Shareholders
A company’s shareholders or members are the owners of the business. They appoint directors, also called the board of directors. The board plays an oversight role by, inter alia, providing policy and strategic direction to management. Some shareholders, if permissible at law, may become part of the board or even management.
Management manages the day to day affairs of the company and reports to the board. Board meetings are held regularly, at least once a quarter. The board reports to the shareholders, through an annual general meetings (“AGM”) and occasionally through an extraordinary general meetings (“EGM”).
Key documents
In interpreting laws on AGMs and EGMs it is advisable to familiarise with the Companies and Other Business Entities Act (Chapter 24:31) which became effective February 2020, a company’s Articles of Association, other applicable laws in the case of regulated entities and relevant internal policies and procedures, if any.
Annual General Meetings
This article looks at an AGM, the provisions of Section 167 of the Companies and Other Entities Act (Chapter 24:31) of 2019, (“the Act”) which became effective February 2020. The Act’s key provisions are that:
- Every company shall, once in every period of twelve (12) months, hold general meetings to be known and described in the notices calling such meetings as annual general meetings.
- The AGM shall deal with and dispose all matters required in terms of the Act to be dealt with and disposed of at an AGM and may deal with and dispose of such other matters as are provided for in the Articles of the company, and subject to the Act, any matters capable of being dealt with by any AGM of the company.
- At an AGM only matters within the scope of the notice and agenda previously sent may be voted on except in the case of essential and urgent matters which arose after the notice was given and could not have been included in the notice. This restriction shall not prevent discussion of other matters and shareholders shall be free to raise any other matters.
In terms of Section 167(5) an agenda for an AGM shall in any event include the following items:
a) Electing members of the board to be elected at that time.
b) Setting or approving the compensation of directors including emoluments, salaries and pension, per Sections 207 and 215.
c) Reviewing the report by the board with respect to its responsibilities and activities, per Sections 183 and 218.
d) In a public company, the report of the audit committee, pursuant to Section 219.
e) In a public company, reviewing the board’s “comply or explain” report on the company’s corporate governance guidelines and the current National Code on Corporate Governance, per Section 220.
f) Reviewing the external auditor’s report, if the report is required under this Act or is otherwise provided and this report shall include but not be limited to:
(i) A statement of whether the auditor has obtained the information it deems necessary to perform its duties satisfactorily,
- Whether the financial statements are in accordance with the reporting standards prescribed by the Public Accountants and Auditors’ Board (“PAAB”) and,
- Whether there have been violations of the company’s memorandum of associations or of the Act during the financial year which affects the company,
g) Appointing the company’s external auditors and setting its compensation for the following / ensuing year.
h) Reviewing the board’s recommendations and actions authorising any distributions or relating to issuance of bonds or other borrowing by the company.
A company that fails to hold an AGM within the stipulated time shall be liable to civil penalty.
Extraordinary General Meetings
An extraordinary general meeting (EGM) is a members’ meeting other than an AGM. It is usually convened to consider urgent company business that require shareholder involvement which otherwise would not wait for an AGM.
Section 168 of the Act provides for the requisition of an EGM by shareholders or members holding at least five percent (5%) of the paid up capital of the company. It specifies the timelines within which directors have to convene the meeting and what happens if the directors do not act. For example if directors do not convene the meeting, following requisition, within twenty one (21) the members, numbering at least fifty (50) or representing at least fifty percent (50%) of total voting rights of all of them, may convene the meeting upon giving twenty one (21) days’ notice.
This articles is for general information only and does not constitute full professional advice.
Godknows Hofisi, LLB(UNISA), B.Acc(UZ), CA(Z), MBA (EBS, UK) is a legal practitioner / conveyancer, chartered accountant, corporate rescue practitioner, and consultant in deal structuring and tax. He writes in his personal capacity. He can be contacted on +263 772 246 900 or gohofisi@gmail.com
