An annual general meeting (AGM) is a meeting that comes to pass every year where every shareholder of that company gets together. The annual meeting involves the presentation of an annual report prepared by the company’s directors that has all the key information which shareholders are interested in as regards to the company’s performance and strategy.
In contrast to individual investors who hold fractionalized ownership rights, company shareholders have voting rights to vote on different issues. In most cases, there are those general meetings that will involve voting when the company you invest in has to appoint new persons who will be their directors, controlling executives or even be subjects of the amendments regarding their dividends, auditors and other organizational matters.
AGMs are highly effective because of the transparency they provide, the shareholders’ involvement, and the fact that they draw attention to coverability – a key issue for all company managers.
Content Outline
Annual General Meeting (AGM)
The Annual General Meeting (AGM) for shareholders is the legal requirement for the company to carry out the process of financial statement distribution, and results of operation or business strategy discussion.
A company incorporated in Hong Kong has to hold its annual general meeting of shareholders much like shares in other mature jurisdictions. The new Companies Ordinance requires that each financial year the company is to be held an annual general meeting in Hong Kong.
What is the objective of Annual General Meetings (AGMs)?
The main goal of an annual meeting is to gather all important stakeholders to discuss:The main goal of an annual meeting is to gather all important stakeholders to discuss:
- Business performance
- Strategy
- Financial reports
- The board should be renewed every now and then (We might have to work on making new board members/executives time to time).
- Compensation plans and dividends
AGM must be held within 9 months of the reference period that ends the accounting period. This is when a company is limited by guarantee which is not a subsidiary of a public company or a private one that is not a public company.
On another hand, all other firms apart from the one we have in mind must hold an AGM within 6 months after their accounting reference period has ended.
Remember that copies of all required documents should be sent to all of the required members no later than the day before the AGM. Such documents include financial statements, auditor’s report, and so forth.
Are there any exceptions to Annual General Meetings (AGMs)?
In such instances, the obligation for conducting a general meeting may be waived. The new Companies Ordinance has laid down the conditions as follows:
- A single-member company may have annual general Meeting. The resolution may be written or e-mailed depending on the whether director and shareholders are present or not and all the members who are liable to vote are present in the meeting (and are able to vote).
- An idle company is not mandated to convene an AGM through the rule of securities act.
- Therefore as a company, they would only be required to conduct the AGM if items needing to be resolved aren’t done so beforehand via written resolution.
- If instead opting out of an AGM, the board of directors will prepare a document that would have been presented at the general meeting, and each shareholder will be sent a copy of the document at least one day before the date of the motion.
Take note that unlike a public company that is legally bound to arrange for an annual general meeting in Hong Kong, a private company has the option to do away with this requirement. The authority to issue dispensations will lie with AGM and it is done by either a written resolution or a resolution passed at the general meeting with the participation of all the stakeholders.
A Hong Kong company does not have to organize an AGM after a resolution has been passed during the year to which the resolution relates.
What is Proxy appointment?
A proxy term represents a person who attends an annual general meeting of the company and represents the interest of the member of the company.
All members have the right to appoint a proxy, including the members of a company limited by guarantee that is the only member entitled to appoint proxies in the event that the company’s Articles grant such rights to it.
What are the duties and obligations of a proxy?
The Companies Ordinance introduces new regulations concerning the proxy appointment process:
- The appointment of a proxy, the power of representation, is a right for any company residing in Hong Kong.
- The company whose assets are limited by guarantee subject to its articles may, as a rule, not allow a proxy to be passed on to anyone other than the member of the company.
- Multiple persons can be represented under the powers of attorneys if the company has a share capital subject to the law.
- Under Hong Kong laws, there should be notice of at least a meeting of proxies for any time when a proxy voting is required.
- Appointing and terminating a proxy and informing a company members is through electronic means, as the law stipulates.
- In order for the proxy of the member to correctly express the share’s instructions, resolution by resolution, an instrument must be issued by the company to the proxy.
- A company’s Articles may allow the proxies or members of the company to exercise the additional rights.
Conducting Annual General Meetings (AGMs)
Now we are going to talk about AGM (Annual General Meeting) and to explain how it will flow, what will be on the agenda, etc. That is a key aspect once you start your own business in Hong Kong.
