Public Gathering Ban: Clear Exemption for Shareholders’ Meetings of Listed Companies Effective from 8 May 2020
With a view to combating the COVID-19 pandemic, the Hong Kong Government has introduced measures to implement social distancing, including, among other things, the Prevention and Control of Disease (Prohibition on Group Gathering) Regulation (Cap. 599G) (Regulation), which has been effective since 29 March 2020.
The Regulation, when first issued, prohibited group gatherings of more than four persons in public places during the “specified period”. On 5 May 2020, the Government gazetted amendments to the Regulation, pursuant to which, with effect from 8 May 2020:
- the specified period has been extended until 21 May 2020;
- the number of persons allowed in group gatherings in public places has been relaxed from four to eight; and
- the scope of exempted group gatherings has been expanded to cover, among other things, shareholders' meeting of a listed company that is held in accordance with any ordinance or regulatory instrument, subject to no food or drink being served and no more than 50 persons in a room or partitioned area.
Prior to such amendments, it was unclear how the Regulation impacted general meetings of listed companies.
When the Regulation was first issued, paragraph 11 of Schedule 1 to the Regulation (Paragraph 11) exempted "any group gathering at a meeting of a body that must be held within a specified period in order to comply with any Ordinance or other regulatory instrument that governs the operation of the body or its business".
The Securities and Futures Commission and The Stock Exchange of Hong Kong Limited published a joint statement on 1 April 2020 (Joint Statement) advising that they have consulted the Government and understood that:
- annual general meetings (AGM) as required under the Companies Ordinance (Cap. 622) and/or the Listing Rules are in general exempted under Paragraph 11; and
- extraordinary/special general meetings (EGM/SGM) of Hong Kong listed companies are exempted under Paragraph 11 if the meeting must be held within the specified period in order to comply with any law or regulation in Hong Kong or overseas, any Listing Rules, the Codes on Takeovers and Mergers and Share Buy-backs; the company's own memorandum or articles of association; or other regulatory instrument.
The Government’s and the Companies Registry’s websites also published frequently asked questions advising that AGMs as required under the Companies Ordinance are generally exempted under Paragraph 11.
Despite these “general” guidelines, it did not seem entirely clear if listed companies may rely on Paragraph 11 (before amendment) for holding their AGMs within the “specified period”. Listed companies with financial year ended on 31 December are required under the Listing Rules and (for HK-incorporated companies) the Companies Ordinance to hold their AGMs no later than 30 June 2020. It is doubtful whether their AGMs “must be held” within the specified period in order to comply with the Listing Rules and (if applicable) the Companies Ordinance as it should be possible for such companies to arrange postponement or adjournment of the meetings to a date beyond the specified period, yet still no later than the deadline of 30 June 2020.
The amended Paragraph 11 now reads: “Group gathering during any of the following meetings at which no food or drink is served and, in the case of a group gathering of more than 50 persons, measures are in place for separating them in different rooms or partitioned areas, each accommodating not more than 50 persons -
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(a)
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a meeting of a body that must be held within a specified period in order to comply with any Ordinance or other regulatory instrument that governs the operation of the body or its business;
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(b)
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a shareholders’ meeting of a company listed on a recognised stock market (as defined by section 1 of Part 1 of Schedule 1 to the Securities and Futures Ordinance (Cap. 571)) that is held in accordance with any Ordinance or other regulatory instrument that governs the operation of the company or its business”.
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This amendment is welcomed as it clarifies the position. It is now clear that all types of shareholders' meetings of listed companies (whether AGM or EGM/SGM) are exempted so long as the meeting meets the following conditions:
- it is held in accordance with any ordinance or regulatory instrument;
- no food or drink is served; and
- there are no more than 50 persons in a room or partitioned area.
Listed companies which are expecting to have their general meetings to be held within a period during which the public gathering ban is still effective should give due considerations on the measures to be taken to ensure that the number of persons in any particular room or partitioned area at any time would not exceed 50. In this regard, reference may be made to the suggestions made by the Hong Kong Institute of Chartered Secretaries on 6 May 2020.
Listed companies are also reminded to take all appropriate precautionary measures to ensure the safety of attendees in accordance with the guidance in the Joint Statement, as well as taking into account the suggestions made by the Hong Kong Institute of Chartered Secretaries on 31 March 2020.