As governments, regional authorities, and companies adopt measures to curtail the spread of coronavirus, we are seeing an impact on annual shareholder meetings to be held in the coming months. Coronavirus, a respiratory disease, has been detected in 70 locations internationally and has been deemed “a public health emergency of international concern by the World Health Organization. Here is a review of how some global markets are addressing the situation.
Update (May 12): In light of the dynamic nature of the ongoing crisis, we have amended this post to provide a comprehensive roundup of the impact on proxy season, with prior updates integrated for each market.
Following the publication of Provisional Measure 931/20, the CVM published several instructions (part of a set of measures adopted to reduce the adverse effects of the pandemic on the country’s economy). After a public consultation, which ended on April 13, the CVM published Instruction 622/20. Said instruction partially amends Instruction 481/09, and foresees that shareholders may participate remotely in shareholders’ meetings held (100% or partly) digitally.
Meetings can be (i) wholly virtual/digital, if shareholders may only participate and vote through electronic systems, or (ii) partially virtual/digital, if shareholders may participate and vote in person or remotely (in both cases, without prejudice to the use of the distance-voting proxy form as a means to exercise voting rights). In the event that a meeting is held (partially or wholly) virtually/digitally, the notice of meeting shall include, besides the information required under article 124 of Law 6.404/76 and Instruction 481/09, information detailing the rules and procedures on how shareholders may participate and vote remotely.
Where a company provides an electronic system made available for remote participation, it shall guarantee shareholders’ registration and respective votes, as well as foresee the possibility for shareholders to (i) just participate in the meeting (having submitted or not the distance voting proxy form), or (ii) participate and vote in the meeting.
Further, the company shall ensure: the (i) possibility of access to documents presented during the meeting that had not been previously made available, (ii) meetings’ full record and, (iii) the possibility of communication between shareholders.
Meetings called prior to the Instruction’s publication could still have been held virtually/digitally, as long as the company disclosed said information, through a material fact. If the meeting is to be held until April 30, 2020, the material fact must be published at least one day before the meeting date. In all other cases (i.e. meetings scheduled for after April 30, 2020), the material fact shall be published at least five days before the meeting date(s).
On April 6, the CVM launched a short public consultation, open until April 13, focused on allowing companies to hold virtual-only meetings. The CVM is seeking stakeholder feedback to establish the minimum requirements for meetings held by electronic systems . Under the proposed amendments to Instruction 481, companies seeking to hold a virtual-only meeting must set out how shareholders can participate and vote, and the electronic system used must ensure the possibility of manifesting and viewing the documents presented during the meeting, as well as the authenticity and security of communications. Shareholders and other interested parties are invited to participate by emailing audpublicaSDM0320@cvm.gov.br. The amended Instruction will be published on April 20, 2020.
On March 30, the Brazilian government approved a provisional measure (MP 931) that will allow public companies to: (i) hold their annual shareholders’ meetings up to seven months after the end of their fiscal year when this is between December 31, 2019 and March 31, 2020, (ii) extend the terms of office of the board directors, executives, members of the supervisory council and committees until the shareholders’ meeting is held (iii) decide by the board of directors ad referendum on urgent matters that generally fall under the scope of the shareholders’ meeting, (iv) declare dividends until the shareholders’ meeting is held.
This provisional measure also establishes a provision stating that shareholders will be able to participate and vote remotely, although the meeting will have to be held, preferably in the building where the company has its registered office.
The Brazilian securities commission will exceptionally be able to extend the deadlines established by the Brazilian Corporate Law 6,404/76.
On March 20, 2020, the Canadian Securities Administrators (CSA) published guidance to assist companies in relation to conducting AGMs, stating that in its view issuers can amend the details of the meeting if they promptly file a news release and take all reasonable steps to inform shareholders and provided companies include clear directions on the logistical details of a virtual or hybrid AGM.
On the same day, Canadian banks and life insurance companies announced in a joint press release that they had obtained a court order to hold meetings, in whole or in part, using electronic means. The order was obtained because Canadian banks and insurance companies are not permitted to conduct an electronic annual meeting in lieu of an in-person meeting without relief from the court.
The initial trickle of virtual-only meeting announcements that started last week is turning into a flood of such announcements, with well over 50 public companies making the last minute switch since the beginning of last week.
The Toronto Stock Exchange (“TSX”), owned by TMX Group, has advised that it continues to operate normally. On March 16, 2020 the Canadian Securities Administrators (“CSA”), the informal umbrella organization comprising all of the major provincial securities regulators, updated on potential filing delays by reporting issuers, stating:
“Issuers that foresee not being able to file their annual or interim financial statements by their prescribed deadline because of the current COVID-19 outbreak should consider applying for a management cease-trade order (MCTO)…The CSA is continuing to monitor the impact of COVID-19 on Canadian capital markets and may issue further guidance in due course.”
As such, there does not appear to be additional market-wide relief for Canadian issuers at this stage, with the most common course of action taken likely to be for companies to take their AGM virtual.
Although virtual-only meetings had not previously been used as much in Canada as in the U.S., they are permitted and appear to be getting more popular. Since Friday March 13, a total of seventeen Toronto Stock Exchange (“TSX”) and TSX Venture issuers announced the switch from a physical to an online meeting, with more sure to follow in the coming days.