What elements should be included in an AGM?
Typically, an agenda includes the following components:
- Welcome
- Review and approval of the previous Annual General Meeting (AGM) minutes
- Presentation of the President’s report
- Presentation of the CEO’s report
- Financial reports presentation
- Amendments to the constitution (if any)
- Elections and voting
- Discussions on life memberships
- Appointment of the auditor for the next financial year.
In general agenda which covers the business is considered in few cases. However, there could be a way that the company uses it to promote conversation between the people present in the meeting.
AGM agendas are frequently very short since, besides the elections, no new office positions are usually being appointed. It is because of that it is good to think about having a speaker speak on a subject of interest. The person should be able to talk and provide governance as well as marketing and strategic planning insights.
What key considerations should be noted?
While the hope for government legislation to extend the current statutory deadlines for holding an AGM, as well as laying accounts and reports before stakeholders, remains unfulfilled, it is imperative for all private companies to take the following into consideration:
- Comply with the government instructions and advice. The government ruling could change from day to day and they will be crucial if the question of hold or not hold an AGM will arise.
- Communicate properly with shareholders. Post the message and let shareholders know that they need to logon to the website for any AGM changes. Evaluate if you are going to make your announcement on different platforms or send out emails to the clients in your database. Inform people about the alterations immediately. This will ensure that people know about the changes whenever they occur.
- Accelerate the repatriation of proxies. Create a paragraph about the essay given below. In conclusion, the impact of international trade agreements on the environment requires careful consideration and balanced approaches. While these agreements may have positive implications such as promoting innovation and sustainable practices, they also pose risks to vulnerable ecosystems and communities. To mitigate these risks, there is a need for stronger environmental clauses in trade agreements. This Encourage shareholders to cast their vote early by the giving them a proxy which they can use to vote via the internet as soon as they can before the meeting.
- Poll voting. Call for a poll to vote on resolutions so voters can be sure that their votes are made properly.
- Questions. Give them a chance to ask questions beforehand (either through writing or electronic means). Through this way, people who couldn’t attend will be given an opportunity to ask questions that they wish to be answered during the AGM.
- Live-streaming. How about live-streaming the meeting as it would grant all shareholders an opportunity to view and hear the meeting proceedings while at the comfort of their homes?
- Backup location. It must be decided if the AGM be held in a different place in case the venue for the event is not available.
- Logistics. In case an organization intends to hold a physical AGM, it would be prudent for it to visit the actual venue to make sure all conditions are met and arrangements for the meeting can be completed.
Annual General Meetings (AGMs) amidst the COVID-19 pandemic
Even after COVID is the issue which the world is still fighting at the moment. Presented with the consequences of the pandemic, companies need to figure out new strategies to not only do what they normally would but also do that with less people.
The AGMs offer the shareholders the chance to get physically present, to raise issues or ask questions and engage directly with managers, but these had to change in a virtual environment.
The firms have to come up with new ways of holding the AGMs because it is not possible for big crowds or traveling now. The other thing is that they should adopt a precautionary action.
Companies that have mailed AGM notices should send around messages to shareholders inviting them to their websites for any AGM announcements. If shareholders are absent from the meeting in person, the companies should encourage the shareholders to submit in writing the proxy votes on written resolutions that are put forward in the meeting.
In several of the jurisdictions, including Hong Kong, a public company is also obliged to conduct AGMs within a specific period of time, which is set to be the fiscal year following the end of the fiscal year.
Is it possible to postpone or delay an AGM?
Many AGMs are being held before the six months’ deadline but some may give the thought of moving the date a bit earlier if they can. Obviously, this should be done while respecting the legal framework and owning up to its responsibilities.
Giving the flexibility of having an AGM in the provided set period, delaying the meeting will be just a short term option if the difficulties with holding AGMs during the time of COVID-19 make it impossible to have AGMs in the following period.
Similar problems will be taking place if the adjournment is stored in an AGM. Shareholders’ meeting adjournment may be stated in company’s constitutional documents but it is also possible that the Meeting’s Chair can adjourn the meeting under certain circumstances.
