. Participation at meetings is likely to be lower than normal due to travel restrictions, lack of electronic equipment or sickness. Companies should consider whether it is necessary for all usual directors or shareholders to attend physical meetings. Still, quorum and other requirements for meetings must still be followed for the meeting to be properly convened and decisions made to be valid.
Can meetings be adjourned or postponed?
A general meeting can be adjourned or postponed due to unforeseen circumstances, sickness or lack of quorum. Any resolutions that are passed will be treated as passed on the day of the adjourned meeting.
Most Articles of Association will provide that where a general meeting is adjourned for 30 days or more, a notice of the adjourned meeting must be given in the same manner as the original meeting.
Here’s what you need to keep in mind for the governance of meetings for Hong Kong companies during COVID-19:
- Physical annual general meetings of Hong Kong incorporated companies are permitted and do not contravene government-imposed restrictions on group gatherings in public places.
- A company may hold an extraordinary general meeting virtually using electronic means. Generally, directors may hold board meetings virtually using electronic means. The process will be contained in the Articles of Association of the company.
- Virtual general meetings are unlikely to be suitable for companies with large numbers of members as they may pose practical issues, and there is a risk that certain legislative requirements may not be satisfied.
- Companies must ensure that quorum and other procedural requirements are satisfied, even if a meeting is held virtually.
- General meetings may be adjourned or postponed. Companies must ensure the meetings are held before deadlines and must serve notice of adjournment or postponement if needed.
Tim Drew and Ivy Chan
If you would like to discuss any of the matters raised in this article, please contact:
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Disclaimer: This publication is general in nature and is not intended to constitute legal advice. You should seek professional advice before taking any action in relation to the matters dealt with in this publication.
 The Prevention and Control of Disease (Prohibition on Group Gathering) Regulation (Chapter 599G, Laws of Hong Kong)
 Section 584, Companies Ordinance (Chapter 622, Laws of Hong Kong)
 Section 576, Companies Ordinance (Chapter 622, Laws of Hong Kong)
 Section 587, Companies Ordinance (Chapter 622, Laws of Hong Kong)