Due to the outbreak of the Coronavirus Disease (“COVID-19”), the Republic of Cyprus, like many other countries, has declared a state of emergency and imposed a national lockdown in an attempt to contain the spread of COVID-19. Passenger flights have been banned, and the movements of people have been restricted to those considered to be absolutely necessary (i.e. getting to work, purchasing food, visiting the doctor, and helping those in need).
As this unprecedented situation continues to unfold, companies are having to adjust to a host of effects arising as a result of COVID-19. Many companies, especially Cyprus listed companies which are required to hold their annual general meeting (“AGM”) within four months following their financial year-end, have concerns on how they will be able to convene their upcoming AGM in view of the restrictive measures.
Whereas the AGM is an important opportunity for shareholders to come together and engage directly with the management, physical meetings may not be feasible given factors such as current travel and quarantine restrictions, a lack of suitable available venues etc. Even in cases where it is possible that physical meetings can be held, this is not advisable as there is a risk of spreading the disease. Consequently, companies should review their normal AGM arrangements and consider alternative ways to hold them. Some recommendations are considered below.
Meeting via electronic means
Cyprus companies are permitted under the Companies Law, Cap.113 (the “Law”) to conduct their general meetings through electronic means. In particular, the Law provides that a company listed in the regulated market can offer participation in the general meeting by the following means:
- Providing mechanisms for casting votes, whether before or during the meeting, and the mechanisms adopted shall not oblige the member to be physically present at the meeting and shall not oblige the member to appoint a proxy who shall be physically present at the meeting;
- Facilitating real-time transmission of the general meeting, or
- Arranging real-time two-way communication enabling members to address the general meeting from a remote location, the so called “hybrid” meeting.
In addition the general meeting of a company, including a company which is not listed in the regulated market, can be convened via teleconference or with any other means provided that the participants can hear and be heard during the meeting by all the other persons participating. That is, it is possible to hold a “virtual” meeting, one which is exclusively online without a corresponding physical meeting. It should be clarified that the persons participating in such a meeting via electronic means shall be regarded as present in the meeting and be counted for quorum purposes.
Before proceeding with the above, companies must ensure that such meetings are not explicitly prohibited by their articles of association. Moreover, it might be necessary for companies to engage a technology solution provider to support the technical part of the meeting and make sure that all technicalities provided by the Law will be met during the meeting. Guidance on how the shareholders will connect, speak, and vote at the relevant meeting may also need to be provided in the relevant AGM documentation.
Despite the fact that the abovementioned forms of meetings are not that common in practice so far, this might be an opportunity for companies to embrace technology and modernize their business model.
Encourage proxy submissions
In the event that holding the AGM via electronic means is not feasible, the companies may wish to encourage their shareholders to appoint a proxy rather than attend the meeting in person. Such recommendation may be communicated to the shareholders through the AGM notice, market announcement and/ or by an announcement in the company’s website. The shareholders can submit questions to the board of directors in advance of the meeting whether via online platform or a specified email address. One person may act as proxy holder for several shareholders who can, in turn, indicate to the proxy holder how to vote.
Delay, postponement or adjournment
Companies should also consider whether they should delay their AGM to a later date in the year, in the case that the notice of the meeting is yet to be circulated to the shareholders, or alternatively postpone or adjourn their AGM if the notice has already been circulated. In doing so, companies should seek professional legal advice to ensure that the above procedure is made in compliance with their articles of association and the Law. Otherwise, the company may be exposed to challenges that the AGM has been rescheduled for an improper purpose.
However, postponement might not constitute a viable option, since no one really knows how long the outbreak of the pandemic will last. It is important that meetings are still held so that the companies can continue with their normal business.
Furthermore, listed companies that are required under law to hold an AGM within a specific time period, as mentioned above, might find this option of limited value. It should be noted that the Cyprus Securities and Exchange Commission (“CYSEC”) has not implemented any legislative changes to extend any statutory deadlines that the companies are subject to. The European Securities and Markets Authority (“ESMA”) in its Public Statement dated 27 March 2020 with subject matter ‘Actions to mitigate the impact of COVID-19 on the EU financial markets regarding publication deadlines under the Transparency Directive’ highlights that issuers are expected to exercise their best efforts to prepare and publish their periodic information within the legislative deadlines. Nonetheless, ESMA expects national competent authorities during this specific period not to prioritize supervisory actions against issuers in respect of the upcoming deadlines set out in the Transparency Directive (“TD”) regarding:
- Annual financial reports referring to a year-end occurring on or after 31 December 2019 but before 1 April 2020 for a period of two months following the TD deadline; and
- Half-yearly financial reports referring to a reporting period ending on or after 31 December 2019 but before 1 April 2020 for a period of one month following the TD deadline.
ESMA further notes that where issuers reasonably anticipate that publication of their financial reports will be delayed beyond the deadline set out in national laws, they are expected to:
- Inform their national competent authorities of this;
- Inform the market of the delay,
- Inform the market of the reasons for such delay, and
- To the extent possible inform the market of the estimated publication date.
CYSEC has issued a circular on 31 March 2020 whereby the position of ESMA above is adopted.
On a similar note, the Department of Registrar of Companies and Official Receiver in Cyprus, in an attempt to support the companies affected by the restrictive measures undertaken to contain the spread of COVID-19, announced on 23 March 2020, among other measures, that no penalties for late filings of annual returns for the year 2020 shall be imposed until 28 January 2021.
Should you wish to discuss any issues regarding your company’s AGM or for any further information on this matter please contact Christos Kafouris or your usual contact at Elias Neocleous & Co. LLC.