The Chilean securities commission is implementing measures so that shareholders’ meetings can be held remotely and will even allow companies to present reasons of force majeure of why the meeting may not be held at all.
As a result of the state of emergency declared in Colombia on March 17, 2020, the Colombian government issued throughout March 2020 several decrees in response to the Covid-19 pandemic. This paragraph summarizes the most relevant ones, in terms of AGMs.
Decree 398 of March 12, 2020 -> The decree allows companies that have called the AGM to update the notice of meeting to indicate that the meeting will be held remotely. This could be done up to one day before the date of the AGM
External Circular Letter 100-00003 of March 17, 2020 -> The Superintendencia Financiera de Colombia modified the timetable for the presentation of the financial statements. The deadline was extended until May 12th.
Decree 434 of March 19, 2020 -> The decree allows the companies to hold their AGMs one month after the end of the state of emergency. If there was no call, the meeting will be held on the 31st day after the end of the state of emergency. The aforementioned decree partially modifies article 422 of the Colombian Code of Commerce.
External Circular Letter 100-00004 of March 24, 2020 -> Regulates Decree 434 of March 2020.
Under normal circumstances, shareholders meetings in Mexico must be held in-person, at the Company’s registered office. There are, however, two exceptions to this rule: 1. If the Company’s Bylaws foresees the possibility of a resolution being adopted outside the in-person meeting, in writing, by the majority of the Company’s shareholders; and 2. In case of extraordinary events/ force majeure, according to article 179 of the Ley General de Sociedades Mercantiles, such as the COVID-19 pandemic.
In spite of the law’s apparent authorization, Mexican companies seemed to have preferred to hold their meetings with the presence of a limited number of shareholders, following the WHO safety guidelines in light of the pandemic. This might be due to the fact that the validity of the virtual meetings could have been contested, given the in-person nature of said meetings in Mexico.
On April 09, 2020, the Mexican Securities Exchange Commission (Comisión Nacional Bancaria y de Valores , “CNBV”) issued a letter extending the date of certain periodical reporting obligations for Mexican companies listed on the Mexican Stock Exchange (Bolsa Mexicana de Valores or “BMV”). This includes the following:
- Annual information: Original deadline: the 3rd day following the day on which the AGM took place. Extended to July 8, 2020.
- Reports (Issuers of shares or credit instruments): Original deadline: June 30. Report on (i) the relevant directors and executives of the Issuer that holds more than 1%; (ii) natural or legal persons, trusts and other investment vehicles, who are direct or indirect beneficiaries of 5% or more of the Issuer’s stock capital; and (ii) the 10 shareholders with the largest direct ownership. Extended to September 1, 2020.
- Annual report: Original deadline: 30 April. Extended to July 3, 2020.
- Quarterly information: Original deadline: April 20, 2020. Extended to July 3, 2020.
The Peruvian government declared a national state of emergency in response to the COVID-19 pandemic from March 15, 2020, until May 10, 2020, with possible extensions. Said state of emergency prohibits large gatherings, which prevents companies from holding in-person AGMs. As a result, the majority of the Peruvian companies have decided to postpone their AGMs to a date after the end of the state of emergency, while a small number of companies have decided to hold virtual meetings.
The Peruvian Securities and Exchange Commission (Superintendencia del Mercado de Valores – “SMV”) issued a letter providing conditional relief to companies that are unable to comply with their filings obligations during the state of emergency, which includes the presentation of financial statements and the annual report. Once said state is over, the SMV will establish new deadlines for the presentation of the aforementioned documents.
Responding to the urgent need of many companies to raise capital as a result of the COVID-19 pandemic, Nasdaq has temporarily exempted, through June 30, 2020, certain private placements from its shareholder approval rules.
Nasdaq Rule 5635(d) requires shareholder approval prior to an issuance, other than a public offering, of common stock (or securities convertible into or exercisable for common stock) which equals 20% or more of the common stock or voting power outstanding before the issuance, at less than the “Minimum Price,” defined as the lower of (i) the official closing price immediately preceding the signing of the binding agreement or (ii) the average official closing price of the common stock for the five trading days immediately preceding the signing of the binding agreement. While there is an exception where the delay in securing stockholder approval would seriously jeopardize the financial viability of the company, Nasdaq recognized that it may not be available in the current environment. For example, a company may need additional cash to pay employees during a period of decreased or no revenue, but its viability may not be in jeopardy.
Nasdaq therefore adopted rule 5635T, to provide additional flexibility to raise capital without shareholder approval. To rely on the new exception, the company must execute a binding agreement governing the issuance, submit the required notices and obtain Nasdaq approval (if required) by June 30, 2020, and issue the securities within 30 calendar days of the date of the binding agreement. The exception is limited to circumstances where the delay in securing shareholder approval would (i) have a material adverse impact on the company’s ability to maintain operations under its pre-COVID-19 business plan; (ii) result in workforce reductions; (iii) adversely impact the company’s ability to undertake new initiatives in response to COVID-19; or (iv) seriously jeopardize the financial viability of the enterprise. The company must also demonstrate that the need for the transaction is due to circumstances related to COVID-19 and that the company undertook a process designed to ensure that the proposed transaction represents the best terms available to the company. The exception is not available for the shareholder approval requirements related to equity compensation (except to allow senior management to participate in the transaction in limited circumstances), changes of control and acquisitions of stock or assets of another company.
