Gazetted on 27 January 2023, the Companies (Amendment) Ordinance 2023 (“Amendment Ordinance”) will come into force on 28 April 2023, which provides for the holding of completely virtual or hybrid general meetings by companies incorporated in Hong Kong.
Under the current legislation, there is a degree of ambiguity surrounding the permissibility of virtual-only or hybrid general meetings. In the absence of any express provision catering for these modes of holding general meetings, the Amendment Ordinance seeks to remedy this by closing the “gap” between legislation and practice.
In contrast to the legislative stance towards companies incorporated under the Companies Ordinance (Cap. 622), the position on the holding of virtual-only general meetings by publicly listed companies in Hong Kong – incorporated locally or elsewhere – is clearer and more certain. Under the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited, no restrictions are placed on the mode of holding general meetings. In addition, due to earlier pandemic-induced constraints on social interactions, rendering it difficult to conduct in-person general meetings, the Hong Kong Stock Exchange confirmed last year that listed companies could conduct fully virtual meetings, subject to any restrictions imposed by their articles of association and relevant regulations.
This article addresses the key changes as set out in the Amendment Ordinance and provides some practical tips to help you navigate certain important aspects relating to its implementation.
Table of Contents
Background
The Companies Ordinance provides that a company must hold an annual general meeting within the prescribed timeframe. Under section 610 of the Companies Ordinance, a private company or a company limited by guarantee is obligated to hold an annual general meeting within nine months after its accounting period ends. For other types of companies, the stipulated period is six months following the end of their respective accounting periods. Ad hoc general meetings in addition to the annual general meeting can be held as and when necessary.
Currently, while section 584 of the Companies Ordinance provides that a general meeting can take place at two or more locations using technology to enable members who are not physically present at the same venue to communicate effectively and vote at the meeting –
thereby effectively implying that hybrid meetings are allowed – the position on fully virtual attendance is less clear. It is noteworthy that no explicit mention is made of alternative modes of holding general meetings in the Companies Ordinance despite how technology has advanced by leaps and bounds, reshaping certain corporate governance practices.
The Amendment Ordinance, therefore, represents a legislative update that is long overdue, given that the Companies Ordinance in its current form has hitherto not been refined to accommodate the profound changes brought about by digitalisation. The fundamental purpose of the Amendment Ordinance is to provide companies with a higher level of flexibility in deciding the mode by which they wish to convene their general meetings, namely:
- At physical locations;
- As fully virtual general meetings, dispensing with the need for members to be physically present at certain venues; or
- In a hybrid format of in-person and virtual attendance.
According to the Company Registry External Circular No. 1 / 2023, the Amendment Ordinance “seeks to modernise the Companies Ordinance and the Companies (Model Articles) Notice (Cap. 622H) (“Model Articles”) to expressly cater” for the above-mentioned scenarios.
What are the key amendments?
Newly inserted definition of “virtual meeting technology”
A definition of “virtual meeting technology” has been added to section 547(1) of the Companies Ordinance, which refers to technology that enables a person to listen, speak and vote at a meeting without being physically present.
Newly added section titled “Mode of holding general meeting”
The new section 583A of the Companies Ordinance expressly provides for the different permissible modes of holding a general meeting. It states:
- A company may hold a general meeting –
- at a physical venue;
- by using virtual meeting technology; or
- both at a physical venue and by using virtual meeting technology.
The above is, however, subject to the following qualification: where a company’s articles of association contain an express provision to the contrary, that is, one that precludes the use of virtual meeting technology, or stipulates that a general meeting be held solely at a physical location, the company shall not be permitted to use virtual meeting technology to conduct general meetings.
Requirements for the notice of a general meeting
Section 576(1) of the Companies Ordinance has been revised to incorporate the additional content requirements for the notice of a general meeting, which shall now include the physical venue of the meeting or the virtual meeting technology to be used for holding the meeting, or both in the case of hybrid meetings. The main venue as well as any other venue(s) must be specified in the notice of a general meeting, where a company holds a general meeting at two or more physical locations.
In addition, pursuant to the amended section 573(2), if a company gives notice of a general meeting on its website, the notice shall include, in addition to the date, time and nature of the meeting, the physical venue of the meeting or the virtual meeting technology to be used for holding the meeting, or both in the case of hybrid meetings.
