AGMs in the time of COVID
For many organisations, AGM (Annual General Meeting) season is upon us, and we are having clients ask-
- Do we have to hold an AGM, or can we postpone it, or even skip it for this year?
- We have elderly or immune-compromised members, and we do not want to risk calling them to a physical meeting - how do we allow them to participate?
- Will a Zoom/Teams/Google hangouts AGM be allowed and be valid?
First: please note that, as we will mention again, these are strange and unusual times- the advice that we give here is based upon the law as we know it, and aimed at being practically useful. Please send your questions and any other suggestions through for sharing- scroll to the end for options.
Before we get into the detail of alternatives, let us examine the possibility of and restrictions on a physical meeting, looking at the Stage 3 Lockdown regulations - and this is an extract from the relevant part:
37. (1) All gatherings are prohibited except a gathering at -
(d) conferences and meetings which is subject to-
(i) a limitation of 50 persons, excluding those who participate through electronic platforms;
(ii) restricted to business purposes; and
(iii) strict adherence to all health protocols and social distancing measures as provided for in directions that must be issued by the responsible Cabinet member, after consultation with the Cabinet member responsible for health;”
It does not appear that any specific protocols have yet been issued for conferences and meetings. In their absence the general protocols of screening: upon entry for fever, sanitising upon entry, taking full details including up-to-date contact details from all who attend (to allow for contact tracing), maintaining physical distance, and wearing of masks which fit properly and cover both mouth and nose throughout the meeting, will probably be advisable as minimum requirements.
It should be noted that the meeting must be ‘restricted to business purposes’. Any social or networking component of the AGM should not take place (no lunch/dinner/tea together afterwards or at the break) and, to limit potential exposure, the meeting should be tightly managed to keep it as short as possible. The suggestions made later in this Brief on ways to take care of aspects of meetings remotely will be useful in trimming the time of the in-person meeting. For instance, if all documents and reports are circulated and read by members before the meeting, then there is no need to read/present the reports at the meeting, and you may proceed straight to question time. You should probably warn members clearly in advance that this will occur, as many (sadly) may not be in the habit of reading reports prior to meetings.
Regarding the serving of tea/refreshments, it should be noted that many cases of spread of infection have come from the tearoom or breakroom. People who are eating and drinking will not be wearing masks and it will be hard to maintain the physical distance requirements. It is probably better to serve nothing at all.
Recent research indicates that a meeting held out of doors or in a very large venue with all doors and windows open, will be the safest bet.
Of course, any in-person meeting involves some risk, particularly if the crowd is large and sociable. It may be hard to ensure everyone’s safety. Nonprofits will not want their AGM to be the cause of spread of infection, both because they will want to care for their members and also because the media is unlikely to be kind when reporting that your meeting was the “epicentre” (that much-misused word!) of a local outbreak.
So, if you have decided that an in-person meeting is not possible or advisable, what are your options?
The first question you need to ask is:
1. DOES OUR ORGANISATION HAVE TO HAVE AN AGM?
To answer this question, you will need to know what sort of organisation you have, what type of legal entity. This handy table will tell you which you are and whether you need to have an AGM:
|Founding document is:||Type of organisation||Members/No||Need AGM?|
|Constitution||Voluntary association||Has members||Must hold AGM|
|Trust deed||Trust||No members||No need for AGM|
|Memorandum of Incorporation (MOI) which states it is a “with members” NPC||Was called a section 21 company, now called a non profit company (NPC)||The old memo and articles will specify that there are members||Must hold AGM|
|Memorandum of Incorporation (MOI) which states it is a “with members” NPC||With-members NPC||Has members||Must hold AGM|
|Memorandum of Incorporation (MOI) which states it is a “no members” NPC||No-members NPC||No members||No need for AGM|
As you can see from this table, only organisations which are membership-based need to hold an AGM of members. If your organisation is a trust or a NPC (non-profit company) without members, then an AGM is not necessary. However, if it is a voluntary association or a NPC which has members, then an AGM is required. If an AGM is required by law then it is not advisable to just skip the AGM this year. For organisations which have members, AGMs serve a purpose and, if they cannot be held in person, the organisation should find a way to have the functions of the AGM take place in different way from usual.