The temporary Nasdaq rule goes further than the New York Stock Exchange’s recent waivers to its shareholder approval rules, by allowing private placements that exceed the 20% threshold even if they do not meet the Minimum Price requirement. The new rule should facilitate time-critical capital raising by Nasdaq-listed companies affected by the COVID-19 pandemic.
The Securities and Exchange Commission (“SEC”) has provided as guidance to allow flexibility in how meetings are held, including to facilitate virtual-only meetings, and promote shareholder engagement; as well as additional relief targeted at investment funds and advisers that removes certain filing and in-person voting requirements. We expect many U.S. companies and fund to adopt hybrid or virtual-only meetings for the 2020 proxy season.
Under the SEC guidance, affected issuers can announce changes to their meetings within regulatory filings without having to physically mail the additional proxy materials. The SEC also addresses the impact on shareholder activism, encouraging “companies to provide shareholder proponents with alternative means, such as by telephone, to present their proposals.”
U.S. issuers are taking a variety of approaches, from waiting it out — Agilent convened and immediately adjourned its March 18 meeting, which will now take place April 17 – to making a last-minute switch to a virtual-only format. Some, such as Wells Fargo, are still planning to conduct a physical meeting, but have included a provisional virtual meeting link in their proxy statement as a backup. In addition, some of the companies that are electing to go ahead with their physical meetings are doing so on a streamlined basis. For example, Farmers & Merchants Bancorp has removed presentations and refreshments from the agenda and is strongly discouraging shareholders from attending the meeting, which is intended to last no more than 15 minutes (subject to questions).
The SEC initially issued “conditional” regulatory relief, providing companies impacted by the virus up to 45 extra days to file disclosures due between March 1 and April 30, including quarterly reports. Issuers who delay their disclosures must provide “a summary of why the relief is needed in their particular circumstances.” Many companies have already submitted petitions.
Additionally, the SEC’s Division of Investment Management as announced that it will not pursue enforcement action against fund boards that do not adhere to in-person voting requirements at upcoming meetings due to emergency circumstances; this position was subsequently extended to cover public accountant appointments, as well as other contractual approvals.
Europe & MEA
In Austria, events of over 100 people have been banned. Companies are discouraging physical attendance. Palfinger AG’s AGM has already been cancelled. The best guess right now is that some companies might have to cancel on the day if too many people attend, although the height of the AGM season is still some way out.
On April 9 the Belgian Government issued a Royal Decree in response to the pandemic, which allows companies with a shareholder meeting scheduled between 1 March and 3 May to either (a) postpone their meeting by up to 10 weeks after the normal deadline, or (b) hold a remote general assembly, so long as shareholder are able to ask questions, either during or prior to the meeting, and clear voting procedures are in place. The decree makes the remote meeting an option regardless of whether it is provided under the company’s articles of association, and gives the board the power to prohibit any physical presence at the GM if the company cannot guarantee compliance with the measures in place. In such cases the board should provide for electronic means of communication in order to facilitate electronic participation.
To date, meetings for Danske Bank and Nilfisk have been postponed. Remote voting is fairly common in Denmark, and there do not appear to be any rules or requirements that would preclude holding a virtual-only meeting; we expect that some companies may attempt to take this approach.
European Central Bank
The European Central Bank (“ECB”) has recommended banks not to distribute dividends until October in light of COVID. The recommendation is not retroactive for proposals already approved, but “banks that have asked their shareholders to vote on a dividend distribution proposal in their upcoming General Shareholders Meeting will be expected to amend such proposals in line with the updated recommendation.”
All gatherings over 10 people are currently banned, and there is a requirement for all votes to be cast in-person by a representative. As such, virtual-only meetings do not appear to be practicable, and it seems most likely that all meetings that have not yet occurred will be postponed until later in the year.
On March 25, 2020, the French government issued a law 2020-321 on adapting the rules for the meetings of legal persons due to covid-19. The ruling states that where a large gatherings are limited or prohibited for health reasons, listed companies may decide to hold their meeting without any members being physically present. In this case, members may participate and vote through other available methods.
Without the need to change their bylaws, companies may decide that people that are connected through conference call are deemed present for the calculation of the quorum. These rules are applicable for AGMs held between March 12, 2020 and July 31, 2020; or, in case of extension, until no later than November 30, 2020.
Also on March 25, the French government issued law 2020-318 on adapting the rules regarding the audit, review, approval and publication of the accounts and other documents for the AGMS, required to be filed or published in the context of the covid-19 epidemic.
Under this law, AGMs may be postponed up to three months after the legal deadline, which is normally six months from the end of the fiscal year for listed companies in France. Furthermore, the French government will allow a three-month extension for the management board to present the annual accounts to the supervisory board; however, for companies with one-tiered governance structure and with more than 300 employees and a net turnover equal to €18 million, their boards of directors will have only a two-month extension.
