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Keeping to the spirit of AGMs
THE latest season of Annual General Meetings (AGMs) - the once-a-year affair in which investors get to engage with the management of companies they invest in - has mostly concluded, with something for both boards and shareholders to think about.
With the spotlight thrown on interactions and behaviour at AGMs - and the recriminations or worse still, legal disputes that could arise - Singapore Exchange Regulation (SGX RegCo) is working with the Securities Investors Association (Singapore) and the Singapore Institute of Directors (SID) to come up with a guide on how directors and investors should best conduct themselves during shareholder meetings.
The details are still being worked out, but a statement by SGX in relation to the issue sheds some light behind the principles that would drive the effort. The exchange said it "firmly believes in and encourages constructive and robust discussions" between shareholders and directors during shareholder meetings.
But it also noted: "While these meetings are subject to qualified privilege, it is important for all parties concerned to note that qualified privilege may not extend to comments that are published or quoted on social or mainstream media."
AGMs are a necessary element in the governance framework. It is a forum for shareholders to air their views and seek accountability from those in charge. It is also a decision-making event for passing resolutions. So, minority shareholders should be able to have their concerns dealt with properly, not dismissed as nuisance or trivialised. They should not have to fear actions by the company, including defamation suits. Directors too should be able to expect civil behaviour from shareholders.
Not always orderly
The problem is not all AGMs are orderly affairs. There have been cases of constant interruptions, booing or worst, verbal abuse by antagonistic investors. Companies know they need to work with even embittered shareholders and address negative shareholder sentiment, but sometimes, a civil exchange could be hard to maintain under the circumstances. There is also the issue of what is said after the AGM, in social-media postings, or to the media.
This brings up the question of qualified privilege, as indicated in the SGX statement. According to Christopher Tan, a partner in the Litigation and Dispute Resolution Department at Lee & Lee, in general if a shareholder at an AGM makes a defamatory statement against a third party such as a director or the management, that shareholder can be sued for defamation and possibly, malicious falsehood.
But a shareholder at an AGM speaking to other shareholders, management and the board at the meeting is usually protected by the defence of qualified privilege.
"The defence will apply if the shareholder and his audience both share a common interest in the subject matter of his/her communication, or if the shareholder had a legal, social or moral duty to communicate the information. It is not difficult to establish qualified privilege, if the communication is relevant to the agenda of the AGM," Mr Tan explained.
"Generally speaking, if a shareholder has a reasonable basis for his statement, and his statement is relevant to the agenda of the AGM, it would probably not be difficult for the shareholder to rely on the defence of qualified privilege," he added.
This defence of qualified privilege can be defeated by proof that the shareholder acted with malice in making the defamatory statements, said Joy Tan, a partner at WongPartnership LLP.
Malice include situations in which the shareholder knew his statement was false or was reckless as to whether it was true, or if his dominant intention in speaking was to injure the person he defamed.
"Where a shareholder is simply honestly mistaken on the facts therefore (without being reckless), he would likely be able to rely on the defence of qualified privilege," Ms Tan said.
What does this mean for shareholders who may not always have their facts right?
Lawyers said if the shareholders do not get their facts right, or if the media inadvertently reports wrong facts, both may be able to rely on the defence of qualified privilege, particularly if there is no malice.
In addition to the defence of qualified privilege, a shareholder at an AGM may rely on the defence of justification where the statements made are true and fair comment.
"Justification is a complete defence, while the defence of fair comment may similarly be defeated by malice. The law therefore gives room for shareholder to express their opinions at an AGM if the opinion is based on the truth, or based on objective facts and are opinions that a fair-minded person can honestly express," Ms Tan said.
So shareholders have a few defences they can rely on.
"If their statements are true, they can rely on a defence of justification. Furthermore, they might be able to rely on a defence of fair comment provided that: the statements complained of are comments which are based on facts, the comment is one which a fair-minded person can honestly make on the facts proved, and the comment is on a matter of public interest," said Lee & Lee's Mr Tan.
"Even if their statements are false or are completely statements of opinion, they can rely on the defence of qualified privilege, unless it is shown that their statements were made with malice," he summed up.
At the end of the day, shareholders should always try to ensure that what they say is true and factually accurate as far as possible.
This is because if they are reckless as to the truth of their statements, a court might consider that their statements were made with malice, Mr Tan advised.
But for both companies and shareholders, going before the court of law should be the last thing they want to come out of an AGM.
The shareholder meeting should be a constructive process for information to be shared, questions to be asked and answered, and for shareholder rights to be exercised.
Even in cases when unhappy shareholders seek to make their views known or remove directors, the spirit of the process should still be respected.