2. CAN WE HOLD A VIRTUAL MEETING?
The Companies Act specifically permits participation in meetings electronically or by electronic communication by members provided that the members can properly participate in the meeting in the same way as they would if they were in the same room with the same effect.
You will need to have a look at your constitution. You may find that it already provides for an electronic participation by members in meetings.
If the constitution does not mention Zoom/Skype/other online meetings, and your members are able to participate in an electronic meeting, then you should obtain the consent of the members to hold the meeting online. If the constitution provides for members to take ‘round robin’ decisions and for the voting percentage required for this, then that percentage may be used. But if there is no such provision (and there usually is not, for member voting) then the strict legal requirement is that all of the members must give their consent to an electronic meeting. A constitution is an agreement between the members and, if you are departing from the procedures laid down in the constitution by calling an online AGM, then all of the members should give their consent to this.
Watchpoints for all electronic meetings:
- Electronic meetings must be properly convened :notice of the meeting must be sent to all members and a quorum must be ‘in the zoom’ before the meeting may start or any matter may be discussed
- Electronic meetings must be reasonably accessible- no members should be excluded from voting at meeting because they cannot access the electronic platform for any reason (see our note in the next section on proxy voting);
- Each voting member or their proxy must provide satisfactory identification of themselves and their proxy (if applicable); and
- Electronic meetings should be secure, to protect members, the organisation and any confidential matters discussed.
3. WHAT ABOUT PROXY VOTING?
You may find that the MOI or constitution provides for proxy voting at the AGM. Of course, to have proxy voting, you need to actually have a meeting (physical or electronic), as some people would have to attend in order to carry the proxies of others, but the proxy voting may be useful in circumstances where you are permitted or have agreed to hold an online AGM but some of the members are not able to participate by electronic means, ie in Zoom or Google hangouts or other sorts of electronic meeting. In this case you could call and hold the AGM on an electronic platform and allow that members who are not able to participate and do not have communication facilities instead give their proxy vote to those who are able to participate. This will take careful advance management as you will need to communicate the details of the matters to be voted on to the members who are giving their proxy vote so that they can give correct instructions to those who hold their proxy.
Another (less safe) option is to call an in-person AGM, and use proxies to limit the total number of people present at the meeting. So, proxy votes are a useful tool, but not a full solution.
4. CAN WE POSTPONE THE AGM?
The first thing to assess is whether there is any value in postponing:
- If you feel the need to postpone for a short while as there has not been adequate time or resources to prepare for the AGM, either because staff (or your accountants/auditors/board) have not been able to get things ready or because the organisation has been so taken up with disaster-relief efforts that admin and planning for the AGM has fallen by the wayside, then postponing is a sensible move, especially if you have to provide time for people to participate and respond on documents sent out prior to the AGM.
- If, however, you are hoping to postpone until a ‘normal’ AGM is safe, then, based upon current projections, it seems like the day of ‘normal’ is just too far away to be useful.
5. WE CANNOT DO VIRTUAL/PROXY/POSTPONE: WHAT ARE OUR OPTIONS?
To establish how the AGM may be accomplished in the absence of the ability to hold it electronically (and via proxy, where applicable), we need to examine the essential components of the AGM which are:
- Reports which need to be delivered;
- Crucial decisions which need to be made (for instance the appointment of board members); and
- The members engaging with and asking questions about the reports.
The delivery of reports can be accomplished by couriering or emailing the financial and narrative reports directly to the members. It is suggested that this communication includes an invitation to the members to submit their questions on these documents and reports via email or via telephone. If there are members who are not proficient with electronic communication or who do not have access to computers, we suggest that management telephones those members once they have read and digested the reports and asks them whether they have questions or issues which need to be raised. A summary could then be made of those questions and responses sent out for all the members to read and consider, before any voting is takes place.