In addition, on March 27, 2020, the AMF, the French market regulator drew shareholders’ attention to the exceptional terms of participation at 2020 general meetings. It reiterated that an exclusively remote vote – by proxy or by post – is available in case AGMs will take place behind close doors. In addition, AMF also reminded issuers to livestream their AGMs, if possible, and to give the option to their shareholders to ask questions, either orally or by e-mail. AMF also noted shareholders that some listed companies decided to postpone their AGMs, which was possible thanks to the exceptionally updated regulation.
On March 6, the AMF, the French market regulator, reminded shareholders of listed companies that they can vote at general meetings without being physically present – by post or by proxy, following the evolving context of the coronavirus epidemic and the restrictions on public gatherings.
In order to encourage remote voting in this context of health crisis, the AMF recommends that listed issuers broadcast their general meeting directly on their website and communicate widely on this subject.
Although there have been rumours about the possibility of passing a bill which would allow AGMs to be held behind closed doors, the French Ministry of the Economy and Finance seems to not favour this legislative solution, because it is unlikely than such a bill will pass through the council of state, parliament and potentially the constitutional council in time to have the desired effect on the AGM season.
On March 27, a law passed pursuant to which companies will be able to hold virtual general meetings, even without a stipulation in a company’s articles of association. In addition, the days until when a company has to call a meeting would be reduced from 30 days to 21 days. Further, interim dividend payments would be facilitated.
And, finally, the period until when a company has to hold its annual general meeting would be extended from 8 months after fiscal year end to “until fiscal year end”.
On March 23, the German Ministry of Justice proposed a draft resolution to the federal cabinet pursuant to which:
- companies (under all relevant incorporation forms for GL) would be able to hold virtual general meetings, even without a stipulation in a company’s articles of association;
- the days until when a company has to call a meeting would be reduced from 30 days to 21 days;
- advanced dividend payments would be facilitated; and
- the period until when a Company has to hold its annual general meeting would be extended from 8 months after fiscal year end to “until fiscal year end”.
The draft will be presented and voted on by the Bundestag (“parliament”) on Wednesday, March 25.
A handful of meetings have already postponed, including some large ones: Daimler, Merck, Continental, and Deutsche Telekom. In Germany, companies have to hold their annual meetings in the first eight months of the fiscal year. No exceptions granted at this stage. Health Secretary Jens Spahn recommended against events of more than 1,000 participants. Stricter regulations are being contemplated at state (Bundesland)-level. Voting is nevertheless possible by post, electronically, or through the independent proxy; electronic voting is often possible right up until the start of the meeting. In the AGM invitations, most companies are advising their shareholders to stay home and vote in this manner.
Legislative act on Measures to Treat COVID-19 Pandemic and Other Urgent Provisions of March 30, 2020 gives Greek companies a power to delay publishing financial statements for the 2019 financial year beyond the statutory deadline, i.e. until June 30, 2020. In addition, pursuant to the provisions of the Act on Urgent Measures to Address Consequences of the Risk of dispersal of COVID-19, to Support Society and Entrepreneurship and to Ensure Smooth Operation of the Market and Public Administration, general meetings of shareholders may be held in hybrid or virtual-only format. This authorisation is also valid until June 30, 2020.
Government Decree No. 102/2020 on divergent provisions concerning the operation of personal and asset pooling organizations (“The Decree”), which entered into force on April 10, 2020, authorises company boards instead of shareholders to pass AGM resolutions. If an AGM has been called by the time of entry into force of the Decree, the board is authorised to pass resolutions on all the items of the already published meeting agenda and modify previously proposed resolutions if it deems necessary.
Within 30 days of the cessation of the state of emergency, shareholders holding at least 1% of the votes may request that a general meeting be convened for the subsequent approval of resolutions of the general meeting taken by the board other than approval of the annual accounts and allocation of profits and dividends. A subsequent shareholder approval of accounts and dividend allocation decision in an EGM is required only if so requested in writing by May 31, 2020 by shareholders representing more than 1% of the votes, in which case dividends cannot be paid before such EGM.
In any case, annual accounts must be approved by company boards by April 30, 2020. The boards then may resolve to distribute dividends to shareholders.
The terms of office of directors and independent auditors expiring during the state of emergency should be automatically extended until the next general meeting. Similar provisions apply to the previously authorised share buy back programs.
The Israel Securities Authority (“ISA”) has announced reporting reliefs and regulatory assistance for public companies, most notably extending the deadline for reporting 2019 financial statements from March 31, 2020 to April 30, 2020, subject to companies announcing to the stock market their intention to make use of the later reporting date as soon as a decision is taken and no later than March 31, 2020.Further, the ISA clarified that from its perspective there is no legal obstacle under Securities Law or Companies Law to companies holding their shareholder meetings solely by electronic means, provided that all participants can hear one another simultaneously. General meeting votes in Israel are in any case typically carried out by ballot or electronic voting, with crowded physical meetings less common.A full statement from the ISA chair and summary of the actions taken is provided in English here.
