Listed Companies Granted Leeway to Convene General Meetings With Capital Markets Authority Approval
The COVID-19 pandemic presents a challenge for companies listed on the Nairobi Securities Exchange (the NSE) which have had to postpone general meetings (GMs) due to the ban on public gatherings in Kenya. This has meant that listed companies cannot hold physical GMs as they have done traditionally.
The requirement to hold annual general meetings and its variation
To comply with the requirements of the Companies Act, 2015, public companies (including listed companies) are required to hold annual GMs within 6 months from the day following the company’s accounting reference date in each year. For a number of listed companies whose accounting reference date is 31 December, annual GMs would have had to be held by 30 June 2020 to comply with this requirement.
In view of the above, listed companies would need to rely on the provision of the Companies Act, 2015, which allows a director or a member of the company to apply to Court to convene a GM where it is impracticable:
- to convene a GM of the company in any manner in which meetings of that company may be convened; or
- to conduct the meeting in the manner required by the articles of association of the company or the Companies Act, 2015.
This provision allows flexibility in convening annual GMs beyond the statutory period or in any manner not contemplated in the company’s articles of association (for example, by way of virtual GMs or extra-ordinary GMs).
High Court order on general meetings
In the Miscellaneous Application No. E680 of 2020, the High Court has given all listed companies flexibility in convening the GMs outside the provisions of their articles of association provided they obtain a no-objection in writing from the Capital Markets Authority (the CMA) at least 14 days prior to issuing the notice of the relevant GMs. This means that listed companies may now hold virtual annual or extraordinary GMs utilising electronic voting subject to the prior approval by the CMA.
Listed companies seeking to rely on this order should ensure that their application to the CMA for the no-objection demonstrates that the company’s shareholders will be provided with the following:
- notice of the GM as required in the Companies Act, 2015 and applicable regulations;
- sufficient information to make informed decisions on any resolutions;
- sufficient opportunity to ask any questions and seek any clarifications from the directors;
- an opportunity to vote and that the registration and voting procedure is clear; and
- other grounds as are appropriate in the circumstances.
This is a welcome development especially for listed companies which are required by law to convene their annual GMs notwithstanding the ongoing COVID-19 pandemic and other regulations restricting public gathering. As a result of this order, listed companies may, subject to the approval of the CMA, hold virtual or partly virtual GMs and carry out electronic voting during such GMs.
It is important to note that the order only covers GMs by public listed companies and does not extend to public companies which are not listed on the NSE. For non-listed public companies, the directors or members of such companies would have to apply to court pursuant to section 280 of the Companies Act, 2015, to be allowed flexibility in the convening of GMs during this period.
ALN Kenya | Anjarwalla & Khanna
ALN Kenya | Anjarwalla & Khanna