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Notice of Combined Meeting of Public Company

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Notice of Combined Meeting of Public Company

One of the first tasks related to the annual meeting process is to consider the type of meeting that will be the most appropriate for the company at this time. This can be a significant decision with important considerations, and should be finalized approximately six months in advance of the meeting date.

Company culture, tradition, company performance and investor concerns are just a few of the factors that guide the decision. The company’s board of directors should be involved in the final decision.

The meeting type will determine the level of planning and preparation required. No matter which type of meeting you decide to hold, the ability of the company’s shareholders to fully participate in the annual shareholder meeting is a primary consideration.

Annual Meeting Types

Traditionally, annual shareholder meetings were always conducted in person. With the advent of virtual meeting technology, some companies have moved to virtual shareholder meetings, or in some cases, a hybrid meeting that combines an in-person meeting with a virtual meeting.

The following brief overview will highlight key issues to be considered. If your company has performance issues, corporate governance or other challenges, the traditional in-person meeting or even a hybrid meeting may be most appropriate, to give shareholders as much opportunity as possible to participate in the meeting and to avoid the appearance of trying to avoid shareholder interaction.

Given the trends in technologies and shareholder preferences, some companies are reconsidering the form their annual meeting should take. Some newer companies only know virtual meetings, never having held an in-person meeting.

In-Person Annual Meetings

By tradition, the in-person annual meeting is the most common form of annual meeting, particularly among established companies. It provides a place where shareholders can hear how the company is doing directly from the company’s leadership.

They typically see and hear directly from the company’s Chairman of the Board, and have the ability to ask questions in person about any proposals during the formal part of the meeting.

They may also elect to vote in person at the meeting by ballot, although most vote in advance of the meeting by proxy. After the formal part of the meeting, shareholders may also have the opportunity to interact with members of the board and senior managers. While these meetings require significant preparation and are tightly managed, shareholders are welcomed to attend in recognition of their role.

At the other end of the spectrum, for many younger companies or companies where few if any shareholders attend, the meetings are short, simple affairs held in the company’s conference room or at the offices of outside counsel. Outside auditors, the Inspector of Election and outside counsel are typically the only outsiders present.

There is no management presentation, and there may or may not be refreshments. Directors may not be present unless there is a board meeting immediately following the shareholder meeting. If no shareholders are present, the meetings are perfunctory and are only held to meet legal requirements.

One disadvantage of in-person meetings is that shareholders who are not able to travel to the meeting are prevented from participating. Some companies will add a webcast feature to the meeting to allow shareholders to watch the proceedings online or after the fact. Expense is another consideration; costs for an in-person meeting can be substantial.

No matter which type of meeting you decide to hold, the ability of the company’s shareholders to fully participate is a primary consideration.

Virtual Meetings

The number of companies holding virtual meetings is on the rise. Virtual shareholder meetings are held online at a secure website, and shareholders attend remotely via the Internet. Shareholders should have the ability to pose questions related to the proposals online.

They may also pose questions about the company’s business online following the formal portion of the meeting. Some companies may have a telephone number for shareholders to call to submit their questions. Shareholders can also cast their votes online in a secure manner while the polls are open and the meeting is in progress.

The same formalities of an in-person meeting will be met, and in some cases, the meeting may be video-streamed over the Internet so that shareholders can see the presenters (although this adds to the costs). The more common way is an audio webcast.

The benefits of virtual meetings are many. They allow a wider group of shareholders to participate in the annual meeting regardless of their location, and the costs to the company are typically considerably less than an in-person annual meeting. Virtual meetings eliminate the need for a large physical space, security, refreshments and large support staff.

They can be run by a small group of people in a room with a good telephone and/or video connection if the event is going to be video- broadcast. Replays are also available. Directors may attend via the phone, or in person, along with the outside auditors and the Inspector of Election.

Despite these benefits, some investors object to virtual- only meetings, and have adopted policies expressing their views about how such meetings should be conducted. They believe shareholders do not have the same access to the board members and senior management they would have at an in- person annual meeting. They worry that the company will not respond to all shareholder questions posed during the meeting.

It is important to know who your investors are, whether they have a policy about the form the annual meeting should take, and whether the company’s approach would satisfy their investors. The company should have a policy stating that they will respond to all legitimate shareholder questions either during the meeting, or if there isn’t time, in writing and post the responses on the company’s investor page of its website.

The main purpose of the Annual Shareholders' Meeting is to deliberate on the approval of the Annual Financial Statements and, as a result, decide on the allocation of the result, that is to say, establish the amount of dividends to be paid. It is also authorized to appoint Directors to the Board and the Statutory Auditors and to fix the total amount of fees to be paid to Directors of the Board.

The decisions of the Annual Shareholders' Meeting are carried by a simple majority.

Extraordinary Shareholders' Meeting

An Extraordinary Shareholders Meeting is held to take any decision that might lead to the modification of Memorandum of Incorporation such as an increase or reduction in its capital, a change in the name of the Company, and so on. The decisions taken by this Meeting requires a two-thirds majority.

When the same Meeting has to consider resolutions, some of which are to be taken by the Annual Shareholders' Meeting and others by the Extraordinary Shareholders Meeting, it is known as a combined Annual Shareholders' Meeting and Extraordinary Shareholders' Meeting. The Companies Act saw fit not to allow an express instruction that relates to specific operational and management decisions, to come from the shareholders to the board.

The main reason is that the board is the body that is bestowed with the necessary operational knowledge and expertise relating to the business and affairs of a company, which shareholders are not.

In addition, the members of the board are subject to fiduciary duties in terms of the Companies Act, which shareholders are not. It would create an absurd position if the board were of the opinion that a resolution was not in the best interests of the company, but was obliged to act upon that resolution because a shareholder had proposed it, and such resolution was approved by the general body of shareholders.

It is also important to be mindful of section 61(2)(a) of the Companies Act, which provides as follows:

"(2) Subject to section 60, a company must hold a shareholders meeting: • at any time that the board is required by this Act or the Memorandum of Incorporation to refer a matter to shareholders for decision…"
This section still has to be interpreted in light of the court decisions where it has been held that the board can legitimately refuse to call a shareholders' meetings where it is clear that the shareholders are usurping the management functions of the board. It is submitted that, in such a case, the board is entitled to refuse to convene a requisitioned meeting, notwithstanding the peremptory wording of section 61(2)(a).

This is because these types of resolutions would be beyond the powers of the shareholders to pass.

Globally, shareholders are becoming actively concerned and interested in environmentally related issues of companies. There is an increasing general belief of shareholders that companies should not limit the shareholders' ability to vote on shareholder proposals that advance certain rights or promote beneficial disclosure by the board.

With the pressures of increasing global concern by shareholders over environmentally related issues, companies and their boards will undoubtedly need to remain alert to the possibility of increased shareholder activism and shareholder challenges on such issues.





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