When it comes to crucial decisions to be made (for instance, the election of new board members), these could be achieved in a number of ways:
- By voting via email or other electronic platform that is acceptable to or accessible to the members (Ensure that these voting platforms are secure and that they allow for verification of the identity of the member who votes) ;
- Using voting forms which are either emailed/couriered/delivered to members for them to indicate their vote.
- For those members who do not have access to any electronic devices or communication, or who cannot receive or return physical voting forms, their votes could be taken telephonically. It is suggested that telephone calls which are made to give the member the opportunity to vote, are recorded so that the result may be independently verified, in case of any dispute about the results of the vote.
In our view, the legal principle which will allow organisations to adopt these sorts of alternative means of achieving the engagement and voting which needs to take place, is the contractual one called ‘supervening impossibility of performance’. Remember that a constitution of a voluntary association is a type of contract. When a certain part of a contract cannot be carried out for reasons which were not anticipated by the parties and which are not the fault of either of the parties, then non-compliance with the contract is not a legal breach, as it is impossible to fulfill that part of the contract. However, although the requirement in the constitution to hold a physical AGM may not currently be possible because of the health risks and/or inability of members to attend in person, this does not mean that the board can give up entirely and cancel the AGM for the year. There are some essential reporting, governance and accountability functions which usually take place at an AGM, and the board needs to ensure that these occur, in ways which:
- Engage with and support members as much as possible;
- Allow active participation and for the voices of members to be heard; and
- Are transparent, fair and effective.
6. WHAT ABOUT OUR NPO REPORT?
For those organisations which are registered as an NPO, there is a requirement to lodge a narrative report with DSD within 9 months of the end of the financial year, and this report includes a record of the number of meetings held in the reporting period.
For organisations which use electronic communication for their meetings or a mix of electronic platform and proxy voting, they would report that a meeting was held on that date, as they normally would with an in-person meeting.
For organisations which replace the AGM event with reports circulated and votes collected, we suggest that the narrative report simply records that, because of the COVID crisis and the wish to protect members from risk, and the inability to properly engage the members in an electronic meeting, the business of the AGM was taken care of by sending reports and allowing the members to share their views and then cast their votes and indicate how this was accomplished.
Where the NPO report includes a change in board members or founding document, the NPO Directorate typically requires that a register signed by sufficient members to prove a quorum, is lodged with these changes. As this physical register will not be possible for either the electronic meeting or the ‘getting business done another way’ option, we have contacted the NPO Directorate to raise this issue with them, and requested that the requirement is waived, or that they let us know what they will require. We will update you on their response but feel sure that their requirements should shift at this time.
7. ANY OTHER QUESTIONS?
None of us has lived through anything like this before, and we, the organisations we serve and our laws, rules and usual procedures are having to adapt to these strange and unusual times. We are all making it up as we go along, doing our best with what we have in order to fulfill our obligations and keep things as tidy and compliant as possible.
If you have
- any questions on AGMs that we have not answered here, OR
- any suggestions for ways to hold meetings
please send them through to us by emailing firstname.lastname@example.org or visit our visit our website, hit the ‘contact’ tab, and enter your questions/suggestions into the ‘Contact Form’ space provided. We will collate responses and suggestions and send them out in our next ngoLAW Brief.
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Stay safe, keep calm and carry on- A Luta Continua!
Nicole, Lize, Bandile, Janice, Lisa and Dorothy
Time to catch up
The lockdown time may be the gap you needed to get your admin, governance, standard agreements and overdue updates done.
This is the stuff we are best at, so let us know how we can help.
ngoLAW services continue. We will all be working from home. The easiest way to get in touch is email, and we will also be available on zoom/skype/cell phone (the landline will only be answered intermittently).
Resources and perspectives:
- Now even more relevant reading: Joan Garry’s blog post on virtual meetings- how they should be designed and led (hint: not just as rushed versions of in-person meetings!) is useful and includes a free download of guidelines for a valuable virtual gathering
- Following on from our previous brief about Mission Shift, have a look at: