Communique Issued At The End Of The Webinar Organized By The Institute Of Chartered Secretaries And Administrators Of Nigeria On The Guidelines Released By The Corporate Affairs Commission (CAC) On “Holding Of AGMs Of PLCs Using PROXIES” Which Was Held On Friday, May 8, 2020.
The Institute of Chartered Secretaries and Administrators of Nigeria (“ICSAN” / “Institute”), is the leading professional body dedicated to the protection and promotion of Corporate Governance and Public Administration through continued professional training, guidance and policy advocacy.
ICSAN is the only professional body authorized in Nigeria to conduct the examinations leading to the qualification of Chartered Secretaries and Administrators.
The Institute has over the years consistently engaged in advocacy to promote Corporate Governance through the publication of policy papers on business and allied issues, issuance of guidance to aid governance in public and private sectors and organizing training and capacity-enhancing programs.
The Institute held a webinar on Friday, May 8, 2020 as part of her efforts to bring together stakeholders, particularly in the capital market, to find solution to the challenge posed to corporate meetings in Nigeria by COVID-19 pandemic and agree on the necessary modifications to the guidelines issued by the CAC in order to assist companies hold their AGMs.
The theme of the webinar was “Holding AGMs of Companies Using Proxies: How to balance the interests of Investors and Companies.”
The panelists were: the Executive Director, Regulations, The Nigerian Stock Exchange, (NSE), Ms. Tinuade Awe; Director of Compliance, Corporate Affairs Commission, (CAC), Mr. Abdu-Hakeem Muhammed; Head, Legal Department /Legal Adviser, Securities and Exchange Commission (SEC), Mrs. Anastasia Braimoh; Chief Equity Analyst/CEO, Palesa Capital Markets Associates Ltd, Mr. Nornah Awoh, representing the investors; General Counsel & Company Secretary (Ghana-Nigeria) Unilever Nigeria Plc., Mrs. Abidemi Ademola, FCIS, representing companies.
The over 600 local and international participants who registered for the webinar, included Investors (institutional and retail), Regulators, Chairmen of Boards, Directors, Chartered Secretaries, Governance Professionals, Company Secretaries, lawyers, and other key stakeholders to the CAC. The President of the Institute, Mr. Bode Ayeku, FCIS, was the Chief Host while a Council Member and the Chairman of the Corporate Members and Training Committee of ICSAN, Mrs. Abiola Laseinde, FCIS, was the Moderator.
Distilled from the comments of the panelists and participants are the following observations and resolutions:
i. The Institute reckons that every crisis has its inherent opportunities that may be explored for beneficial purposes with positive mindset, and that the COVID-19 is no exception. Hence the resolve of the Institute as a thought leader on Corporate Governance, to keep organizing webinars on diverse issues on governance for the benefit of the stakeholders and the country.
ii. Corporate organizations and other stakeholders should imbibe the positive mindset of seeking the opportunities in the COVID-19 pandemic to resolve the challenge it posed to corporate meetings and set precedents that would be used by future generations in providing solutions to similar disruptions.
iii. The Guidelines by the CAC were issued as safe harbor for companies to hold their AGMs despite the restriction on mass gatherings and consider only Ordinary Business. The Guidelines did not include the consideration of Special Business (which could be contentious in order to avoid future challenge to the validity of the meeting) because it would not be possible to secure the attendance of the required number of shareholders to attend AGMs at this moment due to the restriction on mass gatherings. It was emphasized that the Guidelines are not mandatory, and companies may decide to postpone their AGMs to a time when the restrictions necessitated by COVID-19 would no longer be in force.
iv. The CAC Guidelines on holding of Annual General Meetings of Public Limited Companies Using Proxies (issued on March 26, 2020) which restricted the items that may be transacted at such AGMs to Ordinary Business (i.e. only those covered by S. 214 of the Companies and Allied Matters Act “CAMA”), has severely limited the opportunity for companies to pass resolutions on items under Special Business (e.g. increase the authorized share capital, issue bonus shares to shareholders, obtain the approval of shareholders for the renewal of the general mandate regarding Related Party Transactions, amend the articles of association to allow companies to hold AGMs virtually, etc.), which are urgently needed for the survival of companies and to cope with the problems of the COVID-19 pandemic.