A decree was issued by the Italian government on 3/17/2020. Art. 106 covers norms to be applied to all general meetings called until July 31, 2020 (or subsequent date, if the status of emergency was to be extended afterwards), providing for:
- the possibility to call ordinary meetings within 180 days from end-date of the previous fiscal year (120 days under previous provisions, unless specific instances occurred);
- with the notice of meeting, companies can establish proxy voting, postal voting or participation through telecommunication means, even in absence of such provisions in the bylaws; or call a virtual only meeting, as long as participants, their ownership and their vote can be clearly recorded and identified, and with no need for the chair of the meeting, the secretary and the notary to be in the same physical location;
- companies can appoint a common representative even in absence of such provisions in the bylaws, and can determine that participation to the meeting can only happen through the common representative.
So far, three companies have postponed their annual meetings to a later date (Poste Italiane, Banca Monte dei Paschi di Siena, Immobiliare Grande Distribuzione). Moncler has cancelled the special meeting scheduled for March 16, 2020, but has called the ordinary meeting for April 22, 2020. Since the decree was issued yesterday, we would expect to see its impact in the coming days/weeks.
Most companies in the Netherlands are discouraging their investors from physical attendance at AGMs; postal, electronic, and proxy votes are possible. Sligro Food Group NV has already cancelled its AGM.
Federal and regional agencies have issued a number of guidelines and directives aimed at curbing the spread of COVID-19 in Nigeria. Particularly, the Lagos State Government prohibited the gathering of more than 20 people, while the Corporate Affairs Commission (CAC) issued Guidelines on Holding AGM of Public Companies by Proxy. The convening and conduct of the AGM shall be done in compliance with these directives and guidelines. Companies are now providing a list of proxy nominees to pick from, with AGMs to be streamed live online.
The Capital Markets Authority has asked all companies and investment funds to suspend their general meetings for the time being.
On March 31, 2020, an amendment to the Act on specific solutions related to the preventing, counteracting and combating COVID-19, other infectious diseases and crisis situations caused by them, entered into force. Participation in the general meeting is now possible using electronic means of communication (unless articles of association restrict this type of meetings). Public companies must ensure that the general meeting is broadcast in real time.In addition, the Ministry of Finance also issued an ordinance in regard to specific deadlines for annual accounts and other financial and non-financial reports. To this end, preparation of the annual financial statements, annual activity reports and reports on non-financial information has been extended by three months with a deadline now expiring on June 30, 2020. Further, approval of the annual financial statements has been extended by three months with a deadline now of September 30, 2020. For companies subject to supervision by the Polish Financial Supervision Authority these deadlines are extended by two months.
Federal law 115 on amending certain laws of the Russian Federation to harmonise the content of annual reports of state corporations (companies), public companies, and also to determine the specifics of regulations on corporate relations in 2020, and on suspending provisions of certain laws of the Russian Federation extends the deadline for holding annual general meetings in 2020 from June 30, 2020 to September 30, 2020. In addition, the law extends the deadline for publishing of standalone and consolidated financial statements for the financial year 2019 to 210 days from the year end. i.e. until July 28, 2020. Currently, the general rule is that these accounts must be disclosed not later than 120 days from the year end. Similarly, the Central Bank of Russia extended the deadline for holding annual general meetings of banks and financial institutions to September 30, 2020. The Central Bank also recommends that companies defer dividend payments to a further date since, in the current circumstances, more time will allow for more objective assessment of the company’s ability to pay out dividends. To this end, the Bank of Russia suggests that financial institutions schedule annual general meetings for the end of August and September 2020. Companies that have already called the annual meeting by June 30, 2020 and intend to distribute dividends to shareholders are recommended to consider changing the date of the meeting.
Adopted March 18, 2020, Federal Law 50 temporarily lifted certain meeting requirements, including specific agenda items (i.e. EOD, election of audit commission, appointment of auditor, approval of accounts and reports etc.) to be held in absentia. The temporary changes apply for FY 2020.
In Spain only one meeting has been postponed so far: Naturgy, whose AGM normally has a large physical attendance of retail investors. However, only one meeting has been called in last two weeks so companies are waiting to see how things develop. We could see postponements; although AGMs should be held within 6 months of the fiscal year end, they are still valid even if held after. The national regulator, CNMV, also allows fully “telematic” meetings. Maximum flexibility is being allowed to adopt measures needed to conduct such a meeting even if they are not expressly provided for in the articles of association.
The Swedish government has banned all meetings of 50 or more people from March 29. No announcement yet for any regulatory changes regarding filings or virtual meetings.
In Switzerland, all public and private events of over 100 people have now been banned until (provisionally) April 19. Some more-affected cantons (e.g. Waadt) have adopted even stronger measures (e.g. Waadt has banned meetings of 10+ people).
As of yet, Swiss companies have not been provided any exceptions from the rule that they must hold their AGMs in the first six months following the end of the fiscal year. A handful of smaller companies have already postponed their meetings. However, a regulation that came into force on March 17 has allowed Swiss companies – irrespective of anticipated attendance numbers – to host annual meetings without in-person attendance, with shareholders only provided the option of voting by post, electronically, or through the company’s independent proxy.
Roche, which is having its meeting today, is already implementing this; voting at this meeting will only be permissible through the independent proxy.
