Inability to hold AGMs

Inability to hold AGMs

• 27 August 2020
• Accounting
• South African Accounting Academy

The season of AGMs is upon us. Section 61 of the Companies Act requires companies to hold Annual General Meetings (AGMs) for shareholders within certain stipulated time lines. Compliance with these timelines can be difficult given the lockdown restrictions like the ban of large gatherings to contain the spread of COVID-19. However, there is help. Companies can apply to the Companies Tribunal (the Tribunal) for extension of the timelines, online. This service is free of charge and is likely to take much shorter period than in normal courts. Applications can be submitted online through the case management system (CMS), by email or manually subject to strict compliance with the COVID-19 protocols.

AGMs are an integral part of company’s good governance and compliance. The Act introduced flexibility regarding the manner and form of shareholder meetings, and standards for the adoption of ordinary and special resolutions. AGMs amongst others, allow shareholders with voting rights vote on current issues, such as appointments to the company’s board of directors, executive compensation, dividend payments and selection of auditors.

The application to the Tribunal must indicate the basis of such application (show good cause). Upon consideration of the application the Tribunal can either grant or refuse such application.

It is important to note that failure by a Public Company to convene the AGM is a contravention of section 61 (7) (b) of the Act which a company can be held liable in terms of section 214 to a fine or to imprisonment for a period not exceeding 12 months or to both.

For submission of applications visit www.companiestribunal.org.za  or email [email protected]

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