v. The prevailing situation in the Insurance sector where insurance companies are required by the National Insurance Commission (NAICOM), to increase their authorized share capital requires that they consider this item and or merger and acquisition in order to satisfy the re-capitalization requirement under Special Business of their AGMs this year. This is another pointer to the need to modify the CAC Guidelines to allow companies to consider items under Special Business for them to remain in existence and preserve jobs.
vi. Furthermore, by limiting the items to be considered under the Guidelines to Ordinary Business, companies would need to hold an Extra-Ordinary General Meeting at a later date to transact items under Special Business which they could have considered at the AGMs held using proxies, thereby incurring avoidable expenses and wasting valuable time in organizing the second general meeting.
vii. Apart from the option of adhering to the Guidelines, some provisions of CAMA, like S. 213 (on seeking extension of time for not exceeding three months from the CAC to hold AGM after the initial fifteen months allowed), and S. 223 (on the right of a member or director to approach the court for directive on holding and conducting AGM), could be explored to hold a legally binding AGM.
viii. There is the urgent need to incorporate in the CAMA Bill 2020 before it is signed by the President, provisions for holding AGMs of both private and public companies virtually, to address the challenge posed by the restriction on mass gatherings due to COVID-19 pandemic. This is to ensure that our substantive corporate law is equipped to deal with unplanned crises like the current pandemic.
ix. If it is too late to incorporate the provision on holding virtual AGMs in the CAMA Bill 2020, the regulators and other stakeholders should work with the National Assembly to incorporate it in the Emergency Economic Stimulus Bill 2020 currently at the National Assembly. This is necessary to sustain businesses in this kind of challenging COVID-19 period and similar crises that may occur in future.
x. The efforts of Regulators in Nigeria such as the CAC, Securities and Exchange Commission (SEC), The Nigerian Stock Exchange (NSE), the Central Bank of Nigeria (CBN) etc. in swiftly responding with issuance of guidelines and circulars to minimize the impact of COVID-19 on regulated entities, is laudable. They are encouraged to sustain the commitment to support businesses and collaborate with other stakeholders, especially in the areas of ensuring amendments to the laws and incorporating necessary provisions in the pending Bills stated above, to ensure business sustainability despite the prevailing challenges.
xi. The enactment of a specific law to deal with the consequences of COVID-19 which cover various sectors and authorize companies to decide how shareholders are to participate in corporate meetings, which countries like Switzerland have made (Ordinance on Measures to Combat COVID-19), is a good a measure which Nigeria can also emulate.
xii. Mitigating the adverse consequences of COVID-19 pandemic on businesses requires concerted efforts of all stakeholders, including regulators, operators, governance thought leaders like ICSAN, and similar bodies.
It is a positive development that CAC agrees to reconsider the provisions of its Guidelines based on the reasons given by the stakeholders during the webinar as this reflects its willingness to support businesses and laudable sense of responsibility.
Against the backdrop of the above observations, the Forum recommended, THAT:
- Companies should be allowed in the Guidelines issued by CAC to discuss Special Business at the AGMs held using proxies without limitation. This is to enable companies consider all items that are allowed by the Companies and Allied Matters Act (CAMA) to be handled at AGMs for their survival at this crucial time.
Under the current challenging situation created by COVID-19 where the main objective of all companies is to devise strategies for their survival, they would like to consider other matters which fall under special business. These items include:
- Amending their Articles to provide for AGMs to be held virtually under special circumstances like COVID-19;
- Approving the General Mandate required annually by listed companies based on the NSE Rulebook in order to carry out the usual related parties’ transactions of a recurrent nature necessary for its day to day activities;
- Issue bonus shares to shareholders in addition or in lieu of payment of dividend due to liquidity challenges created by COVID-19;
- Increase their authorized share capital (which some companies desperately need now) particularly, for companies in the insurance sector that their regulators have requested them to increase their authorized share capital;
- Merger and acquisition to satisfy the new paid up share capital requirement directives given by the regulators, etc.
