The Corona Virus Disease of 2019 (COVID-19), a global pandemic, has wreaked havoc across the world and has interrupted life as we have known it. Worldwide, economies have taken a beating and the operations of several companies greatly impacted. To alleviate this apocalyptic effect on world economies and the affairs of businesses as going concerns, certain precautions and measures have been put in place to keep these economies and businesses running. Thus, the World Health Organisation (WHO) recommended specific guidelines to respective national governments to help contain the spread of the disease. On that basis, the Government of Kenya, through the Ministry of Health (MOH) issued the Public Health (Covid-19 Restriction of Movement of Persons and Related Measures) Rules, 2020 (MoH Guidelines) which prohibited public gatherings apart from funerals; this includes general meetings of companies.
That being said, Section 275A of the Companies Act, 2015 requires all companies, save for single member companies, to hold annual general meetings. A company that fails to comply with this section commits an offence and is liable to a fine not exceeding Kenya Shillings One Hundred Thousand only (Kshs.100,000/=). Further, in the case of private companies, there are some company resolutions which cannot be passed by a written resolution of a company but can only be passed after a meeting of the members of a company. Section 262 resolution states that these include resolutions to remove a director from office before the end of the director’s period of office; or a resolution removing an auditor before the end of the auditor’s term of office. This becomes a quintessential Joseph Heller’s ‘Catch 22 situation’ for private companies whose membership exceeds the maximum number allowed under the MoH guidelines’ aforementioned.
Engineering a Remedy
In recognition of the potential challenges and consequences that companies may face for failure to hold Annual General Meetings as a result of the pandemic, the Kenya Private Sector Alliance Limited (KEPSA) made an application to the High Court sitting at Nairobi (Commercial and Tax Division) vide Miscellaneous Application No. E680 of 2020 – In the matter of WPP Scangroup PLC In the matter for an order allowing the convening of an extraordinary general meeting under Section 280 of the Companies Act, 2015 for an order allowing the convening of annual general meeting under Section 280 of the Companies Act, 2015. The Court therein granted leave to KEPSA to hold, convene, and/or otherwise conduct a general meeting companies employing the use of technology subject to compliance with the provisions of the Companies Act, the regulations thereto and the Guidelines on the Conduct of Hybrid and Virtual Meetings by Companies published by the Attorney General’s office through the Business Registration Services.
In addition and as a result of this the above, the Capital Markets Authority (CMA) and the Institute of Certified Secretaries (ICS) have both published guidelines for virtual meetings, that is to say:-
- CMA’s Circular No.CMA/MRT/005/2020:Requirements for Convening and Conducting Virtual General Meetings by Issuers of Securities to the Public; and
- ICS’s Governance Guideline for Virtual Meeting approved on 22nd May 2020.
The ICS’s Governance Guideline for Virtual Meeting defines “Virtual Meeting” to mean a meeting where:-
“people are not present in the same physical location participate in online scheduled and structured discussions through use of video conference, audio conference, web conference or a combination of these or such other electronic method to make decisions as would ordinarily be required in a physical meeting. Virtual Meetings also include Hybrid Meetings” while Hybrid Meeting is defined to be a meeting “which allows for simultaneous physical attendance and virtual participation”.
The Two Options
The Guidelines on the Conduct of Hybrid and Virtual Meetings by Companies published by the Business Registration Services are published pursuant to the Registrar’s powers under Section 876 of the Companies Act. The guidelines provide that a company whose requirement for meetings cannot be met due to the Covid-19 pandemic may opt to postpone its meetings to a future date.
This can be done by way of application to the registrar for extension of the period within which a company can conduct its AGM. The Registrar has the discretion to extend such a period, subject to the company advising on how such postponement would affect its business or interests.
The second option that the regulations propose for Companies to consider is holding virtual or hybrid meetings. This is however only possible where, in the case of non-listed companies, their constitutive documents allow for virtual/hybrid meetings. This is because the Companies Act, 2015 as is, does not contain any provisions on the conduct of virtual or hybrid meetings. For companies which fall under this category, an amendment to their constitutive documents may be necessary to incorporate virtual and hybrid meetings prior to exercising this option. Listed companies on the other hand are required to comply with the Court Order in issued Miscellaneous Application No. E680 of 2020 which listed the terms which listed companies could hold general meetings.
