AGMs for private companies

Is it necessary to hold AGMs for private companies (annual general meetings)? What are the provisions of the Companies Act (Act) and Regulations in this regard?

The details outlined herein must not be confused with the requirement for AGMs for private companies, which is a specific type of shareholders’ meeting and need only be held by a private company if so provided for in the MoI.

No provision however exists in the Act for private companies to hold AGMs, although it is not prohibited. It is recommended that such meetings only be called and the procedures followed to the extent that it is set out in the memorandum of incorporation (MoI) of the company.

If no provision for AGMs exists in the MoI, no such meetings need be held. In such a case the approval of the AFS by the board is sufficient.

Provisions of the MoI

You must familiarise yourself with the MoI of the company and act strictly following its provisions. You ignore these at your peril.

Documentation

In compliance with the provisions of the Act and the company’s MoI, the following documents need to be prepared and circulated:

1. Notice and agenda of a shareholders’ meeting

Section 62(1) provides that a notice and agenda of a shareholders meeting must be in writing and be circulated to all shareholders of the company on or before the Record Date.

The notice should include the name of the company, registered address, the date, time, and venue where it will be held as well as whether or not it is an on-site meeting only, or a hybrid on-site/electronic communication meeting. The provisions of the MoI in this regard are important, i.e. Section 63(2) provides that an electronic-only shareholders’ meeting may not be held if prohibited per the MoI.

The documentation must be circulated to shareholders before, but not later than the record date.

2. Record date of the meeting

The record date determines when the notice and agenda of the meeting should be circulated, i.e. the number of business days before the planned date of the meeting. Section 62(1)(b) provides for 10 business days in the case of a private company. Section 59(1) provides that the board may not determine a date that is earlier than prescribed in the Act, but the MoI may determine such a date.

Section 62(2A) provides that if a shareholders’ meeting is called with less notice than required, it may only proceed if all shareholders who may vote at such a meeting, are present in person and vote in favour of waiving the required minimum notice period.

3. Form of Proxy

Section 62(3)(e) requires that a statement to the effect that a shareholder entitled to attend and vote at a shareholders’ meeting, is entitled to appoint a proxy to do so on his behalf.

It is recommended that the Notice and Agenda of the meeting be accompanied by a form of proxy to be completed by a shareholder if he so wishes. This enables a shareholder to not only identify the person appointed as a proxy but also how he should vote in respect of each agenda item.

Procedures at an AGM

The Act provides for, or the MoI of the company may provide for a range of procedures to be followed at shareholders’ meetings.

4. Chairman of the meeting

The chairman of the board of directors usually chairs a shareholders’ meeting. He is entitled to establish the rules governing the conduct of the business at the meeting to the extent that MoI is silent thereon.

Each person attending a shareholders’ meeting must present reasonably satisfactory identification to the chairman per Section 63(1) before he may attend or present a proxy..

5. Quorum

Section 64(1) provides that the minimum number of shareholders to be present by proxy or in person shall be 25% of all the voting rights that may be exercised at an AGM.

Should a quorum not be achieved at a shareholders’ meeting within one hour of its scheduled start time, it is adjourned to the same date, time and venue seven days later.as provided for in Section 64(4).

6. Voting at an AGM

Section 63(4) provides that voting may be either on a show of hands or by polling. If at least 5 shareholders present in person or by proxy demand it, voting on any matter shall be by polling per Section 63(7).

7. Ordinary or Special Resolutions

Every agenda item is either to be voted on as an ordinary matter or a special resolution according to Section 65(1). This must be highlighted alongside each agenda item heading on the Notice and agenda.

8. Annual financial statements (AFS), directors and auditors reports

The AFS for the financial year is approved by the board of directors. Its important to note that the Act does not require the AFS to be approved by the shareholders in AGM.  The AFS and reports are thus tabled for noting only and the shareholders do not have the authority to amend or reject it. 

9. Election of directors

Section 68(1) provides that all directors are appointed by shareholders. The Act also does not provide for a term of office that a director may serve. If no such provision exists in the MoI, directors are not required to resign and shall serve for life, or until they resign, die or are voted off the board by the remaining directors.

The board is entitled in terms of Sections 70 and 68(3) to fill any vacancy till the next AGM should a director resign, die or is voted off the board during the year, Such director shall resign at the date of the AGM but may make himself available for re-election.

Should the MoI provide for director rotation, the matter must be taken up with the chairman prior to circulating the Notice of the meeting, as the details of directors who have to stand down but may make themselves available for re-election, must be dealt with in the Notice.

10. Directors’ remuneration

Section 66(8) and (9) provide for a company to remunerate its directors in the future, subject to it being voted on as a special resolution by shareholders. Note that the resolution must cover future periods and may not relate to past periods.

11. Re-appointment of Auditors

In the event that the company did appoint auditors in respect of the previous financial year, the shareholders are entitled to consider their re-appointment or to resolve to appoint new auditors.

12. Audit Committee

A board may appoint any number of committees, including an audit committee unless the MoI provides otherwise. The charter, terms, and other conditions applicable to each such committee shall be determined by the board.

Section 84(4)(c) provides that every public company and state-owned company shall appoint an audit committee, but not a private company.

Should a board resolve to appoint an audit committee, it shall comply with the provisions of Section 94. Most importantly, the audit committee shall comprise three directors of the company, none of whom may be involved in the day-to-day operations of the company.

13. Minutes of a shareholders’ meeting

The minutes of shareholders’ meetings need not be circulated to shareholders unless provided for in the MoI. It is however done from a practical point of view for shareholders’ meetings other than AGMs.

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