What is an annual general meeting? Do I need to hold one every year? Does it need to be a physical meeting?

Essentially, an annual general meeting (“AGM”) is a meeting held by the company once a year to update its members on its financial performance and allow members to engage in management. In general, AGM is a statutory requirement under the Companies Ordinance (Cap. 622).

What is an AGM?

An AGM generally has the following functions:

• To keep the members posted on the company’s finances and performance;
• To elect the managing body of the company; and
• To provide a platform for the members to ask questions.

For instance, the appointment of directors/company secretaries, declaring dividends to shareholders, and voting on resolutions are examples of some of the matters discussed in the AGM.

When should you hold an AGM?

Under the new Companies Ordinance, a company must hold an AGM  in respect of each financial year of the company, rather than in each calendar year.

The time limit for a private company (not a subsidiary of a public company) or company limited by guarantee to hold an AGM is 9 months after the end of its financial year. In case of any other company, the time limit is 6 months after the end of its financial year. If it is the first AGM, the time limit is nine months after the first anniversary of the company’s incorporation or three months after the end of the first accounting reference period.

Exceptions:

Despite the necessity of holding an AGM stated in the Companies Ordinance (Cap. 622) and the model Articles, there are situations where an AGM is not required, they are as follow:

• When the company has only one member;
• If everything to be done at the meeting is revolved by written resolution and copies of the documents that had to be shared in the meeting are provided to the members of the company before the circulation date of the written resolution;
• If there is unanimous consent of members that the AGM can be dispensed with; or
• When the company is dormant.

Notice of AGM

A 21-day written notice is required when calling an AGM, unless there is unanimous consent on a shorter notice. The notice typically contains the following:

• The date, time and place(s) of the meeting;
• The brief outline of matters to be discussed;
• The resolutions to be passed; and
• The fact that the particular meeting is an AGM.

Click on the link for a template of notice of meeting.

Proxies

Members can appoint proxies to attend and vote in their places if they cannot attend the meeting in person, but proxy notice must be given in accordance with the requirements in the Articles for an appointment to be effective.

Quorum

To make any valid decisions, there must be a quorum at the meeting. There must be at least 2 members to form an effective quorum. You can require more than 2 members to form a quorum by drafting so in your Articles.

Holding AGM during the period of the Novel Coronavirus (COVID-19) Pandemic

With the outbreak of COVID-19, it is rather difficult to hold any physical meetings without putting everyone’s health at risk. The Prevention and Control of Disease (Prohibition on Group Gathering) Regulation (Cap. 599G) (the “Regulation”) prohibits group gathering in public places unless exempted. Therefore, the companies must ensure that if they are holding an AGM then it is in compliance with the Regulation.

As per one of the exemptions in the Regulation “Group gathering at a place of work for the purposes of work”. This exemption covers holding of annual general meetings by the companies.

However, even though a physical AGM is exempted from the prohibition of group gatherings under the Regulations, you will have to ensure social distancing by allocating no more than 20 shareholders in one room if there are more than 20 shareholders attending the AGM.

Can AGM be held virtually?

In view of the pandemic, the better option is a virtual meeting. Conveniently, Hong Kong is one of the jurisdictions where it is statutorily permitted to hold a shareholder meeting in 2 or more places, as long as members can “listen, speak and vote” with the help of technology. Therefore, anything with at least a telephone call function suffices, which a video conference would do.  Proper mechanism should be in place to ensure the shareholders can listen, speak and cast their vote.

Also, bear in mind that the quorum and procedural requirements must be met even if you are holding a virtual meeting.

Lastly, check the provisions of your Articles if non face to face AGM’s are permitted. If it is explicitly provided in the Articles that an AGM must be held physically, you will have to amend your articles to allow virtual meetings.

Key takeaway

• An annual general meeting is a member’s meeting held yearly to update the shareholders with the company’s finances and activities and enable members to make company decisions.
• Unless exempted, AGM is a statutory requirement under the Companies Ordinance (Cap. 622).
• In spite of the pandemic, a physical AGM can nonetheless be held in accordance with the relevant rules regarding social distancing set out in the Prevention and Control of Disease (Prohibition on Group Gathering) Regulation (Cap. 599G)
• Check your company’s Articles and/or other relevant agreements to determine if you can hold an AGM virtually.

Bibliography

Companies Registry, FAQ on Meetings, Resolutions and Company Records: https://www.cr.gov.hk/en/faq/companies-ordinance/meeting-resolution-company-record.htm#07

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