2. The CAC should allow companies to conduct all items under Special Business instead of limiting it to those that are required to be passed by ordinary resolution.
3. It is important to create a framework for AGMs where all shareholders have the right to attend and participate through virtual online media, in cases where physical meetings will be impossible to hold as in the COVID-19 situation. It is therefore proposed that the CAC, in conjunction with SEC, CBN, National Insurance Commission (NAICOM) and NSE should put their full weight behind ensuring that provisions which allow for virtual AGMs and AGMs by proxies in such unusual circumstances, are included in the 2020 CAMA Amendment Bill before it comes into effect. Private companies are allowed under the 2020 CAMA Amendment Bill to hold virtual meetings and it is the view of the stakeholders that the same provision should apply to public companies in the Bill before it is signed into law. It is worthy of note that AGMs are already being implemented virtually as part of global best practice in the USA, UK and in Europe without any negative impact on Corporate Governance.
4. Pending the incorporation of virtual meetings and AGMs by Proxies in the CAMA Amendment Bill (which could take some time to be concluded) as stated in (3) above, it is recommended that both virtual meetings and AGMs by Proxies should be incorporated in the Emergency Economic Stimulus Bill 2020 currently before the National Assembly. The regulatory agencies (CAC, SEC, CBN, NAICOM and NSE) should work together to facilitate the inclusion of relevant provisions like Article 6 of the COVID-19 Ordinance in Switzerland and Coronavirus Act in UK. This is to give legal backing to these two items and make it difficult for AGMs held under this dispensation to be challenged.
5. In the interim, Companies may amend their articles to allow holding of AGMs virtually in order to proactively overcome the challenge poised to corporate meetings by COVID-19. The measure will give such companies the legal authority to hold their AGMs virtually in future.
6. Shareholders and directors should explore the options offered by S. 213 of CAMA (on seeking extension of time for not exceeding three months from the CAC to hold AGM after the initial fifteen months allowed), and S. 223 of CAMA (on the right of a member or director to approach the court for directive on holding and conducting AGM) which could include the order of court to hold an AGM virtually.
7. Companies should also choose proxies to represent the minority shareholders and not only a limited group of shareholders.
8. All stakeholders must constantly innovate to find means of identifying and exploring opportunities and advantages which are lurking in any challenging situation. The mindset of turning threats into opportunities should be adopted in entrepreneurial endeavors for business continuity, social growth and economic development.
9. While the Institute appreciates the swift response of the regulators, specifically those of CAC, NSE, SEC, CBN, NAICOM, etc. in coming out with circulars and guidelines on how the companies can keep sustaining their activities in the COVID-19 era, ICSAN hereby tasks all regulators to collaborate and synergize their efforts to ensure appropriate amendments are made to the relevant laws to accommodate the new realities.
10. The COVID 19 pandemic is still an unfolding phenomenon across the globe -a fact which necessitates that our regulators must not only be alert to monitor happenings across many jurisdictions to know how other regulators are responding, but they must also be ready to innovate and adapt lessons abroad to local circumstances.
11. ICSAN lauds the CAC for its readiness to review, amend and revert to ICSAN within 72 hours of the receipt of ICSAN’s letter on behalf of stakeholders forwarding the recommendations of the webinar on the necessary amendments to the Guidelines issued by CAC.
12. ICSAN is pleased to inform the stakeholders that CAC has amended its Guidelines after the Webinar as promised by providing that “The meeting shall only discuss the Ordinary Business of an AGM as provided in S. 214 of CAMA. However, where any Special Business is considered very urgent and necessary, the application letter shall provide the justification and the nature of the special business.” Consequently, it is now possible to consider Special Business at AGMs under this dispensation if the details are communicated to the CAC for approval.
Mrs. Taiwo Ganiyat Olusesi, FCIS
Registrar / CEO