In the second scenario, which is adjournment to another day, the reason could be justification of the opening of a physical meeting. Before the meeting can be postponed to the next date (if the necessary quorum conditions are met), the meeting must be adjourned.
This will be followed by the provisions for either postponing or suspending the meeting. The resolution will be written as the suggested agenda for the forthcoming AGM. One of the most important resolutions that are frequently passed at the AGMs end for example, share allocation and repurchase specialists are drafted in such a way that they run out by the next AGM or at their long-stop date.
Consequently, we can adjourn the AGM until a later date. However, not to mention the occurrence of other crucial problems that can happen in different delaying circumstances.
Is it feasible to conduct AGMs virtually?
In short, yes.
In reality, conducting an AGM through virtual means is just as good as the real ones in some parts of the world. On the other hand, as compared to other jurisdictions, this is once in a blue moon.
In some areas, there might also be a legal issue proving to be an obstacle of holding an online meeting that would comply with all the specific requirements mentioned in the law for the events. Furthermore, the direction from proxy consultants and institutional investors in some countries in the world are not in line with virtual conferences.
It is also for these companies that this is not the easiest way to carry out their AGM and possibly have a virtual one as the guidance can not be changed easily.
Is it possible to have hybrid AGMs?
The hybrid AGM must be covered by the secretariat with due regard to legal regulations which may differ from country to country. The ones that have such arrangements, like Hong Kong, may try and move to a mixed up 2021 AGM just to reduce the number of people that are physically present in a single location.
But this is just the cost of working together with a technology provider and adapting the whole process to a set of electronic forms.
How FastLane Group Can Help?
FastLane Group provides comprehensive support to businesses in Hong Kong, including assistance with hosting AGMs, dispensation participation, agenda setting, and document preparation. Our team of experts simplifies accounting and bookkeeping, specializing in all aspects of company incorporation and ownership in Hong Kong. Rest assured, you can rely on us whenever you require assistance. Contact us now.
Frequently Answered Questions
Certainly. Pursuant to section 584 of the new Companies Ordinance (Cap. 622), companies can hold general meetings at multiple locations using any technology that enables members not physically present to listen, speak, and vote, provided there are no contrary provisions in the company’s articles.
Please note that to accommodate local companies conducting fully virtual or hybrid general meetings, relevant sections in the new Companies Ordinance have been revised. Specifically, section 584 was modified by the Companies (Amendment) Ordinance 2023, which becomes effective on April 28, 2023. For more information, please consult the Frequently Asked Questions accompanying the Companies (Amendment) Ordinance 2023.
Under the new Companies Ordinance (Cap. 622), a company must hold an Annual General Meeting (AGM) for each financial year rather than each calendar year. However, certain circumstances allow a company to avoid holding an AGM:
- Written Resolution: According to section 612(1), a company is not obliged to hold an AGM if all the necessary actions can be accomplished via a written resolution and the required documents are provided to every member by the circulation date of the written resolution.
- Single Member Company: Section 612(2)(a) states that a single member company is not required to conduct an AGM.
- Dispensing with AGMs: Section 613 permits a company to waive the need for AGMs by passing a written resolution or a resolution at a general meeting supported by all members.
- Dormant Company: Section 611 exempts dormant companies from the obligation to hold AGMs.
A single member company, as per section 612(2)(a) of the new CO, is not obligated to conduct an AGM. There is no requirement for any resolution to be passed to waive the necessity of holding an AGM.
If a company is not required to conduct an AGM for a financial year, the auditor serving at the end of their appointment period is automatically considered reappointed for the next financial year (as per section 403(1)). Additionally, the company is mandated to furnish a copy of the financial year’s reporting documents to each member (as per section 430(3)).
However, the new Companies Ordinance (Cap. 622) does not provide specific guidelines for handling the distribution of final dividends or the re-election of directors in instances where a company is not obligated to hold an AGM under section 612(2)(a) or has opted out of holding an AGM under sections 612(2)(b) and 613. In such cases, the company may refer to any relevant provisions outlined in its articles of association. For companies utilizing the model articles for private companies, guidance can be found in Schedule 2 of the Companies (Model Articles) Notice (Cap. 622H). If necessary, the directors can convene a general meeting to address these matters, or a written resolution can be passed.
