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Company Meetings by Electronic Means Or Virtual Platforms in Wake of COVID-19 Restrictions

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Company Meetings by Electronic Means Or Virtual Platforms in Wake of COVID-19 Restrictions June 16, 2020 High Court grants leave for publicly Legal Alert: Key Decisions on listed companies to convene AGMs Company Law in Uganda by electronic means or virtual NEW! ALP Company Law News platforms in wake of impracticality, ALP Alerts is a free legal information service owing to COVID-19 restrictions, of provided by ALP East Africa in respect of the in-person meetings, subject to prior firm’s practice areas in its country presence in no-objection from the Securities Kenya, South Sudan, Tanzania and Uganda. Exchange and compliance with The Alerts are also available on the ALP applicable notices. website www.alp-ea.com Company Meetings by Electronic Means or Virtual Platforms in wake of COVID-19 restrictions Background meeting of the company to be called, held and conducted in the manner the court thinks fit.” The COVID-19 pandemic has fundamentally disrupted “business as usual” as we had come Both British American Tobacco (Uganda) to know it. With social distancing measures that Limited and Stanbic Uganda Holdings Limited have been put in place by very many countries, (hereinafter “the companies”) are public it is becoming impossible to engage in forms of companies listed under the Main Investment physical interaction—assemblies, meetings, Market Segment of the Uganda Securities etc.—a thing that was hitherto not envisaged. Exchange. The need for public companies to hold a general meeting is provided under The question that arises is: what happens when section 138(1) of the Companies Act 2012. physical interaction is required to do a certain Such general meeting is held once a year and thing? Especially, when that is required by the law requires that not more than 15 months constituent documents of a body or by law. With elapse between the date of one general regards to company meetings, this question meeting and that of the next. A monetary default was addressed by His Lordship Judge Musa fine of twenty-five currency points (UGX Ssekaana in two landmark decisions delivered 500,000/=) is imposed on the company and on June 11, 2020. This alert focuses on the every officer of the company who defaults in decisions of In the Matter of British American complying with the requirement under section Tobacco (Uganda) Limited & in the Matter of an 138(1) of the Act. Application by Fred Tumwesigye Bisamunyu, Misc. Cause No 107/2020 [2020] UGHCCD 133 The dilemma faced by the two companies in and In the Matter of Stanbic Uganda Holdings complying with section 138(1) of the Act was Limited & in the Matter of an Application by that their respective Articles of Association Oscar Kambona, Misc. Cause No 108/2020 required physical attendance for the general [2020] UGHCCD 134. meetings. The companies require annual general meetings to be physically convened Summary of the decisions with quorum of at least 7 members entitled to Both company matters were brought under attend the meeting present physically in person. section 142 of the Companies Act 2012, which The membership of the companies stands at provides: 1,230 for British American Tobacco (Uganda) Limited and approximately 22,500 for Stanbic “Where for any reason it is impracticable to Uganda Holdings Limited. The applications call a meeting of a company in any manner in underlie the impracticability of in-person which meetings of that company may be called or conduct the meeting of the company meetings given that, in the wake of the COVID- in the manner prescribed by the articles or 19 pandemic, there is a ban on physical this Act, the court may of its own motion or on meetings. This was particularly the case since the application of any director of the company the Public Health (Control of COVID-19) Rules or of any member of the company who would 2020 (gazetted on March 24, 2020) banned all be entitled to vote at the meeting order a public gatherings and meetings (the Rules were amended at various stages to extend the period light of similar COVID-19 limits on gatherings in of the ban, including, the Public Health (Control public places, the Supreme Court of New South of COVID-19) (Amendment) Rules, 2020 (that Wales granted an order for the convening of a extended the ban until May 5, 2020); the Public virtual members’ meeting to consider a Health (Control of COVID-19) (Amendment No proposed scheme of arrangement (In the 2) Rules, 2020 (that extended the ban until May Matter of Windlab Limited [2020] NSWSC 571 19, 2020)); and the Public Health (Control of (Australia (NSW (SC)). In multifarious COVID-19) (Amendment No 3) Rules, 2020 decisions, courts in Australia, Hong Kong, New (that extended the ban until June 9, 2020)). Zealand and United Kingdom have addressed Within that context, the two companies brought use of electronic means and virtual platforms the applications seeking for court orders to hold for handling company matters, including notice the meetings by electronic means or