Amid the Covid-19 pandemic and the restrictions imposed on public gathering it is evident that the Annual General Meeting (“AGM”) of companies cannot be held in a physical space. An AGM in Ghana, unlike in some jurisdictions, is mandatory every year and so cannot be postponed. The options available to companies will be to dispense with the holding of an AGM in accordance with section 157(5) of the Companies Act, 2019, Act 992 (“Companies Act”) or hold the AGM electronically as directed by the Registrar of Companies (“Registrar”).
For most companies in Ghana, holding a virtual AGM is an unchartered territory but the only option. Until now, the holding of an AGM involved a company securing a physical meeting venue, sending out hard copies of notices and financial statements to members through the mailbox, members assembling at the meeting venue and having a face-to-face interaction. This time, it will involve the use of technology, instead of a physical venue. Members will no longer have to arrive and assemble at the meeting venue to participate in an AGM. They will be required to own digital devices and have a certain level of digital literacy to be able to participate in a virtual AGM. A virtual AGM therefore has the potential to restrict a member’s right to attend and vote at the meeting as required by law.
Holding a Virtual AGM.
In jurisdictions such as the USA and some parts of Europe, virtual AGMs are not new. In fact, the first virtual shareholders meeting was held in the United States in 2001 and has been gaining popularity in some parts of the world. Companies in the United Kingdom have also been holding virtual shareholders meeting since 2009. However, it was not until 2016 that the first virtual-only AGM for a listed company was held. In Ghana, this apparently will be the first-time companies will have to hold a virtual AGM.
A company’s constitution must provide for the holding of a virtual AGM. However, depending on the exigencies, the Registrar can direct that anything that is required to be done under the Company’s Act can be done electronically. Pursuant to section 378(2) of the Companies Act, the Registrar on the 14th of May 2020, directed the holding of a virtual AGM by companies and published guidelines on the procedure and conduct of the meeting. Thus, the AGM of companies which were held in a physical space can now be held in the virtual space. The directive of the Registrar General to allow companies to hold a virtual AGM may not automatically apply to listed companies as they may require further approval from the Securities and Exchange Commission (SEC). The novelty of a virtual AGM in Ghana comes along with some benefits but not without limitations on members right.
The Pros and Cons of a virtual AGM.
A virtual AGM has cost advantages since companies will no longer have to pay for the cost of printing hard copies of notices, financial statements, hiring of venue, equipment, security, refreshments, etc. For members, it eliminates travel and accommodation cost, especially for members who must travel long distances just to attend a general meeting. Besides the cost advantages, a virtual AGM also provides greater access to members which results in broader representation. This is because it allows members in remote locations and from everywhere to participate in the meeting. Some companies around the world have already experienced an increase in the attendance at virtual AGMs than at physical AGMs.
Notwithstanding the cost and participation advantages, a virtual AGM has its downsides. Firstly, the right of a member to attend, speak and vote at an AGM can be restricted. To participate in a virtual AGM, a member must have the technological resources required i.e. smartphones, tablets, computers, internet connectivity, etc. Secondly, in jurisdictions such as Ghana where internet services are unstable, expensive, and usually on pay-as-you-go basis, the use of virtual AGMs can impose additional cost to members. Especially, if the internet cost outweighs the travel cost advantage. A member must purchase internet data that will last for the duration of the meeting and sufficient to download all the necessary documents that will be sent electronically. Thirdly, a virtual AGM can be a disincentive because attendance will require some level of digital literacy. Members must be technologically savvy to be able to navigate the functions of the virtual meeting platform (“VMP”) to be able to participate effectively.
Without the required technological resource and skill, the doors of a virtual AGM can be completely shut to a member who otherwise would have been entitled to attend a physical meeting. The cost advantages obtained by companies are inadvertently transferred to members. Thus, a member who desires to participate in the virtual AGM must invest in or have access to technology to be able to join the meeting. These downsides do not only have the potential of limiting a member’s right to attend general meetings but also can result in the poor attendance of a virtual AGM.
Notice of Meeting.
