AGM season is upon us, and this year, changes are to be expected with the new Company Act 2016 in place.
One of the issues that most companies have to deal with during the AGM is proxy voters. Proxies are people appointed by the shareholders to attend, participate, speak and vote on their behalf.
The Listing Requirements specify that an authorised nominee can appoint up to two proxies, while there is no limit to the number of proxies who can be appointed for an omnibus account.
The old Company Act 1965 and the new Act (2016) merely states that a member can appoint another person to act on their behalf at the AGM. There is no maximum limit specified and so some public-listed companies (PLCs) have limited the number of proxies to two. This is their interpretation of the Act, taking it to mean that “more than one”, is surely two.
However, as some companies are worried about the more vocal shareholders who may question the limit to the number of proxies, some PLCs have now decided to take a “friendly approach”.
Despite their constitution (this is what the Memorandum of Association and Articles of Association is now called) limiting the number of proxies that can be appointed, these companies have started to change their AGM notices to allow the appointment of proxies with no limit or restriction.
With this, one would assume that with more attendees at AGMs, we are likely to see an increase in the depth of questions for the board of the companies and their management teams.
However, the company secretaries are now grappling with a section in the Company Act, Section 334 which states that “a member of a company shall be entitled to appoint another person as his proxy to exercise all or any of his rights to attend, participate, speak and vote at a meeting of members of a company”.
Section 619(3) CA 2016 also states that the MAAA of an existing company in force and operative at the commencement of the Act, and the provisions of Table A under the Fourth Schedule of the Companies Act, 1965 if adopted as all of part of the articles of association of a company at the commencement of this Act, shall have effect made or adopted under this Act, unless otherwise resolved by the company. In simple English,
What all this means is that the old limit to the number of proxies still applies. Moreover, Section 32(2) CA2016 states that “the constitution of a company has no effect to the extent that it contravenes or is inconsistent with the provisions of this Act”.
At a recent AGM, a shareholder quoted Section 32(2) to say that the company was wrong to limit her rights to appoint an unlimited number of proxies, and that she should be allowed to appoint the number of proxies to the number of shares she holds, i.e. the one-share-one-vote policy.
Her contention was that she should be allowed to appoint more proxies. However, the view held was that if the Company Act 1965 has similar provisions and PLCs themselves could limit the number of proxies to two before the Company Act 2016 came into force, why make such a fuss now? Perhaps this particular shareholder was not well versed with the 1965 Act?
For us, the contention over the issue of proxy voters is not just to do with the number, but their actual role at the AGM. At certain AGMs, we have witnessed shareholders who have even appointed their domestic helpers as their proxies.
The domestic helper is standing in the queue with her passport, and alongside her is a minor – another proxy voter – holding her IC. The main purpose of these proxies’ attendance is not to vote, question and improve the dialogue at the AGMs, but to ensure that the shareholders maximise their benefits, i.e. in getting the free food, door gifts, food vouchers or department store vouchers.
We have also seen bogus shareholders trying to register using another person’s identification card (NRIC). Fortunately, the share registration desk was quick to pick this up and when they were questioned, they tried to make a fuss but fortunately the share registrar stuck the said NRIC into a biometric reader and asked for her thumb print. The bogus shareholder complied and of course it did not match. So she quietly left.
To make this shameful behaviour worse, we have seen proxy voters pushing and shoving each other just to get the free food and the vouchers. Once they have received their goodies, they are out of there. No vote, no questions; absolutely no interest in what the company is doing or what management is doing.
How can the wider investment community come together to increase all shareholders’ interest in the company and its activities? It is high time we remove the attention from the free giveaways at AGMs, and start educating shareholders about their actual responsibilities.
We were aghast that shareholders are willing to cheat to enter an AGM or fight for more proxies to be allowed entry at an AGM. Some more colourful shareholders even muttered law suits in order to allow more proxies to enter the general meeting.
All this over some food coupons and door gifts?
© CORSTON-SMITH ASSET MANAGEMENT SDN BHD 2014