Please refer to Q2 above. According to sections 622(1)(g) and (2), a company is obligated to submit a copy of the resolution passed under section 613 to the Registrar of Companies for registration within 15 days after its passage.
A company can only utilize sections 612(2)(b) and 613 to forgo the necessity of holding an AGM for a company’s financial year that begins on or after the implementation of the new CO on March 3, 2014. Similarly, under section 612(2)(a) of the new CO, a single member company is excused from holding an AGM only for a company’s financial year that starts on or after March 3, 2014. For more information, please refer to sections 78(1) and 107(2) of Schedule 11.
- The provisions in sections 612(2) and 613 of the Companies Ordinance that allow dispensing with AGMs are permissive and do not override a company’s articles of association.
- If a company wants to utilize sections 612(2) and 613 to not hold an AGM, but their articles state an AGM must be held or prohibit dispensing with AGMs, the company would need to amend their articles first.
- Because company articles can differ, each company should seek professional legal advice to determine if an amendment to their particular articles is required before dispensing with an AGM under sections 612(2) and 613.
- The goal is to ensure the company does not breach its own articles by dispensing with an AGM without amending the articles first, if the current articles require an AGM.
A company’s AGM must be held within a specified period for each financial year:
For a company limited by guarantee or a private company not a subsidiary of a public company: 9 months after the end of its accounting reference period.
For any other company: 6 months after the end of its accounting reference period.
(Sections 610(1) and (4))
If the accounting reference period is the company’s first and lasts longer than 12 months:
For a company limited by guarantee or a private company not a subsidiary of a public company: 9 months after the first anniversary of the company’s incorporation, or 3 months after the end of that accounting reference period, whichever is later.
For any other company: 6 months after the first anniversary of the company’s incorporation, or 3 months after the end of that accounting reference period, whichever is later.
(Sections 610(2) and (4))
For an AGM, the notice period is a minimum of 21 days. In other cases, the notice period is a minimum of 14 days for a limited company and a minimum of 7 days for an unlimited company (section 571(1)).
If the company’s articles mandate a longer notice period, the meeting must be convened with the duration of that longer notice period (section 571(2)).
For an AGM, the meeting can be convened with a notice period shorter than 21 days (as per section 571(1)(a)) if all members eligible to attend and vote agree (section 571(3)(a)). In the case of any other meeting, the notice period can be shorter than 14 days (for a limited company) or 7 days (for an unlimited company), as appropriate (as per section 571(1)(b)), if a majority of members eligible to attend and vote, representing at least 95% of the total voting rights, consent (section 571(3)(b)).
Yes. A general meeting of the company is regarded as having been duly called if: in the case of an AGM, a period of notice shorter than 21 days is so agreed by all the members entitled to attend and vote at the meeting (section 571(3)(a)); and, in the case of any other meeting, the shorter period of notice is so agreed by a majority in number of the members having the right to attend and vote at the meeting, being a majority together representing at least 95% of the total voting rights of all members (section 571(3)(b)).
Subdivision 2 of Division 1 of Part 12 in the new Companies Ordinance (Cap. 622) details the processes for proposing, approving, and documenting written resolutions. Here are the primary provisions:
- Circulation Requirement: A company must distribute a proposed written resolution to all members with voting rights upon receiving requests from members representing at least 5% of total voting rights, or a lower percentage specified in the company’s articles (section 552).
- Statement Request: A member proposing a written resolution can ask the company to distribute a statement of up to 1000 words on the resolution’s topic (section 551).
- Statement Discretion: The company is not obligated to distribute the statement if the Court determines the right is being abused or used for unnecessary defamation (section 554).
- Circulation Methods: Copies may be distributed in hard copy or electronic form, or made available on a website (section 553). Members can agree to the proposed resolution and return it to the company in hard copy or electronic form (section 556).
- Agreement Period: Members have 28 days, or a period specified in the company’s articles, to agree to the proposed written resolution (section 558).
- Notification: If a resolution is passed as a written resolution, the company must notify all members and the auditor within 15 days (section 559).