On March 31, 2020, with the aim of preserving equity capitals of companies and in line with the Article 13/5 of the Regulation Regarding Shareholder Meetings’ Principles and Procedures and Representatives of the Custom and Trade Ministry, the Turkish Ministry of Trade sent a writ to Turkish Union of Chambers and Exchange Commodities to make an announcement that Turkish companies, except the ones that are controlled by the state, will not be able to distribute cash dividends from previous years’ profit accounts and the cash dividend to be distributed from FY2019 profit accounts will not exceed 25% of the total net profit. Further, boards of directors will not be allowed to distribute interim dividends.
United Kingdom & Ireland
On 26 March, the UK’s Financial Conduct Authority (FCA), Financial Reporting Council (FRC) and Prudential Regulation Authority (PRA) released a joint statement confirming that issuers would receive a two-month extension to annual filing requirements, alog with guidance from the FRC for companies preparing financial statements; guidance from the PRA regarding the approach that should be taken by banks and other financial institutions in assessing expected loss provisions under IFRS9; and guidance from the FRC for audit firms seeking to overcome challenges in obtaining audit evidence.
UK companies are being given an automatic two-month extension to file their accounts, and another one-month extension is available in extreme circumstances. Similarly, on March 19 the Irish Registrar of Companies announced an extension on all annual returns filings through 30 June 2020. In addition, the Financial Reporting Council has issued guidance that lays out several options to issuers. These include making adjustments to the standard AGM format, such as dispersing over several venues, integrating an online Q&A and/or livestream, or even adopting a hybrid approach that includes both a physical and electronic meeting; or delaying, postponing or adjourning the meeting.
The hybrid option is only available to companies whose articles of association allow it. In the past year, nearly two dozen FTSE 350 companies have taken this step, most recently Rio Tinto plc—however, we may see companies effectively ratify article amendments to this effect as part of the AGM agenda. Companies who opt to delay their meeting should review the expiry date of existing share issuance, repurchase and other authorities, and the potential impact on dividend payments. For the many UK companies that were due to submit their remuneration policy for binding approval, the existing policy would remain in effect, and the company would have until the end of the current financial year to approve a new policy.
In line with the FRC guidance, Wynnstay Group plc announced that its 24 March AGM would be made available via webcast, external physical guests strictly limited, and the agenda condensed to only consider ordinary and special business, with no management presentation.
Australia & Asia Pacific
ASIC has issued a statement addressing the difficulty in hosting AGM’s during the COVID-19 pandemic. ASIC noted that this issue was immediately pressing for listed and unlisted public companies with December, 31 balance dates, which ordinarily would be required to hold AGM’s by May 31, 2020. Given social distancing is being encouraged, ASIC has confirmed that it will take no action if AGMs are postponed for two months i.e. until the end of July. ASIC also clarified that it considers the Corporations Act allows for ‘hybrid’ AGM’s (where there is a physical location and online facilities), however did not provide a position on the Corporations Act allowing for virtual only meetings. Nonetheless, ASIC has clarified that it intends to take a no action position on non-compliance with provisions of the Corporations Act that may restrict virtual AGMs where an entity elects to hold such a virtual AGM in order to comply with the May 31 deadlines. This position is conditional on the technology used allowing for reasonable opportunity for members as a whole to participate.
The Shenzhen (“SZSE”) and Shanghai (“SSE”) Stock Exchanges have taken a number of steps in response to the outbreak.They are extending the reporting period for annual results from March 30, 2020 to April 30, 2020; waiving initial an annual listing fees for issuers registered in Hubei province; and encouraging companies to hold their meetings electronically. As of February 16, 2020, the SSE had arranged for more than 70 companies to delay their annual report disclosure. Additionally, in an effort to mollify the economic impact of the virus on the Chinese markets, the China Securities Regulatory Commission (“CSRC”) revised its rules (PDF) on Seasoned Equity Offerings (“SEO”) to allow for a greater discount on offering prices (80% of benchmark price, compared to 90% previously). Moreover, the upper limit of investors for each SEO has been increased to no more than 35 from 10, while the cap of the issuance size has been increased to 30% of the total share outstanding before the issuance.
In Hong Kong, where issuers are required to file their annual results by March 31, the Hong Kong Business Accountants Association has petitioned the stock exchange to grant an extension to the reporting deadline. While the Stock Exchange of Hong Kong (the “Exchange”) is permitting companies to issue unaudited results while suggesting views of issuers’ audit committee on the unaudited results shall be considered by the investing public. While companies may continue to trade on a case-by-case basis, a blanket extension has yet to be provided.
On March 16 the Stock Exchange of Hong Kong released further guidance for companies with financial years ending December 31, 2019. The guidance includes permission for issuers to defer the publication of their annual reports by up to 60 days from March 16, provided they meet criteria. Issuers seeking to defer the publication of their annual report will need to announce the expected publication date, and any other updates as appropriate.
Given the continued efforts to address the spread of Covid-19 in India, the Ministry of Corporate Affairs (“MCA”) announced on May 5, 2020, that all companies will be able to hold their AGMs during the calendar year 2020 by way of video conferencing of other audio visual means. The holding of an AGM electronically may also be done in-person at a company’s registered office, or elsewhere, thereby allowing for a hybrid meeting. The MCA included in its announcement the rules that would need to be followed for a company to conduct a virtual or hybrid meeting. New rules expanded the ability for companies to hold their AGM electronically, which was previously limited only to companies with a financial year that ended on December 31, 2019.
