FUTURE OF AGM: VIRTUAL
AGM’s pursuant to Covid-19 pandemic: Government regulations
The struggle of the Canadian economy to fight the global pandemic of COVID-19 has made government agencies and authorities to think on their feet and come up with unique solutions to circumvent problems which were earlier unknown or less relevance to them. One such problem was to help issuers to overcome the challenges faced by them majorly concerning the new alternative to conduct the in-person Annual general meeting of shareholders ("AGM") in accordance with guidelines by Public Health Ontario regarding physical distancing. Though the virtual meeting is not a new concept but was just considered as an option that has have been adopted by some companies in the past, including but not limited to Starbucks, Intel, and HP. However, who thought that once which was just an option would become a need one day.
Drafting new policies, temporary provisions, and laws designed towards technological advancement is no piece of cake and it certainly requires a series of changes to existing rules and norms. Such laws may include what we list as S.133 of CBCA and S. 94 OBCA which is responsible to directs the directors of the corporation to call an annual meeting of shareholders not later than fifteen months after holding the last preceding annual meeting but no later than six months after the end of the corporation's preceding financial year.
The relevant authorities such as Canadian Securities Administrators ("CSA") the Toronto Stock Exchange ("TSX"), the TSX Venture Exchange ("TSX-V"), and the Ontario government took bold steps to eliminate the problem of in-person AGM's. These steps could result as an example for every other nation who plans not only to organize virtual AGM's but also is dedicated to using technology as a new tool to boost the business industry.
The steps taken by the above authorities resulted in the introduction of two options, either of which could be adopted by the issuers:
1. Delay of the agms.
2. Holding either Virtual (i.e., an AGM through the internet or other electronic means instead of an in-person AGM) or Hybrid AGM (i.e., an in-person AGM that also permits security holder participation through electronic means).
Delaying the AGM's
It is pertinent to mention that on March 23, 2019, both the TSX and the TSX-V announced measures to provide relief to issuers who are listed on the TSX and TSX-V. These measures stated that the issuer can delay the AGM but must hold their AGM during 2020. Moreover, the issuer must convene it on any day up to and including December 31, 2020, regardless of the issuer's fiscal year-end.
For issuers incorporated under CBCA, the guidance by Industry Canada shed light on the fact that issuers looking to delay an annual general meeting would still require court approval to do so. Though according to legal experts at OLF, holding a virtual meeting in the light of this pandemic, would be a better choice than seeking approval when courts are temporarily closed.
Fortunately, Issuers incorporated under OBCA seem to be in a better position due to flexibility in the rules governing them. The temporary provision declared that an AGM that is required to be held on a date during the state of emergency is instead required to be held no later than the 90th day following the termination of the state of emergency. Additionally, a meeting required to be held on a date that is within the 30-day period after the termination of the state of emergency is instead required to be held no later than 120 days after the termination of the state of emergency.
Holding a virtual or hybrid meeting
The government of Ontario issued an order (retroactive to March 17, 2020) under the Emergency Management and Civil Protection Act which temporarily suspended and replaced specific sections of the ("OBCA") and the Corporations Act (Ontario) ("CA"). It stated that irrespective of the corporation's by-laws, an AGM may be held virtually or electronically and a shareholder participating by such means is deemed to be present at the meeting.
While considering the position of issuers incorporated under CBCA, the temporary relief depicts that if no provision allowing for a virtual AGM is included in the existing by-laws, then the board of directors can add such a provision to the by-laws and seek confirmation of the by-law amendment at the meeting of shareholders. Moreover, in a situation where by-laws do not permit virtual meetings or are silent, then a hybrid AGM meeting would be appropriate. Note: For voting rights under hybrid AGM, one should always look at the applicable by-laws of the corporation.
Moving from in-person to virtual or hybrid AGM where proxy-related materials have already been sent and filed:
The CSA took initiative by providing relief to reporting issuers by relieving them from the obligation of sending additional soliciting materials or updating its proxy-related materials. Under such circumstances where the reporting issuer decides to update the date, time or location of its new virtual or hybrid AGM, then reporting issuer shall just notify security holders of such change by filing the news release with the applicable securities regulatory authorities in Canada through the System for Electronic Document Analysis and Retrieval (SEDAR) and also take all reasonable steps necessary to inform all the parties involved in the proxy voting infrastructure (such as intermediaries, transfer agents, and proxy service providers) of the change.
Moving from in-person to virtual or hybrid AGM where proxy-related materials have not already been sent and filed:
The CSA under these circumstances stated that the reporting issuer should consider including disclosures in its proxy-related materials regarding the possibility of such changes due to COVID-19.