- Article Alternatives: A company’s articles may outline different procedures for passing a resolution without a meeting, as long as all eligible members agree to it (section 561).
If the company’s articles contain provisions governing the passing of a resolution without a meeting, and if these provisions adhere to sections 561(2) and (3), the company is permitted to pass a resolution in accordance with those article provisions. The statutory procedures outlined in Subdivision 2 of Division 1 of Part 12 do not impact these article provisions.
However, please note that section 561(1) states that any article provision rendering a resolution unable to be proposed and passed as a written resolution is void. If a written resolution is properly proposed by the directors or a member in accordance with section 549, the company must adhere to all statutory procedures.
Section 549 stipulates that either the directors or a member of a company may propose a resolution to be passed as a written resolution.
If the resolution proposed as a written resolution is not suggested by the directors or a member of the company pursuant to section 549, the company is not compelled to distribute the resolution under section 550 or 552.
Additionally, if the company’s articles do not specify a percentage lower than 5% of the total voting rights for the circulation of a resolution proposed as a written resolution, and if the company has not received requests for circulation of the resolution from members representing not less than 5% of the total voting rights of all members eligible to vote on the resolution, the company is not required to distribute the resolution under section 552.
In such cases, the necessity to circulate the resolution proposed as a written resolution under section 553 does not apply, as section 553 is relevant only when a company is obliged under section 550 or 552 to distribute a resolution proposed as a written resolution.
In the old Companies Ordinance (Cap. 32) (“the old Ordinance”), members of a company who meet certain criteria could request the company to distribute a proposed resolution for the upcoming AGM, or a statement of up to 1000 words regarding any proposed resolution or business to be addressed at a general meeting. The company was not obligated to distribute a statement if the Court found that the right was being misused to gain unnecessary publicity for defamatory content. The members making the request were responsible for the costs of distribution, unless the company decided otherwise.
In the new Companies Ordinance (Cap. 622), sections 582, 615, and 616 stipulate that the costs of distributing members’ proposed resolutions at an AGM and members’ statements related to proposed resolutions or business to be discussed at the AGM shall be covered by the company. This is on the condition that the required number of requests for distributing the proposed resolution are received by the company no later than 6 weeks before the AGM, or before the time at which notice of the meeting is given if later. For the distribution of a statement, the necessary number of requests for distribution of the statement must be received by the company in time to be sent along with the notice of the meeting. The criteria for not requiring the distribution of members’ statements has also changed. Now, if the Court finds that there is an abuse of the right to require distribution, or that such right is being used to obtain unnecessary publicity for defamatory content, distribution may not be required.
The requirement for requesting a poll under the new Companies Ordinance (Cap. 622) is met if either 5 members with voting rights at the meeting or a member or members representing 5% of the total voting rights of all members with voting rights at the meeting make the demand (section 591).
The updated regulations for proxy appointments under the new Companies Ordinance (Cap. 622) are as follows:
The right to nominate another individual as a proxy is applicable to all companies (section 596(1)).
A company limited by guarantee can, through its articles, limit proxies to company members only (section 596(2)).
If a company has a share capital, it can appoint multiple proxies (section 596(3)).
A notice period is specified for proxy appointments when a poll is requested (section 598).
Proxy appointments and terminations can be communicated to the company electronically (section 599).
An instrument of proxy issued by a company must enable the member to instruct the proxy to vote for or against each resolution or to use the proxy’s discretion if no instructions are provided (section 601).
A company’s articles can grant its members or proxies more extensive rights than those outlined in the new Companies Ordinance (section 608).
For records of former members, the prescribed duration is 10 years from the date when the individual ceased to be a member of the company (section 627(5)). Regarding records of resolutions and meetings of members and written records of decisions of a single member company, the duration is no less than 10 years from the date of the resolution, meeting, or decision (section 618(2)).
Changes to company registers in Hong Kong:
- Separate registers: Companies can now maintain separate registers for directors and company secretaries. (Previously, they were combined.)
- Location: These registers can be kept at the company’s registered office or any other location within Hong Kong, as specified by regulations.
- Shadow directors: Information about shadow directors no longer needs to be included in the director register.
- Company secretary address: For individual company secretaries, the register requires their “correspondence address” instead of their “usual residential address.”
