EGMs on contentious issues must allow for more shareholder participation

LISTED companies are expected to hold physical general meetings from Jul 1, with the revocation of temporary measures to allow alternative arrangements for such meetings during the Covid-19 pandemic. 

Following this, both annual general meetings (AGMs) and extraordinary general meetings (EGMs) will have to return to physical mode.

While some investors celebrate the end of general meetings run solely via electronic means, it would be a loss for the market as a whole if shareholders who are unable to attend these physical meetings do not now have an option to dial in virtually.

Singapore Exchange Regulation (SGX RegCo) previously said it would work closely with the Monetary Authority of Singapore (MAS) to provide guidance for listed issuers to have the option to conduct hybrid meetings.

Still, some Singapore companies have recently announced that they would hold only physical AGMs, with no option for shareholders to attend virtually. Examples include Singtel, Boustead Singapore, EC World Reit and The Hour Glass. 

This is less than ideal, as not all shareholders are able to attend such meetings in person.

For instance, investors who hold shares in multiple Singapore-listed companies might find themselves having to choose between two companies holding their meetings at the same time. And investors based overseas might also be unable to attend. 

While physical general meetings are preferred over virtual ones, it is clear that hybrid meetings would be best.

Further, investors could benefit from stricter rules around the formats of meetings. This is particularly true for EGMs, which are convened to vote on contentious corporate issues. 

For example, the regulator could mandate that specific time slots be set aside for shareholders to field questions to company executives during these meetings. 

While AGMs are held yearly for shareholders to vote on standard issues such as the payment of a dividend and the election of directors or auditors for the upcoming year, EGMs are convened for time-sensitive corporate transactions or decisions that require shareholder approval. 

Certain transactions voted on at these EGMs, such as rights issues or mergers and acquisitions, could be value-destructive to shareholders.

It is fair that shareholders ask for more clarity on the details of these transactions, or seek the advice and opinions of a company’s executives, before they decide how they will vote. 

It might also be worthwhile to note that retail investors often rely heavily on physical AGMs and EGMs to meet a company’s executives. While larger shareholders or institutional investors have the means to reach a company’s top-ranking honchos, retail investors do not. 

Allowing retail shareholders to ask questions at such meetings would also benefit the companies, as they would be able to get a sense of how their shareholders on the ground feel about the company and its corporate decisions, rather than just relying on their biggest investors or investor-relations teams.

To their credit, the majority of companies that hold EGMs often have dialogue sessions with their investors, or invite their shareholders to submit questions, before the meetings take place. 

But there have been instances of companies skipping certain questions from shareholders due to the limited time available during these dialogues. Worse, questions are not aired because companies choose not to answer them directly. 

If a mandated time period is set aside for shareholder queries at general meetings, it would give shareholders a chance to ask the companies’ executives questions directly.

As things stand, EGMs may require closer scrutiny and tighter rules than AGMs, given that EGMs deal with more complex matters.

With rising shareholder activism and the growing number of complicated deals surfacing in the local stock market, it is expected that more EGMs will take place. 

For instance, Sabana Industrial Reit has said it would convene an EGM in response to activist investor Quarz Capital’s call for the removal of the current manager of the real estate investment trust (Reit), and for an internal one to replace it.

Sabana Reit on Jun 28 said in an update that it would hold a physical EGM on Aug 4. However, it gave no details on whether a virtual option would be made available to shareholders. 

Given the seriousness of the trust’s situation and the upcoming vote – and the numerous back-and-forth allegations and announcements that have been made by the Reit manager, Quarz Capital and ESR Group – investors should be given some time to ask the three parties questions before voting. 

It would also be in the best interests of the Reit to give investors the option to attend the EGM virtually, to ensure that as many unitholders as possible are able to exercise their vote.