The notice to convene a virtual AGM certainly will be different from the contents of the normal notice as set out in the Eighth schedule of the Companies Act. The normal contents of a notice which include the place, date, time of the meeting, the general nature of business to be discussed at the meeting, etc. will be inadequate. The notice convening a virtual AGM must in addition to the normal contents provide detailed information on how a member can participate effectively at the meeting. It must contain clear instructions on how to access the meeting, speak and vote at the meeting. It must also have a helpline to assist members who will need assistance before the meeting or those that may encounter difficulties during the meeting.
The main difference between a physical meeting and a virtual meeting is the format of the meeting. While physical meeting requires in-person attendance, virtual meeting is entirely online. Moving from a physical space into a virtual space requires companies to resort to a VMP that can facilitate the proper conduct of meetings and enhance greater participation. The type of VMP must take into consideration the number of members who will be attending the meeting. i.e. the meeting platform must be able to accommodate all members entitled to attend the meeting. Most members will be using such a technology for the very first time and so it must be user friendly and must also accommodate the different levels of digital literacy of members. The technology must include features which support real time electronic voting, quorum counting and member identity validation. Since it will be the first time for most companies in Ghana to hold a virtual AGM, there is the risk of technology failure during the meeting. In the event of unstable internet connectivity or other technological challenges, it could be costly and embarrassing for companies if the virtual meeting fails. Thus, companies should test their VMP before the meeting and have a backup plan as well.
Challenges in Holding Virtual AGMs.
With reference to the guidelines issued by the Registrar, the notice of meeting must be sent electronically. This presupposes that companies have database of email addresses and telephone numbers of all its members to be able to send notices either by email or by text. But do companies have such a comprehensive database? Before the commencement of the Company’s Act, 2019, Act 992 companies were not required to collect such data. Hence it will be challenging for existing companies who do not have a complete database of all its members but intend to hold a virtual AGM. Members who may have changed their telephone numbers, email addresses or do not have email access will not be able to receive the notice of the virtual AGM.
The virtual challenge will be daunting for members. They are likely to experience a culture shock. In countries where virtual meetings are on the rise, public internet access is free and readily available in most restaurants, pubs, coffee shops, recreational centres etc. Moreover, the cost of internet services is comparably less expensive and so members will not have difficulties with internet access. In addition, digital literacy is also high because most services are offered online, and people are accustomed to it.
In Ghana, however, there are no free public internet access. Internet connectivity is unstable and internet services are expensive compared to most advanced countries. Digital literacy is also very low because only a few services are offered online and thus most people are yet to adapt to the technological world. From the above, how can a member participate fully in virtual AGMs in Ghana? In order not to restrict a member’s right to participate, the VMP must be zero-rated so that members can access it without internet data. It should also be accessible on all the common device platforms such as smartphones, tablets, and computers and must as well support conventional text messaging system and call-in options to reduce internet charges. Companies, if possible, must conduct training in the use of the VMP before the meeting so that members can familiarise themselves.
The Future of Virtual AGMs.
Virtual AGMs are bound to survive the Covid-19 pandemic. Even before the pandemic, virtual AGMs have been held in other countries. For the first time in Ghana, companies will have to invest in technology to hold a virtual AGM. The successes and challenges will inform improvements for the future. Companies must therefore begin to tailor provisions in their company’s constitution to allow for virtual meetings. They must begin to compile and keep a comprehensive electronic database containing updated email addresses and telephone numbers of all its members and provide members with unique identification codes or numbers. Companies must endeavour to develop a virtual meeting app for members to download in advance if things will have to be done electronically in the future. Virtual meeting apps will allow members to acquaint themselves with the technology before any general meeting. Members must also constantly update their information with companies to be able to receive notices and updates from such companies. For regulators, there must be clear guidelines for the holding of virtual AGMs which will not restrict or limit a member’s right to attend and vote at general meetings.
Across the world, the Covid-19 pandemic has created a new normal which comes with its challenges. Companies and regulators have begun making the necessary arrangements and adjustments to allow for things to be done electronically. Going forward, the office of the Registrar General and the SEC must take into consideration the peculiar challenges in Ghana regarding the holding of virtual general meetings (both annual and extraordinary) so that the door is not shut to members. Members must also realise the changes that the current and future world bring and adapt accordingly.