Note: Transitional arrangements for these changes can be found in specific sections of the Companies Ordinance.
The old system for keeping branch registers outside Hong Kong has been replaced with a simpler notification system:
- Companies no longer need a license to keep a branch register.
- Instead, they must notify the Registrar of Companies within 15 days:
- When a branch register is opened (including its address).
- If the address changes.
- If the register is discontinued.
Location of the register:
- Companies can now keep the branch register anywhere outside Hong Kong, not just near their business location.
- This applies only to companies with shares and if allowed by their articles.
Updating the main register:
- Companies must send a copy of any new entry in the branch register to their registered office within 15 days.
- They must also update a duplicate register kept at the same location as their main register of members.
Discontinuing the register:
- Entries from a discontinued branch register must be transferred to another branch register in the same location or to the company’s main register of members.
The Companies Records (Inspection and Provision of Copies) Regulation (CR(IPC) Reg) is a set of rules established under the new Companies Ordinance (CO). This regulation outlines how companies in Hong Kong must manage their records, specifically in three key areas:
- Where records are kept: Companies have flexibility in choosing where to store their records, either at their registered office or at another location designated by the CR(IPC) Reg.
- Accessing records for inspection: Anyone with the right to inspect company records can do so during business hours, with reasonable restrictions potentially set by the company.
- Obtaining copies of records: Companies are obligated to provide copies of their records upon request, within a set timeframe, and for a specific fee.
In essence, the CR(IPC) Reg ensures transparency and accountability by regulating how companies manage and share important information.
While the CR(IPC) Reg deals with company record keeping, it’s selective and only applies to specific types outlined in the new Companies Ordinance (CO).
Think of it like a shopping list:
- The CR(IPC) Reg is the list.
- The new CO defines which records are on the list (e.g., register of members, directors, and debenture holders).
- Records like accounting records (sections 373-378 of the new CO) are not on the list, so the CR(IPC) Reg doesn’t apply to them.
This clarifies that the CR(IPC) Reg focuses on specific records, not everything a company keeps.
Previously, specific records, like the register of members, had to be kept at either the registered office or the place they were created.
However, the CR(IPC) Reg introduces more flexibility. It allows companies in Hong Kong to keep specific types of company records (as defined in the new CO) at any location within Hong Kong, as long as those types of records can be kept at a place prescribed by the CO itself (sections 356 to 657).This means companies now have more options for storing specific types of records, potentially offering greater convenience and efficiency.
The information clarifies that the inspection process for company records remains largely unchanged under the new regime compared to the old one. Here’s a simplified explanation:
- Who can inspect? As before, only individuals entitled under specific provisions of the new Companies Ordinance (CO) can inspect company records.
- When can they inspect? Inspection is still possible during business hours, subject to any reasonable restrictions a company might set (as long as at least two hours per day are available for inspection).
- What can they inspect? The request must specify the type of record and the date or period desired.
- Making copies: Individuals can still make copies of the records they are inspecting.
In essence, the CR(IPC) Reg maintains the core structure of the existing inspection system while adding some specific requirements regarding the request format. This ensures clarity and consistency in the process.
The inspection fee, typically applicable when the requestor is not a member of the company, has been unified to $50, as opposed to the previous range of $1 to $2.
The company is prohibited from charging a fee higher than the standard amount, but it is within its rights to levy a fee lower than the standard amount or no fee at all.
Indeed, there have been notable adjustments concerning the provision of copies of company records, particularly in terms of response time and applicable fees. In all instances, the lead time for responding to a request has been standardized to 10 business days (excluding general holidays and days of inclement weather), compared to the previous range of 7 to 20 calendar days stipulated in the old Ordinance.
Regarding the fees, there has been a change in the calculation basis. For registers, the fees are now determined based on the number of entries (starting at $5 for every 10 entries within the first 2,000 entries requested, followed by $1 for every additional 100 entries). Conversely, for records other than registers, the fees are based on the number of pages ($5 per page), as opposed to the previous calculation method which used the number of words.
The company is not allowed to impose a fee higher than the standard amount, but it may charge a fee lower than the standard amount or waive the fee entirely.