virtual of meetings (e.g. by email); notice of electronic platforms, since it was impracticable to hold facilities for meetings (e.g. audio-visual links them in the “usual” way involving in-person (AVLs) or teleconferences); lodging of proxy attendance. forms; ensuring effective participation at the The High Court granted the applications and meetings and voting, etc. The courts have ordered the companies to hold their respective particularly urged companies to embrace the annual general meetings by electronic means use of AVL and teleconference technologies to or virtual platforms, subject to obtaining a prior effect matters requiring legal and regulatory no-objection from the Uganda Securities compliance. Exchange and complying with all applicable Impact of decisions on annual general notices issued under the Uganda Securities meetings Exchange Listing Rules 2003 and the law. These decisions are a welcome addition to the Implications of decisions for private “new normal”. They will save on costs for hiring companies meeting venues and all other incidental It is to be noted that it is not legally mandatory expenses. for private companies to hold annual general More significantly, Company Secretaries are meetings. However, if a member requests that placed in a position of being required to an annual general meeting be held, then a appraise themselves with procedures of holding private company is required to oblige. In e-meetings; ensuring each members receives circumstances where the private company the board meeting packages within times refuses to oblige to member’s request, an stipulated in the articles of association; adopt aggrieved member may apply to the registrar of innovative ways to, among other things, carry companies who may call or direct the calling of out deliberations, provide for decorum of the a meeting. Where there is non-compliance with members at electronic meetings, and casting of the decision of the registrar, the company, votes by members. Additionally, it is imperative together with every officer of the company who the proceedings are electronically recorded and is in default, is liable to a fine of five currency minutes extracted and documented. Finally, points (UGX 100,000/=) (as per section 138(2), and of great significance, most of these (4) and (8) of the Companies Act 2012). changes will require companies to amend their In the event it is not practicable to hold a articles of association and all related meeting in the way stipulated under a private documents to provide for holding meetings by company’s articles of association, the company electronic means. can apply to court under section 142 of the In a nutshell, both the members and company Companies Act 2012 for an order to hold the secretary will be required to comply with all that annual general meeting in the most practical is required of them during electronic meetings. way. Concluding remarks Therefore, it follows that in these COVID-19 pandemic times, a private company which has The COVID-19 pandemic has made the world been moved by a member to have an annual realise the importance of electronic modes of general meeting can schedule and hold that doing business. Companies and other business meeting electronically on the strength of the two models have now embraced this, which may decisions reviewed. become the norm, even long after the pandemic. We therefore encourage companies Comparative common law practices to embrace electronic meetings and ensure that The decisions delivered by the High Court the necessary legal documentary requirements reflect a trend in company law practice in other are in place for the holding of such electronic countries in these COVID-19 pandemic times. meetings in compliance with the law. This has been the case in Australia where, in _________________________________________________________________________________ Disclaimer: No information contained in this alert should be construed as legal advice from ALP East Africa or ALP Advocates or the individual authors, nor is it intended to be a substitute for legal counsel on any subject matter. For additional information in relation to this alert, please contact the following: Ann Namara Musinguzi Head, Corporate & Commercial Department [email protected] Judith Maryanne Aboto Associate, Corporate & Commercial Department [email protected] Rebecca Muheki Associate, Corporate & Commercial Department [email protected] ALP East Africa Who we are ALP East Africa is a premier integrated legal and professional services firm. ALP combines high impact analysis, strategy and innovation to provide a single service point for clients’ legal and professional services’ needs. ALP has a deep understanding of Africa and in all assignments, the practice deploys a multidisciplinary and integrated approach using an extensive network of global and local partners to support our clients. Our contacts ALP Advocates ALP Kenya ALP South Sudan ALP Tanzania Lotis Towers, 5th floor Trance Towers, 1st floor, Old KCB Building, 3rd Janqid Plaza, 1st floor Plot 16 Mackinnon Rd South B floor, Room No 204 Ali Hassan Mwinyi Rd P.O.
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