Calling an Annual General Meeting (AGM) in Hong Kong
7 minute read
An annual general meeting (AGM) is a meeting that takes place every year when all shareholders of a company gather. During this meeting, the directors of the given company present an annual report that has all the important details that shareholders need to hear regarding the company’s performance and strategy.
Company shareholders hold voting rights to vote on various issues. These general meetings often include voting processes when the company needs to appoint new directors, executives, or even change something regarding dividend payments, auditors, and other issues.
AGMs are very important due to the transparency they provide, the ability to include shareholders, and the emphasis they put on accountability – which is essential for all company managers.
Annual General Meeting (AGM)
The Annual General Meeting is a legal obligation for a company’s shareholders to meet and discuss financial statements, results of operation, or business strategy.
As in many other jurisdictions, a Hong Kong business must hold an annual general meeting of shareholders. The new Companies Ordinance states that a company must hold an annual general meeting in Hong Kong for each financial year.
What is the purpose of AGMs?
The main goal of an annual meeting is to gather all important stakeholders to discuss:
- Business performance
- Financial reports
- Appointments of new board members (executives)
- Compensation plans and dividends
An AGM has to be hosted within 9 months after its accounting reference period ends. This is in the case of a company limited by guarantee or a private company that is not a public company’s subsidiary.
On the other hand, any other company has to hold an AGM within 6 months after its accounting reference period ends.
Keep in mind that all necessary documents must be sent to the members that are necessary prior to the start of the AGM. These include financial statements, auditor reports, and so on.
Are there exemptions to AGMs?
In some cases, an AGM may not need to be held. The new Companies Ordinance has laid down the conditions as follows:
- A single-member company is not required to hold an AGM. The company may avoid conducting AGM by providing a written resolution or proposed resolution passed and approved by all the members entitled (director and shareholder approval).
- A dormant company is also exempt from the rule to have an AGM.
- If all that is required to be done at the AGM is completed by written resolution, the company is exempt from conducting the AGM.
- If choosing not to hold an AGM, the required documents that would have been presented at the general meeting shall be circulated to each stakeholder of the company on or before the date of the written motion.
Keep in mind that a private company can dispense with the requirement for holding an annual general meeting in Hong Kong. This is called a dispensation and the dispensation of AGM can be passed through a written resolution or a resolution at a general meeting by all stakeholders.
A Hong Kong company does not need to have an AGM during the year to which the resolution relates after it is passed.
A proxy is a term used for an individual attending an annual general meeting AGM and voting on behalf of a company’s member.
All the members have the right to appoint a proxy, including members of a company limited by guarantee that is solely entitled to appoint proxies if provided for within the company’s Articles.
What are the roles and responsibilities of a proxy?
The Companies Ordinance stipulates a set of new rules regarding the process for the proxy appointment:
- Appointing another person as a proxy is a possibility all Hong Kong companies can practice.
- A company limited by guarantee may, based on the company’s Articles, confine proxies only to company members.
- The law grants the appointment of multiple proxies if a company has a share capital.
- Hong Kong laws stipulate that there should be a notice period for any meeting of proxy where a voting session is demanded.
- The law grants the appointment and termination of a proxy, which is also sent to the company member by electronic means.
- The law rules that an instrument of proxy issued by a company must be characteristically capable of permitting the member to instruct the proxy to vote for or against each decision.
- A company’s Articles can, however, grant more extensive rights to its proxies or members.
Let’s walk through the basics of the Annual General Meeting and the way it should proceed. This will be of great importance once you set up your own business in Hong Kong.
What should an AGM include?
The agenda is usually made of these elements:
- Minutes of previous AGM
- President’s report
- CEO’s report
- Presentation of financial reports
- Amendments to the constitution
- Elections and voting
- Life memberships
- Appointment of the auditor for the upcoming financial year
In most cases, there is no general business item on the agenda. However, it can happen that a company includes it to encourage discussion between those who have come to the meeting.
An AGM agenda can often be really short, especially if there are no new elections. That’s why it is wise to consider having a speaker come and talk on a topic of interest. The person should be able to talk about governance and share some insights regarding marketing and strategic planning.
What pointers should you take note of?
Even though many hope that governments will pass legislation to extend the current statutory deadlines for holding an AGM—and laying accounts and reports before stakeholders—that’s not the case. Until that day comes, all private companies should consider the following points:
- Follow government instructions and advice. The government instructions can change on a daily basis and they will be relevant when deciding whether or not to hold an AGM.
