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AGM gatecrashers

29 August 2015

A company’s AGM, is a routine yet important event for all shareholders. A statute such as Malaysia’s Companies Act provides that the company must hold an AGM every calendar year, and not more than 15 months after the last such meeting, whichever is earlier.

There are clear rules as to who can and cannot attend an AGM. The AGM is a meeting of shareholders and a company’s management, and both are there to review what is called “ordinary business”. Such business includes going through the company’s accounts at the end of the most recent financial year, the election of directors, the appointment of and the fixing of remuneration for, auditors and the declaring of a dividend.

Anything beyond such perennial considerations is termed “special business”.

Who, then, is welcome at an AGM? First, its members, that is, its shareholders. They can attend it personally – or by proxy. A shareholder who is an individual can appoint one proxy, whereas if a shareholder is a corporate entity, that entity can either choose to appoint an individual as its proxy, or as its corporate representative.

Whether or not a shareholder is a person or a company, the proxy appointed can only act as such for the specific AGM. A corporate representative, however, can stand in for the shareholder at all of its respective AGMs; if the terms of its appointment are that wide.

A corporate representative appointed to safeguard the interests of a corporate shareholder at AGMs has the full power and discretion to vote on a resolution as he sees fit. Such a representative is as good as an individual shareholder at an AGM and, in some cases, has much more flexibility than the latter. For example, a corporate shareholder’s certificate of appointment of a corporate representative does not state how the representative has been directed to vote. This is in contrast to an individual shareholder’s proxy, who is often directed via his proxy form to vote only according to how the appointing shareholder has directed him to do so.

What this means is that only a corporate shareholder and his corporate representative are privy to the special or specific instructions between them. In this way, a company will not be able to get a feel in advance of how a corporate representative might vote at an AGM.

Since proxies and corporate representatives step into the shoes of the actual shareholders, they have the same rights as the shareholders themselves. This is because Bursa Malaysia has in recent years relaxed its listing rules so that proxies may ask questions at AGMs.

This was not the case previously. Before Bursa’s amendments, proxies had no right to ask questions or vote by a show of hands at AGMs. They could at most join in the demand for a poll, and vote during a poll. But now, Bursa has put them on a same footing as shareholders.

So much for who can and cannot attend an AGM. Now, we examine what actually happens at an AGM. First, let us look at what happens when people register to attend it.

When two people, both named as corporate representatives, turn up to register, the share registrar will ask them who between them will be the representative at the AGM.

The registrar will capture the name in the system and then issue the poll form to the identified corporate representative.

After this, the second representative will not be able to attend the meeting, and according to the rules, will have to wait outside the AGM meeting room.

Most companies, however, do not want to appear unfriendly and so would allow the second representative to attend the AGM as a guest. The share registrar will then inform this representative that he will be allowed into the meeting, but must only observe, and not take any part, in it.

Some companies have cordoned off a space within the AGM area for such guests. This practice also helps the AGM chairman identify these guests and differentiate them from members at the meeting. It used to be that even proxies were not allowed to sit together with shareholders. Many “mom and pop” proxies did not take well to such segregation, and insisted on sitting together.

This was how wristbands came into play. With this system to tell attendees apart, the share registrar would check the identification number of a shareholder to verify that he is a shareholder and so may enter the AGM room.

The registrar would then give the verified shareholder a coloured wristband which the latter has to wear throughout the AGM.

The procedure is slightly different for a corporate representative. The share registrar would have received a letter on the appointment of the corporate representative ahead of the AGM.

Once the corporate representative arrives, the share registrar would check the corporate representative’s name against that in the letter.

The registrar would then give the representative a wristband, in a colour similar to that sported by shareholders or their proxies.

Official rules

Such are the official rules for entry into AGMs. Interestingly, we have been told that at least one company required members, proxies and corporate representatives to hold up different coloured placards whenever they wanted to speak or vote by a show of hands.

However creative these waistbands and placards might be, they all still smacked of segregation and so were never popular.

The general disdain for such overt segregation has led to complications that can interrupt the flow at AGMs in a few ways.

For example, recently, we have noticed an increase in the relaxing of the rules of entry by some registrars.

The share registrars have been admitting more than one corporate representative; this is after a corporate shareholder sends them a letter listing more than 10 potential corporate representatives for an AGM.

The naming of so many potential representatives is obviously a way to get around the packed and sometimes uncertain work schedules of the corporate shareholder’s staff members.

We have no issue with this, but we do question the wisdom of share registrars admitting more than one corporate representative into an AGM.

In some cases, such non-registered corporate representatives were allowed to ask the company’s management questions during the AGM.

Most directors who are taking questions from the floor do assume, in the heat of the moment, that everyone asking questions is entitled to do so.

In one extreme case, we overheard one corporate representative trying to coerce a share registrar into admitting a fellow corporate representative without the latter even having to sign the attendance sheet.

Brazen flouting

The reason for such a brazen flouting of the rules of entry was very weak, that is, the corporate representative was at the wrong end of the ballroom and it would have been inconvenient for him to walk to the proper entrance and sign the sheet!

In another instance, there were three corporate representatives of the same corporate shareholder at one AGM. All three fired questions at management, even though two among them were only allowed into the AGM as “guests”. One wouldn’t have described them as guests due to their aggressive and incessant grilling of the directors.

One has to ask: Why are share registrars letting all this happen? Why are they being so blasé about the rules of entry?

Company directors should always be very mindful of who are present at their AGMs, as serious business discussions do take place.

The share registrar should inform the company secretary beforehand how many corporate representatives to expect per corporate shareholder.

The registrar should also alert company directors to these representatives, and identify them as either guests, observers or multiple corporate representatives, because each of these individuals have different rights, or rather lack thereof, at AGMs.

Above all, everything that is discussed within an AGM is supposed to be private and confidential among a company’s shareholders, so it simply will not do for people who should not be in an AGM to listen in or participate in such privy discussions.

If shareholders and share registrars alike do not have proper regard for AGM rules, then they will have to risk some rather ugly scenarios which may emerge. Not only does this soak up time which the shareholders could have spent better on more pressing company matters, but it also makes a mockery of the integrity of the rules that are supposed to govern the processes of AGMs.




© CORSTON-SMITH ASSET MANAGEMENT SDN BHD 2014