The Ministry of Corporate Affairs released guidance on the passing of resolutions in response to the threat posed by Covid-19. Notably, the guidance includes updated procedures for how companies are to provide for the noticing of general meetings, which may include by postal ballot, along with rules pertaining to voting. The Ministry also notified that companies with a financial year ended December 31, 2019, may be able to postpone the holding of their AGM up to September 30, 2020, when those AGMs normally are to be held by June 30. Lastly, the Securities and Exchange Board of India is relaxing the requirement for the top 100 companies by market capitalization to hold their AGM within five months from the end of their financial year. Instead, those companies, which mostly have financial years ended on March 31, will be able to hold their AGM by September 30, instead of August 31. At this point, no guidance has been released on the holding of AGMs for all other companies with financial year ends of March 31, 2020, which encompasses the majority of Indian companies.
The Financial Services Authority of Indonesia (“OJK”) on Wednesday, March 18, 2020 had extended the deadline for reporting and holding a General Meeting of Shareholders (GMS) for Capital Market Industry participants in a response to the emergency conditions due to the Corona virus in Indonesia.
The provision for extension can be summarized as follows:
- The implementation of the Annual General Meeting of Shareholders, which was supposed to be held no later than June 30,2020, was extended to August 31, 2020;
- Submission of the Annual Financial Statements have been changed from March 30,2020 to May 31, 2020; and
- Submission of the Annual Report was extended from no later than April 30, 2020 to June 30, 2020.
Additionally, Company are encouraged to hold GMS through electronic authorization mechanism using the e-GMS system provided by the Depository and Settlement Institution. The holding and use of the Electronic Proxy mechanism for the GMS through the E-GMS system will be as prepared by PT KSEI (“PT Kustodian Sentral Efek Indonesia”). With Electronic Proxy, it is expected that the shareholders do not need to be present (avoiding the crowd) and are sufficiently represented by the proxy.
As a result of the nationwide state of emergency declared in April 2020, Japanese companies have already begun to delay their financial reports. Travel restrictions have made it difficult for auditors to complete their work, and companies have faced additional obstacles to accurately gathering financial information. Furthermore, a small number of companies have also delayed their annual general meeting as a result of COVID 19.
Tokyo Stock Exchange rules normally require companies to disclose their full year results within a period of 45 days from the end of their financial year. However, taking into account the impact of COVID 19, this deadline has been removed, with the disclosure to be accepted whenever they are settled. Any company which is expected to experience a significant delay is requested to consider disclosing that information in a timely manner.
Similarly, the current Financial Instruments and Exchange Act state that companies must submit their periodical financial statement report within three months of the end of their fiscal year. However, given the difficulty of gathering accurate financial information, the Financial Services Agency will revise the Financial Instruments and Exchange Act to allow for the submission of corporate securities reports to be extended to the end of September.
Companies in Japan are also considering the possibility of holding hybrid annual general meetings. This structure would allow shareholders to participate electronically in conjunction with a physical meeting. While the current corporate law requires companies to set a physical venue for a meeting, on February 26, 2020, the Ministry of Economy, Trade and Industry (“METI”) released guidance that a hybrid meeting structure was permissible. Further, on April 2, METI, together with the Ministry of Justice, released guidance that companies may restrict the number of shareholders in attendance at a physical meeting, and may in fact host a meeting without any shareholders being physically present.
Companies in Japan are legally required to disclose their notice of meeting a minimum of 14 days before the meeting date. In recent years there has been an increase in companies which have chosen to disclose their notice of meeting earlier than this legally required deadline, which provides shareholders with additional time to consider their voting options. However, given the dynamic situation resulting from COVID 19, it is possible that this year will see an increase in the number of companies disclosing only 14 days in advance.
On March 17, Bursa Malaysia Securities Berhad announced measures permitting listed companies to apply to delay their AGMs more than six months after the financial year end. Similarly, listed Real Estate Investment Trusts (“REITs”) have been granted a two-month extension to hold their AGM, giving most REITs until the end of June. In addition, it has been reported that AGMs may be held electronically, which is permitted under the Companies Act 2016.
The Securities and Exchange Commission Philippines (“SECP”) has announced the ability for companies to extend their filing annual filing period, including annual reports and audited financial statements up to June 30, 2020. The extension is mainly meant for companies with overseas operations impacted by the COVID-19 outbreak, although domestic companies can also seek an extension. The SECP also announced the rules and procedures for companies to hold general meetings electronically.