The Capital Markets Authority (CMA), pursuant to the Court Order Miscellaneous Application No. E680 of 2020 issued a Circular No. CMA/MRT/005/2020 which detailed the Requirements for Convening and Conducting Virtual General Meetings by Issuers of Securities to the Public. The said Court Order provided that listed companies could hold general meetings virtually and/or electronic technology or any hybrid meeting. This is subject to a “No Objection” from the CMA. The CMA has listed the requirements for it to issue a “No Objection” in the said circular which are:
- Meeting has been properly convened;
- The notice contains instructions and steps on how shareholders can log in, register access proceedings and documents and participate;
- Shareholders are provided with sufficient information for them to make informed decision, they are given opportunity to ask questions, place items on agenda and have a mechanism to appoint proxies;
- The details of the system to be used has been disclosed
- The system is user friendly;
- The system has sufficient security features;
- The voting system is reliable, verifiable, secure and transparent
- Fair and equitable treatment of shareholders;
- Provision of communication channels for addressing shareholders concerns, iniquities and complaints; and
- Conducting of a comprehensive risk assessment for intended virtual meeting by both the issuer and its registrar.
Once the above are met and confirmed, the CMA issues its “No Objection” and the issuers can proceed to hold virtual and/or hybrid meetings.
The Institute of Certified Secretaries on its part issued Governance Guideline: Guideline for Virtual Meetings approved on 22nd May 2020 providing a guideline to its members on how virtual and/or hybrid meetings can be held. The guidelines are said to have been developed for the purpose of providing guidance for the convening and conduct of virtual meetings for the Board, Members or other Stakeholders of an Organisation in order to promote effective decision making, professionalism, uniformity and consistency.
The guidelines specifically indicate that for a company to conduct virtual meetings, the same must be permitted by applicable laws and the constitutive documents of the company. It proposes that companies ought to have documented policies and procedures guiding such meeting i.e. relating to nature of meetings, managing questions and the role of the secretary in the virtual meetings. However, in the absence of documented policies and procedures, companies can utilise the Institute’s guidelines. The requirements for virtual and/or hybrid meetings as issued by ICS are a detailed extension of the CMA requirements.
Comparisons in Light of the Pandemic
To elaborate the evolving perspective and dispelling the view of the subject of annual general meetings of companies as an isolated phenomenon, a cross-spectrum view would come in handy. A case in point is the Law Society of Kenya (LSK), a statutory body established under the Law Society Act, No. 4 of 2012. The LSK made an application vide In re Application for Leave to hold the postponed Law Society of Kenya Annual General Meeting Virtually  eKLR (Misc Civil Application No. 181 of 2020 (O.S.)) to hold the Annual General Meeting virtually. The orders were granted by the Court for the society to hold its meeting, a demonstration of the changing practice and the centrality of the Court in validating such virtual gatherings.
Despite the great impact that the COVID-19 has had on the economy and the effect that it has had on the running and operations of companies, the pandemic has brought to light the need for companies to embrace virtual/hybrid meeting to ensure that costs are that usually incurred by companies in convening physical meetings are reduced. Inasmuch as the jury is still out on the effectiveness and efficiency of the meetings, this is a welcome move which will have positive impact on the holding of general meetings by companies. The law is evolving and now there are proposals for amendments to the Companies Act, 2015 to make provisions for virtual and Hybrid meetings. The proposed Companies (General) (Amendment) Regulations, 2020 seek to amend the Principal Regulations to the Companies Act by providing recognition of virtual or hybrid meetings as well as including how votes can be cast digitally as well as requiring companies to provide to the members clear instructions for accessing meetings. If passed, companies can, unless in extraneous circumstances, and subject to meeting all the statutory requirements, have virtual/hybrid meetings which may be more beneficial, convenient and effective in the long haul.
* LL.B (Hons) (Moi University), PGD (KSL), LL.M (University of Nairobi), Dip, Project Management (KIM), Advocate of the High Court of Kenya, Certified Secretary (CS), MCIArb.
 See, Legal Notice No. 50 of 2020 Gazetted as Kenya Gazette Supplement No. 41 (6th April, 2020) <http://kenyalaw.org/kl/fileadmin/pdfdownloads/LegalNotices/2020/LN50_2020.pdf>
 See MISC/E721/2020 available at <https://brs.go.ke/assets/downloads/Order%2016.6.20.pdf>
 Section 278A
 In the matter of WPP Scangroup Limited and in the matter of Application for an order allowing the convening of an Extraordinary General Meeting under Section 280 of the Companies Act, 2015 between Bharat Kumar Thakar and Capital Markets Authority.