Newsletter No. 176 (EN)

Meetings of Directors and Shareholders of
a Private Hong Kong Company

May 2017

 

I. Introduction

Every company is required by law to con­duct an An­nual General Meeting (“AGM”) of sharehold­ers (Section 610 of the Hong Kong Companies Ordinance (“CO”)). For private companies, if the first accounting reference period of the company is longer than 12 months, the first AGM should be held within 9 months after the anniversary of the company’s incorporation or 3 months after the end of that accounting reference period, whichever is later. Each subsequent AGM should be held within 9 months after the end of its financial year. In practice, most compa­nies hold their AGM at the same time each year; e.g. every first Monday in March. Section 565 and 576 CO pro­vide that the exact time and location of the AGM is de­cided by the company’s di­rec­tors.

The AGM provides the shareholders with an opportunity to question the directors on any matter, but in particu­lar on the com­pany’s accounts and audit report, which are usually presented at the meeting.

The business of the AGM may include de­cid­ing upon the distri­bution of dividends, electing new direc­tors and ap­pointing audi­tors. The AGM can be held, ei­ther by way of a tra­ditional in-person meeting or in the form of written resolutions.

1. Convention of an AGM

It is the directors’ responsibility to convene an AGM every year. The directors are re­quired to give 21 days notice to the share­hold­ers of the proposed AGM date. The AGM notice must contain suf­ficient mate­rial and particu­lars to en­able any shareholder to decide whether the pro­posed resolutions for the AGM would af­fect their interests.

Further, the shareholders must be able to see and under­stand the entire AGM process and all the decisions that are proposed prior to the actual AGM. If a special resolution is to be passed at the AGM, then the precise wording of this resolution must be cited in the AGM notice. To pass a special resolution, at least 28 days’ notice must be given to the company by a member of his intention to move the proposed resolution.

Section 565 CO provides that the directors may call a general meeting. The company secretary may call a general meeting on the instruction of the board. In addition, Sections 566, 569 and 570 CO also give authority to the directors, members and the Court to convene meetings under special circumstances.

2. Extraordinary General Meetings

In addition to the AGM, the shareholders may hold other meetings throughout the year as and when required. These meetings are called “Extraordinary General Meet­ings” (“EGM”). An EGM may be con­vened at the request of:
The Directors;
The shareholders;
The auditors;
The liquidators; or
A Court order.

The notice period for an EGM is 14 days, unless the Articles of Association require a longer time.

II. Proceedings at Company Meet­ings

The way in which business is conducted at a company meeting is determined by the CO and by the Articles of Association of the company. The pro­cedure can also be decided during the meeting itself. Please note that the following information applies equally to AGMs, EGMs and Board of Director (“BoD”) meet­ings.

1. Quorum

No business can be conducted at a meeting unless a quorum is present for the entire du­ra­tion of the meeting. Two members who are present in per­son or by proxy shall be a quorum.

If a quorum is not present within 30 min­utes of the appointed time for opening the meet­ing, the meeting will be ad­journed for 7 days or as otherwise decided by the di­rectors. If at the adjourned meeting, a quo­rum is not present within 30 minutes of the appointed time, the members which are present will constitute a quo­rum.

2. Chairman

Unless the company’s articles provide other­wise, any member may be elected as the Chair­man of the meeting by the other atten­dees. The Chair­man of the meeting will be elected at the meeting. The powers of the Chair­man are set out in the company’s Articles of Association. However, at common law the Chair­man must ensure that all enti­tled persons are given a reasonable oppor­tunity to debate and vote. If the Chairman is

a member of the BoD but he is not a share­holder, he is not eligible to vote at an AGM or EGM.

3. Proxy

Any member of the company is entitled to appoint another person, whether a member or not, as his proxy to attend and vote in ­his place. The proxy also has the same right to speak at the meeting on the appointing mem­ber’s behalf. The member’s right to appoint a proxy must be stated in the notice for the meeting.

A member may appoint multiple prox­ies to represent whatever number of shares is speci­fied in the instrument of appoint­ment. The proxy’s appoint­ment may be permanent, i.e. the proxy may act as such at all company meet­ings. A per­manent proxy is sometimes de­scribed as a general proxy. However, if the Articles of Association of a company specify the form for ap­pointment of a proxy and that form does not provide for perma­nent appointments, the proxy will only be empowered to act at the single meeting which is speci­fied in the form.

Unless the company’s Articles of Association provide otherwise, a proxy cannot par­ticipate in a show of hands vote. The instru­ment appointing the proxy is therefore deemed to confer au­thority to demand or to join in demanding a poll vote. If a share­holder has appointed a proxy but exercises his right to vote in person, the proxy is re­voked. The proxy is merely the agent of the member who appoints him and that agency can be terminated at any time unless it has been agreed that the proxy is irrevocable. Even if the proxy has been given for a fixed period of time, the mem­ber is still entitled to re­ceive notice of all meetings during that peri­od.

 

4. Voting

a) Voting by hands

At any meeting, a resolution which is put to the vote of the members is decided on a show of hands, unless a poll vote is de­manded before or on the declaration of the result. On a show of hands, every mem­ber present in person has one vote irrespec­tive of the number of shares he holds. A proxy usually cannot vote on a show of hands.

b) Demanding a poll vote

Under the CO, all proposals put to the meet­ing, except for the election of the Chairman and adjourn­ment of the meeting, may be de­cided by a poll vote. A company’s Articles of Association may provide less stringent requirements for calling a poll vote than those provided by the CO, but they may not impose require­ments which are more stringent. The Chair­man may also demand a poll vote.

In a poll vote, every member shall have one vote for each share that he holds. A mem­ber who is entitled to more than one vote does not have to use all of his votes in the same way. For example, a mem­ber may cast some of his votes for one di­rector candidate and some for an­other. The votes may be cast personally or by proxy.

c) Casting vote

If there is an equality of votes, whether on a show of hands or on a poll vote, the Chair­man of the meeting has the casting vote.

__________________________________

1  Hong Kong Rac­ing Pigeon Association Ltd. v. Lam Koon Nam (2002) 3 HKLRD 133, Sec­tion 576 (1)(e), (3), (4), (5) and (7) CO.
2  Cap 622H Compa­nies (Model Articles) Notice, Sched­ule 1, Sec 38 (2); Schedule 2 Sec 34 (2).
3  Section 569 (1) CO at least, however, 2 representing at least 10 % of the total voting rights.
4  Section 421 CO.
5  Section 570 CO.
6  Cap 622H Companies (Model Articles) Notice, Schedule 1 Sec 43 (2); Schedule 2, Sec 39 (2).
7  Cap 622, Section 585 (3).
8  Cap 622H Companies (Model Articles) Notice, Sched­ule 1 Sec 46; Schedule 2, Sec 42.
9  Section 586 (1) CO.
10  Section 596 CO.
11  Section 596 CO.
12  Section 588 (2) CO.
13  Section 591 (3).

 

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