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Rethinking the AGM

Companies have traditionally used the annual general meeting (AGM) as a key platform to seek shareholders’ approval for a range of matters, including annual financial statements, appointment of external auditors, retirement and re-election of directors and payment of dividends. 

However, developments and events in recent years suggest there is a continuing need to modernise this age-old practice to make it more effective and useful, as well as create alternative platforms for greater outreach to shareholders.

Companies Act reforms

Over the years, regulations have been streamlined to reduce the regulatory burden for companies. Most recently, the Companies Act provisions relating to AGMs have been changed to exempt most private companies from holding AGMs, subject to certain prescribed safeguards.

With effect from 31 August 2018, a private company need not hold an AGM if: (1) it has dispensed with the holding of AGMs by a resolution passed by all members present at a general meeting, or (2) it has sent financial statements to all persons entitled to receive notice of general meetings of the company not later than five months after that financial year end, or (3) it is a dormant company at the end of that financial year end.

Shareholder engagement

For public listed companies, the AGM has also been the principal means by which companies engage with their shareholders. Once a year, all shareholders (retail shareholders, in particular) are given the opportunity to meet personally with directors and senior management and pose questions to them on the performance of the company.

But the AGM is no longer the only means through which companies engage with their shareholders. The Code of Corporate Governance 2018, together with its Practice Guidance, makes this trend very clear.

The Code calls on companies to communicate regularly with their shareholders, not just at AGMs, and implement an investor relations policy which allows for an ongoing exchange of views so as to actively engage and promote regular, effective and fair communication with shareholders.

Companies are encouraged to have in place a mechanism, such as an interactive website, online submission form, email address or contact number, through which shareholders may contact the company with questions and receive responses in a timely manner. Companies should also have arrangements in place to identify and engage not just their shareholders, but also their material stakeholder groups.

The Practice Guidance recommends companies to go beyond the AGM by considering other avenues of engaging shareholders, such as through town hall meetings, investor briefings and roadshows, or webcasting meetings and allowing electronic online voting of shares. 

Issues with AGMs

As companies gear up to move beyond AGMs and adopt new rules of engagement with their stakeholders, interactions with shareholders still have to be managed.

Last year, Stamford Land Corporation and minority shareholder Mano Sabnani were embroiled in a contentious lawsuit over a Facebook post and letter to the press that purportedly detailed the proceedings at the company’s AGM held earlier. While the dispute was eventually settled after facilitation by the Singapore Exchange (SGX), it drew attention to the need for boards of directors and shareholders alike to engage in constructive and respectful discussions and debates during AGMs.

It is therefore welcomed that the Singapore Institute of Directors has, together with the SGX and the Securities Investors Association (Singapore), developed a “best practice” guide for both boards and shareholders on proper conduct during AGMs and the roles and responsibilities of each party to ensure that engagement is constructive and fruitful. 

The guide, which was issued in March this year, aims to remind participants on all sides that while discussions at AGMs can be robust, they should be kept courteous and sincere.

The Code now states that AGM minutes should be posted on corporate websites, when previously they were accessible only upon request by shareholders. Companies should ensure their AGM minutes reflect a balanced view of the discussions that took place at the AGM, do not contain any libellous or defamatory statements and do not have references to the personal identities of shareholders that breach the Personal Data Protection Act of Singapore.

The future of the AGM

Practice Guidance 11 envisages the day when AGMs can be webcast and shareholders are allowed to cast their votes electronically online. Today, these measures have not been adopted by any listed company here – presumably because of security concerns, cost and distrust associated with the technology and the perception that the Constitutions of companies may disallow this.

These are serious issues that need to be addressed. After all, even the Elections Department of Singapore has said that, while online voting for general elections has its advantages, it is not foolproof. There remain significant challenges, such as impersonation, ensuring voting secrecy and the threat of cyber-attacks. 

Virtual AGMs, video conferences and online or electronic voting can enable firms to increase direct shareholder accessibility to companies and management, reduce costs and improve efficiency.

Perhaps a more detailed study can be undertaken to better understand how to modernise the entire AGM process in Singapore by looking into the safeguards that have been put into place in other jurisdictions. Regulations can also be upgraded to provide support to these initiatives.

Together, all stakeholders in the corporate governance ecosystem can help AGMs in Singapore today embrace and fulfil the promise of becoming the AGMs of tomorrow.

The writer is Vice-Chairman of the Singapore Institute of Directors.

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