General meetings are major events in the corporate calendar of a listed company. Boards are responsible for maintaining an ongoing dialogue with shareholders and encouraging shareholder participation at general meetings under the Corporate Governance Code and often under the listed companies’ shareholders’ communications policy.
Despite the Hong Kong Stock Exchange encouraging listed companies to consider the use of technology to maximise shareholder participation (see Guide on General Meetings, first published in September 2010 and mostly recently updated in August 2019), adoption has been slow and limited.
However, recent restrictive measures put in place to prevent the spread of COVID-19 have prompted many Hong Kong listed companies to reassess how they can make better use of technology to allow shareholders to exercise their votes and to communicate with directors and senior management at general meetings.
One of the trends we have identified as part of our review of COVID-19 related disclosure by Hang Seng Index constituents (see our earlier blog post) is an uptick by listed companies in the use of live webcasts of general meetings as an alternative to shareholders attending general meetings in person.
We have also noted that some listed companies have recently announced proposed amendments to their constitutional documents to allow for hybrid general meetings – where shareholders may attend and vote at general meetings by electronic means (such as webcasts) in addition to meetings where they participate in person. A few listed companies are even considering going one step further by amending their constitutional documents to allow for electronic general meetings (i.e. fully virtual general meetings).
Whilst the Listing Rules do not mandate a particular format of general meeting, Hong Kong listed companies that are considering hosting a hybrid or electronic general meeting should ensure this is permitted under the laws of their jurisdictions of incorporation and their constitutional documents.
For companies with constitutional documents that only allow physical general meetings to be held, shareholders who are participating by electronic means would be prohibited from voting or being counted towards the quorum, and would instead have to vote by proxy in advance of the general meetings.
Hong Kong listed companies have historically been slow to adopt hybrid and electronic general meetings. Against the backdrop of COVID-19, now would be an opportune time for directors and company secretaries to consider hosting hybrid or electronic general meetings to increase shareholder participation or proposing relevant amendments to their constitutional documents if they do not currently allow for hybrid and electronic general meetings.
