Nigeria: Virtual AGMs By Proxy - Nigeria's Response to COVID-19

13 July 2020

Necessity, they say, is the mother of invention. This saying came into play with innovations created as a result of the Novel Coronavirus (COVID-19).

The pandemic, with its huge negative impact on economies, has led to emergency lifestyle adjustments, with countries thinking outside the box as they grapple with partial or total lockdown.

COVID-19 pandemic has led to government-ordered closure of companies and offices, and affected global stock market, causing postponement of public companies' Annual General Meetings (AGMs) as well as loss of jobs, among others things.

According to a report by the Institutional Shareholders Services (ISS), as at March 31, the total number of meetings postponed or cancelled globally because of COVID-19 is approximately 557 while the number of meetings that will be virtual-only or proxy-only stands at 560.

These figures, as tracked by the ISS, are changing by the day as the pandemic is pushing into the traditional AGM season for many markets in the northern hemisphere.

In response to stay-at-home orders and ban of gatherings, many countries updated their regulations, allowing quoted companies greater freedom to hold virtual AGMs.

Some of the countries that updated their regulations to allow quoted companies to hold virtual AGMs or AGMs by proxy are Spain, Switzerland, Austria, United Kingdom and Nigeria.

In Nigeria, virtual AGM is a novelty.

The Corporate Affairs Commission (CAC), in March, in view of the COVID-19 pandemic, said companies could hold their AGMs by taking advantage of Section 230 of the Companies and Allied Matters Act on the use of proxies.

The CAC published guidelines and procedures that companies should follow in conducting AGMs in view of the new normal in the country.

It says approval of the CAC shall be obtained before such a meeting is held, adding that application for approval can be submitted to its head office in Abuja or any branch office in states.

It demands that the meeting shall only discuss the Ordinary Business of an AGM as provided in S.214 CAMA, while notice of meeting and proxy form shall be sent to every member in accordance with the requirements of CAMA.

According to the guidelines, all members shall be advised in the notice that in view of the COVID-19 pandemic, attendance shall only be by proxy, with names and particulars of the proposed proxies listed for them to select therefrom.

Consequently, Guaranty Trust Bank on March 30 became the first quoted company in Nigeria to conduct an AGM with attendance by proxy when some quoted companies had notified the market about the postponement of their AGMs due to novel coronavirus.

With GTBank's bold step, many listed companies that earlier cancelled their various AGMs due to the COVID-19 pandemic embraced the initiative.

Some companies that have successfully conducted their AGMs by proxy include FBH Holdings, United Bank for Africa, Access Bank, Fidelity Bank, Union Bank of Nigeria, FCMB Group, Transcorp, Africa Prudential and Wema Bank.

Financial experts are convinced that the practice have come to stay even after COVID-19.

If the desirable is not available, the available becomes desirable, they argue.

Uche Uwaleke, a Professor of Finance and Capital Market at the Nasarawa State University, hails the initiative.

Uwaleke believes that virtual AGM as well as AGM by proxy will still ensure payment of dividends to shareholders once approved at the meeting.

He also.notes that it saves cost of attendance, saves time spent travelling and attending the meeting by shareholders.

According to him, it enables shareholders who are far away or in remote places and unable to attend physical meetings to participate in discussions and voting, which are done electronically.

On the flip side for the shareholders, Uwaleke says virtual a AGM does not allow bonding among shareholders and networking, which physical AGM promotes.

"A shareholder may also face issues, if in a remote location, of electricity and internet service, and a local shareholder may not be recognised to air his views in a virtual meeting.

"Unlike in a physical setting where one can keep one's hands in the air to draw the attention of the presiding officer, virtual meetings may not give shareholders, especially the minority and 'troublesome' ones, equal opportunities to be heard during AGMs.

"The chairman of the meeting can pretend not to notice a shareholder who indicates to speak through the hand symbol, using Zoom, for example," Uwaleke argues.

On the advantages of a virtual meeting to a company, he is of the opinion that it saves huge cost of organising a physical AGM, including hiring of venue and making provisions for refreshments, gifts and security.

"It saves the company a lot of time spent and logistics/hassles associated with organising the event.

"Resolutions including voting may be faster and not as rowdy as obtained in physical meetings."

Uwaleke points out, however, that the success of a virtual meeting depends on availability of enabling technology, especially internet service.

"Technology can fail, leading to disruption of the meeting; unlike a physical meeting where shareholders can be seen, it may be difficult in a virtual meeting to know those who actually participated," he adds.

For Mr Moses Igbrude, the immediate Publicity Secretary, Independent Shareholders Association of Nigeria, the new coronavirus pandemic has necessitated a new normal which Nigeria must embrace.

"Many companies postponed their AGMs initially, thinking it (COVID-19) would soon be a thing of the past but we can see now that the end is not in sight.

"Should we stop doing business or develop new ways of doing things until normalcy returns? So, virtual AGM by proxy is the one of the new normals," Igbrude says.

The shareholder-activist believes that virtual meetings make it possible for shareholders to get dividends in time instead of postponing the meetings.

According to him, it will also enable companies to avoid huge expenses on AGMs.

However, the National Coordinator, Progressive Association of Nigeria (PSAN), Mr Boniface Okezie, is of the opinion that the virtual meeting option is not stated in the law of CAMA.

He adds that even in the face of the meetings by proxy or virtual technology, some companies fail to provide links for shareholders to join in the meetings.

"This one just came from an emergency situation, as this is not what was planned," he notes.

According to Okezie, the CAC was reluctant to approve the AGMs because it was not in CAMA.

"As long as there has not been an amendment to the law of CAMA, there is nothing of such called virtual meetings.

"It is noteworthy to point that companies should not abuse these things.

"A lot of these shareholders were disenfranchised due to virtual meetings which I think will result in some of these companies perpetrating illegalities which could have been challenged by shareholders.

"After the pandemic, we cannot do this same type of meeting because, to get technology to continue, involves a lot of money, and I cannot advise companies to start spending on technology from investments made from shareholders," Okezie urges.

Analysts are convinced that virtual AGM by proxy in this era of COVID-19 pandemic is helpful, but warn that it should not be abused.

Joel-Nwokeoma works with the News Agency of Nigeria

NAN

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