Requirements for general meetings held at two or more physical venues
According to the amended section 584(1) of the Companies Ordinance, where a general meeting is held at two or more physical locations simultaneously, regardless of whether it is also conducted via the virtual meeting technology as prescribed in the notice of the meeting, the company must use any suitable technology to facilitate effective communication between members who are not physically present at the same venue, and which enables members to vote at the meeting.
Members attending virtually are to be deemed present
Under the new section 585(4A) of the Companies Ordinance, a person attending a general meeting using the virtual meeting technology, as provided for in the notice of the meeting, is to be deemed present for the purpose of ascertaining whether the quorum requirements, i.e., the minimum level of attendance, for general meetings are satisfied.
What practical issues should you consider?
Do you need to amend your company’s articles of association?
In addition to being governed by the provisions contained in the Companies Ordinance as well as the Model Articles, the way in which general meetings are held is dictated by the provisions of the company’s own articles of association.
Since the alternative modes of holding general meetings are now expressly provided for in the Amendment Ordinance, the key implication – or indeed benefit – is that you will (most likely) no longer need to amend your Hong Kong company’s articles of association to provide for the holding of virtual-only or hybrid general meetings.
This notwithstanding, you are urged to conduct a detailed review of your company’s articles of association to ensure that there are no provisions that in some way inhibit or preclude the above alternative modes of attendance. It should be noted that, according to official guidance issued by the Companies Registry and section 583A(3) of the Companies Ordinance, where a company’s existing articles of association make reference to a specific venue or venues for holding general meetings, no amendment of its articles is necessary to provide for the holding of general meetings using virtual meeting technology. The same applies to any provision in a company’s articles stipulating that a notice of a general meeting specify the physical venue(s) of the meeting. Such a provision shall not be interpreted as a requirement for general meetings to be held solely at a physical location.
On the other hand, prohibitive provisions would include wording that expressly forbids the use of virtual meeting technology in convening general meetings or stipulate that general meetings must be held exclusively at a physical venue.
Which mode of holding general meetings should you opt for?
The decision on the mode of conducting general meetings is left entirely to the discretion of companies. In reaching a decision, you should carefully consider which mode would optimise engagement and participation levels among members, taking into account a range of factors, such as members’ preferred mode of attendance, geographical location and professional circumstances.
How should you draft a notice of a general meeting held in virtual or hybrid mode?
In the Guidance Note – Good Practice on Holding Virtual or Hybrid General Meetings published by the Companies Registry, it is recommended that you elaborate on the meeting arrangements in the notice of a general meeting in sufficient depth, which should include details on the following points:
- Where registration and identity verification prior to the meeting are required, the link to the relevant website and corresponding login credentials should be provided in a timely manner.
- Where members must download a software or appropriate virtual meeting technology, precise instructions on the installation procedure should be provided well in advance.
- A functioning hyperlink providing members with direct access to the live general meeting at the scheduled time and date.
- Detailed instructions should be provided on, for example, how documents relating to the general meeting can be viewed, how queries can be raised orally and in writing, the procedure by which votes are cast electronically and, in the event of technical difficulties, how to troubleshoot or where to seek support.
What factors should you consider when choosing the appropriate virtual meeting technology?
- The cost of relevant hardware or software components
- Is the technology user friendly and intuitive to use?
- Is a cap imposed on the number of attendees?
- Is a time limit placed on the length of meetings?
- What is the quality of technical support when it comes to troubleshooting?
- Are features that are essential to conducting a general meeting, e.g., an online voting system, included?
- What features are available to facilitate presentation of documents and other information?
- How robust are the built-in security controls?
- What security measures must be adopted to ensure that only authorised personnel are allowed to join the meeting?
For more information about the Amendment Ordinance, visit the Companies Registry’s dedicated website.
What can CW do for you?
At CW, we understand that your time and resources would be better spent on delivering value for your business. Needing to keep track of the constantly evolving and increasingly complex regulatory landscape only adds to your compliance burden. Our professional and experienced Corporate Secretarial team can help you comprehensively assess the implications of the Amendment Ordinance for your business and ensure compliance with your statutory corporate governance obligations.
Reach out to us for a thorough review of your Hong Kong company’s articles of association so that you can start making the most of the flexibility offered by the Amendment Ordinance.
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