On April 13, the Accounting and Corporate Regulatory Authority (“ACRA”), the Monetary Authority of Singapore, and Singapore Exchange Regulation (“SGX RegCo”) issued a joint statement for the conducting of general meetings. The joint statement includes a checklist for how listed and unlisted entities may conduct their general meetings during the period of time when elevated safe distancing measures are in place. The checklist was included in the COVID-19 (Temporary Measures) Act 2020 and the COVID-19 (Temporary Measures) (Alternative Arrangements for Meetings for Companies, Variable Capital Companies, Business Trusts, Unit Trusts and Debenture Holders) Order 2020.The checklist notes that listed and unlisted entities may hold their general meetings virtually. For virtual meetings, shareholder must be allowed to submit their questions up to 72 hours before the holding of a general meeting, while questions may be submitted via email and/or post and boards must address the substantial and relevant questions prior to, or at general meetings, including follow-up questions. Voting will be primarily done through proxy voting, unless an entity electronic voting. Proxy forms will be allowed to emailed, provided the proxy form is signed and is enclosed as a PDF.On April 7, SGX RegCo announced an automatic extension for issuers to extend their AGMs by 60 days. The extension will not be exclusive to issuers with a financial year-end of December 31, 2019. Issuers will need to email SGX RegCo to notify of the need for an extension, and provide an indicative timeline for the convening of their AGM. Issuers are strongly encouraged to provide a 21-day notice period leading up to the AGM, instead of the statutory minimum of 14 days.
SGX RegCo also announced that entry into the Financial Watch-List, which highlights struggling companies, will be suspended as many issuers are going to experience financial difficulties. In addition the limit on general share issuance mandates has been temporarily increased, from 50% to 100% of share capital for preemptive issuances, and from 20% to 50% for non-preemptive issuances.
SGX RegCo released a new announcement on March 31, whereby companies may hold their AGM before April 30, provided there are opportunities for shareholders to ask questions and that the meeting be shown by a “live” webcast and that the meeting allow for proxy voting. The statement follows a statement from March 25 on the guidance on safe distancing measures. Yet, the March 31 guidance includes an annex whereby gatherings of more than 10 people have been prohibited from March 27, per the Infectious Diseases (Measures to Prevent Spread of COVID-19) Regulations 2020. In light of changes to Ministry of Health Regulations, the Finance Ministry is working to submit new regulations to Singapore’s parliament for its next sitting on April 7, on the holding of meetings. The draft regulations may include virtual meetings and e-voting, if not a strengthened provision for voting via a proxy. With all the changes, SGX RegCo is strongly encouraging companies to release their notices of meeting at least 21 days in advance of a general meeting, while the normal minimum disclosure time is 14 days.
On March 19, SGX RegCo issued new guidance on the holding of general meetings amid the COVID-19 outbreak. Notably, the guidance includes the ability for companies to webcast their general meetings, particularly as guidance would limit the number of people attending a general meeting at 250 people. Similarly, venues for general meetings would need to be set up in order to promote and maintain social distancing. Where companies seek to webcast their general meeting, arrangements must be made to allow shareholders to pose questions. As for voting, shareholders are encouraged to vote by proxy, while SGX RegCo is looking to work with companies to adopt further digital tools for the conducting of general meetings.
In February, the Singapore Exchange Regulation (“SGX RegCo”) decided to provide issuers with a two-month extension to hold annual shareholder meetings to approve fiscal year 2019 results, due to feedback expressed by shareholders that are concerned about attending large-group meetings. This extends a waiver that was granted earlier in the month by SGX RegCo to Singapore-listed companies with their principal place of business in China, which had been put in place following concerns raised by audit professionals on the practical difficulties of conducting their work. Should a company seek to extend its annual shareholder meeting from April up until the end of June, they still must submit their annual reports by April 15. The issue is particularly relevant given that Singapore does not allow for e-voting or remote participation in annual shareholder meetings.
In South Korea, the Financial Services Commission (FSC) announced measures to allow companies to delay the submission of their audited financial statements and annual reports. The delay would primarily apply to companies with main operations (including subsidiaries) in China or domestic areas of South Korea designated as “COVID-19 affected areas”. Likewise, companies can seek a delay if their auditor was impacted by the outbreak or because of disinfection measures. According to the Korean version of the FSC’s announcement, companies that request a delay will not be subject to fines of not having financial statements at their annual shareholder meeting, but must re-hold their meeting after April. Further, the FSC is encouraging voters to use postal voting and electronic voting systems rather than attending in person.
The Colombo Stock Exchange has released guidance on the holding of general meetings. Currently, where an issuer seeks to delay or postpone their AGM, the payment of dividends will also need to be postponed until shareholders can approve the dividend. Issuers will also be able to dispatch their general meeting communications via electronic means. As for the holding of general meetings, issuers will have the option to hold a hybrid meeting whereby there may be a physical meeting and a virtual meeting taking place simultaneously, or have multiple locations to host televised meetings. Alternatively, issuers may also hold a virtual general meeting through teleconference mechanisms. For voting, issuers are encouraged to have shareholders vote by proxy. For shareholder questions, for hybrid or virtual meetings, questions must be submitted to issuers up until the day of the meeting, while issuers may include a response from the board to submitted questions.
Thailand’s Securities and Exchange Commission announced on February 21, 2020, that companies could seek a delay in submitting their financial statements. In addition, a request for delay can be sought if a company’s operations or the travel plans of board of directors has been impacted by the COVID-19 outbreak to the point that the board is unable to hold a meeting to approve its financial statements.
Companies are currently delaying their AGMs, which the peak time for meetings is usually in April. Media reporting indicates that AGM extensions could be upward of two months to the end of June, while other reports note that companies may have had the ability to host virtual meetings, but not all investors may be able to participate in the meetings.
Note: Chris Rushton, Jeff Jackson and Marie Romer contributed to this report.