- Communicate properly with shareholders. Send out the notice and remind shareholders that they need to look at the website for any AGM changes. Consider if you should announce major changes online or manually send out notifications. Announce changes as soon as they happen.
- Stimulate early return of proxies. Ensure that shareholders can vote by telling them to return their proxy electronically as early as they can prior to the meeting.
- Poll voting. Call a poll on votes to ensure that the votes of the company shareholders are accounted for on the resolutions.
- Questions. Provide a way for shareholders to ask questions before the meeting (in writing or electronically). This way, those who don’t attend will have a chance to ask questions that can be answered during the AGM.
- Live-streaming. Consider live-streaming the meeting since that would enable all shareholders to watch and see how the meeting unfolds.
- Backup location. A company needs to consider the possibility of organizing an alternative venue for the AGM in case the original venue becomes unavailable.
- Logistics. If a company wants to proceed with a physical AGM, it would be wise to check the physical venue to ensure that all conditions can be met and that the arrangements for the meeting can be prepared.
AGMs in the COVID-19 era
COVID-19 is, unfortunately, still an issue the whole world is fighting. Due to its effects, businesses need to find new ways to execute tasks they would usually have no problems executing.
AGMs are a chance to gather shareholders to discuss or bring up various issues and engage directly with managers, but this has had to change.
Companies have to rethink their arrangements for the upcoming AGMs due to the inability to hold large gatherings or travel. They also need to implement precautionary measures.
Companies that have already sent out AGM notices should urge shareholders to check their websites for any AGM updates. In case shareholders are unable to attend the meeting in person, the companies should recommend that they submit their proxy votes on written resolutions in order to be considered at the meeting.
These problems are becoming even bigger as in a number of jurisdictions, including Hong Kong, a public company is required by law to hold AGMs within the following period after the end of their fiscal year.
Can an AGM be postponed or delayed?
Most AGMs are held well ahead of the six-month deadline, but some may want to consider pushing the date back further if possible. Of course, this should be done within legal boundaries and obligations.
In light of any requirements to have an AGM within a set period of time, delaying the meeting will be a limited option if COVID-19 restrictions make it difficult to hold AGMs in the following period.
Similar problems will occur in the case of an AGM adjournment. The power to adjourn a shareholders’ meeting is often provided in a company’s constitutional documents, but even without that power, the chair of the meeting can adjourn in certain circumstances.
Adjournment to a later date, on the other hand, necessitates the opening of a physical meeting. Before the meeting can be adjourned to a later date, the necessary quorum requirements need to be met.
In the case of either delay or suspension, there will be suggestions for the written resolutions to be proposed at the AGM. A number of resolutions commonly passed at AGMs, for instance, share allocation and buyback specialists, are drafted so as to run out before the next AGM, or at a long-stop date thereafter.
Therefore, it is possible to postpone an AGM. But as it is clearly evident, even more problems can occur in various postponement situations.
Can AGMs be virtual?
In short, yes.
In fact, holding a virtual AGM is perfectly fine in some parts of the world. However, this kind of form is less common in a lot of jurisdictions.
In some regions, there could also be legal problems regarding whether or not holding a strictly online meeting would follow all legislative necessities that apply to conferences. Moreover, guidance from proxy advisers and institutional investors in some jurisdictions don’t support virtual conferences.
Consequently, even for those companies that have enclosed provisions in their constitutional documents allowing them to carry on a virtual AGM, this is not the way they will likely take since the guidance cannot be changed quickly.
Can AGMs be a hybrid?
To hold a hybrid AGM, businesses may have to lay down various points in their constitutional documents, depending on variations in local law. The ones that have such provisions, including Hong Kong, may seek to move to a hybrid 2021 AGM so as to reduce the number of people present at a physical location.
However, this would require involving a technology provider and adapting the whole documentation to a virtual set of forms.
How can Sleek help?
Sleek’s team of experts can help you host your AGM by participating in the dispensation, agenda-setting, and document preparation.
Moreover, our team of experts simplifies accounting and bookkeeping and specializes in all processes related to company incorporation and ownership in Hong Kong.
Needless to say, you can reach out to us whenever you need help.
Clearly, AGMs are incredibly important, seeing as they gather the top management members and executives to discuss various issues that affect each part of the business. This is a chance to directly engage very high-level people that take part in running the company.
Even though the viral outbreak made AGMs in the Covid-19 era a bit more difficult to navigate, it’s still a crucial legal obligation to hold an AGM in accordance with local law.
So, consider everything that may be of importance (both for your company and for your health) and then go ahead with the meeting.