GK first to test remote AGM amid pandemic
FOOD AND financial services conglomerate GraceKennedy Limited, GK, held what it described as a closed-door annual general meeting, AGM, on Wednesday, which required a minimum three shareholders to form a quorum.
The event was live-streamed in what was a first for the near-century-old company, which usually opens up its headquarters to shareholders annually.
The new meeting format, which saw five of GK’s shareholders in attendance in the room, another 84 participating in the voting process by proxy, and about 200 logged on to the video stream, was meant to be accommodative of shareholders amid the restrictions on gatherings to contain the spread of the COVID-19 coronavirus.
But the Jamaica Stock Exchange, JSE, has been warning companies that the law requires that shareholders be allowed the opportunity to participate in the room where the meeting is convened, and that decisions taken at virtual meetings could be challenged legally in the future.
Typically, shareholders approve audited accounts, dividend payments, the appointment and reappointment of directors and auditors through resolutions that are put to a vote at annual general meetings. AGMs usually ratify decisions taken by the board of directors and/or approve future actions.
GraceKennedy faced a slew of questions about the issue from shareholders during the live-streamed event, but the conglomerate was steadfast that how it was conducting the meeting was within the bounds of the law.
“Our AGM is lawful and legal; GK would not proceed otherwise. We are not having a virtual AGM because that is not permissible under Jamaican law. What we are having, in keeping with our articles and the Jamaican law, is a meeting in person,” said GK General Counsel & Chief Corporate Secretary, Gail Moss-Solomon.
“It is, however, closed to the public, unfortunately, because of the unique situation that we are in now and the disaster risk-management orders which limit the number of persons to no more than 10,” she said.
Still, the JSE has advised that companies going that route take the risk of having AGM decisions overturned. The exchange has been trying to rally members to join in an application to the court for a special order in order to negate that risk.
The court action had not been filed up to Thursday.
The JSE, in its notice to listed companies, advised that all shareholders are entitled to attend AGMs in person, if they so choose, and that companies cannot require shareholders to appoint a proxy from a designated list of proxies or to watch by video stream.
Companies are also not allowed to require shareholders to send in their questions and vote on the resolutions in advance.
The correspondence, issued by JSE Group Managing Director Marlene Street Forrest, also made it clear that the law is not all to be found in the Companies Act, but more so in judgments of court cases where meetings were challenged.
Any variations, it says, would cause the company to breach the laws of Jamaica, disenfranchise shareholders of their rights, and run the risk of the meeting later being invalidated along with all resolutions, director appointments and subsequent board business.
Moss-Solomon, while holding firm that the conglomerate did the right thing, acknowledged that there were risks in the company hosting the meeting.
“It’s not inconceivable that a shareholder could bring an action against us. However, we are confident that because we have a quorum of three, as required, and because we delivered our notice within the right time and in the manner required, we had the AGM in keeping with the legal requirements, both by the Companies Act of Jamaica and our articles of incorporation,” she told the Financial Gleaner.
“We also made provisions, so if any shareholders had come today and asked to be admitted to the meeting, they would have been allowed in a separate room. But our shareholders instead chose to appoint proxies, so 84 attended by proxy, and over 200 viewed and participated online,” Moss-Solomon said.
GraceKennedy is the first company to have moved ahead with its scheduled annual general meeting since the imposed social-distancing requirements by the Government that allows for no more than 10 individuals to be in a common space at any one time.
One of the pluses highlighted by the company from the streaming decision was that it allowed shareholders living overseas to participate.
“GraceKennedy is an international company. We have with our bankers and other important stakeholders a statutory obligation to have our AGM on time. This is the first time in GK’s history our shareholders all across the world have had the opportunity to participate in our AGM,” said Group CEO Don Wehby.
“We’ve heard the term ‘new norm’ quite a lot. This could become the new norm for GK, so all our shareholders can participate. We also looked at what other companies are doing: Coca-Cola and Nestle had virtual meetings ,while Barclays Bank had a physical meeting with closed doors,” he said.
Another AGM, Indies Pharma Jamaica, which was scheduled to take place in Montego Bay on Thursday, May 28, was postponed to August 27.
Section 130(2) of the Companies Act allows the Supreme Court to direct how a meeting may be held where it is impractical to hold one in the legally prescribed manner.
In response to mounting concerns from listed companies around the hosting of AGMs, the JSE has advised that it plans to seek the order, and was urging as many companies as possible to participate and share the costs to make the legal fee more affordable.
GraceKennedy itself has not taken up the offer by the JSE, nor filed its own court application.
But Moss-Solomon told the Financial Gleaner that GK, in solidarity with fellow listed companies, is seeking legal advice from respected attorney Michael Hylton, QC, but the corporate secretary said she could not comment on the precise nature of the discussions at this point. Hylton is the same lawyer that JSE is looking to for advice.
“The main thrust of that order as communicated by the JSE is to allow companies to serve their notice electronically, whereas GraceKennedy does not require that,” Moss-Solomon noted.
“It’s also to allow persons to attend virtually so that they can vote virtually, and we don’t need that because we had three members present, in accordance with our articles. So a lot of the things that the persons participating in that action would need, would not apply to GraceKennedy,” she said.
GK, which was founded in 1922, is one of Jamaica’s most profitable companies, with revenue topping $103 billion in 2019 and earnings of $5 billion.
Its first-quarter results ending March, which incorporates the beginnings of the COVID crisis for Jamaica, produced strong results. Net profit for the period grew 42.8 per cent to $1.45 billion, on the back of $28.8 billion of revenue, which also grew by 11.4 per cent.
“GraceKennedy, being a diversified group, has so far been able to manage the impact of the system-wide risk of the COVID-19 pandemic on its performance. As we navigate this period of great uncertainty, we continue to adjust our structure to be nimble and agile,” Chairman Gordon Shirley and CEO Wehby said in their message to shareholders issued with the first-quarter results in mid-May.