Holding board/shareholders meetings during social distancing
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Entrance to the Colombo Stock Exchange which is closed due to the curfew. Pic by M.A. Pushpa Kumara
With steps taken by the Government to combat the spread of COVID-19 through indefinite curfews and restrictions on travel / large gatherings etc, it is inevitable that companies would want to conduct their meetings by means other than physical meetings, instead of postponing indefinitely or cancelling meetings.
Corporate Services (Pvt) Ltd, which offers corporate secretarial services, said in a communication to clients this week that the Companies Act No. 7 of 2007 (Act) and the Articles of Association (AOA) of any company, govern the conduct of meetings. Whilst the Act provides basic statutory requirements to conduct meetings, the AOA specifies the process and method of holding these meetings. In the current situation in the country, there is provision in the law to conduct electronic meetings, the company said
In a note to its clients, the company provided possible alternatives that are available for physical board and shareholder meetings.
Alternatives to conducting physical meetings:
1) Executing Resolutions in Writing – Generally, AOA of most companies provides for the making of decisions by written resolutions.
A typical clause in the AOA would be: “a resolution in writing signed or assented to by all/most directors entitled to receive notice of a board meeting, is as valid and effective as if it had been passed at a meeting of the board duly convened and held.”
2) Conducting meetings by Electronic Means – Again, many companies provide for the conduct of meetings by electronic means in the AOA.
A typical clause in the AOA would be: “meeting organised by tele/video conference, provided that a direct and uninterrupted discussion and decision-making process in real time is always possible” (i.e. Microsoft Teams, Zoom, Skype or a Conference Call).
The notice calling for the meeting can specify that the meetings will be held by electronic means and provide the joining/dial-in details.
The secretary would also join the meeting and note the attendance of directors and prepare the minutes of the meetings, as is usual for a physical meeting.
Software, such as Boardpac, facilitate the sharing of agenda, documents, conduct of meetings, granting of approval of resolutions, communications by directors and the maintenance of records of all such activities, electronically.
General meetings of the shareholders – Alternatives to conducting physical meetings:
1) Executing Resolutions in Writing – Subject to the AOA, Section 144 (1) of the Act allows the shareholders’ resolutions to be passed in writing, and is as valid as if it had been passed at a meeting of those shareholders, provided it is signed by:
i) not less than 85 per cent of the shareholders who would be entitled to vote on that resolution (i.e. number of shareholders);
ii) who together hold not less than 85 per cent of the votes entitled to be cast on that resolution (i.e. shareholding percentage),
If it is to be a Special Resolution – approved and signed by 75 per cent of the 85 per cent shareholders entitled as above;
If it is to be an Ordinary Resolution – approved and signed by 51 per cent of the 85 per cent shareholders entitled as above.
The circulation and signing of a resolution may be done electronically. The Electronic Transactions Act No. 19 of 2006 gives legal recognition to communications, documents and signatures in electronic form.
2) Other Alternatives to Physical Meetings
The AOA will govern the conduct of meetings by alternative means. Conducting the meeting by way of audio or audio and visual communication –
where all persons participating and constituting a quorum can simultaneously hear and be heard throughout the meeting, and
where the discussion points can be reduced into writing and authenticated by the company secretary.
Conducting the meeting by electronic means of communication – setting up an Internet portal (e-ID), and allowing shareholders to be identified by the company, and making it possible for shareholders to follow the proceedings of the meeting on a real time basis, and enabling shareholders to vote through the portal, or to maximize flexibility, shareholders can be allowed to vote electronically, by post prior to the meeting or via the company’s website by means of a form made available by the company.