It remains business as usual for money managers and business brokers on the five listed securities exchanges in South Africa as electronic trading activity remains unphased by the increase in the number of Covid-19 cases in the country.

JSE CEO Leila Fourie says that the largest local virtual trading floor will keep markets open to enable all participants to conclude transactions in accordance with their investment decisions and strategies.

“A fundamental part of running a fair market is to enable free market forces to play out. Our role at the exchange is to ensure that we run orderly and fair markets, allowing companies access to capital and investors to trade in these volatile times,” Fourie says in a press release.

But the Covid-19 outbreak and government’s subsequent restrictions are posing a number of challenges in terms of limits imposed on travel and get-togethers of a large number of people, especially on how the five licensed stock exchanges will deal with their plans for calling and holding general meetings and, in particular, this year’s AGMs within the set regulatory framework.

The purpose of shareholders’ meetings is to provide the shareholders of a company with an opportunity to debate and vote on matters affecting that company. 

An AGM is a critical process for a company, specifically a listed company, as at that meeting shareholders are required to approve the annual financial statements of the company which are required by the Companies Act and/or listings requirements of the relevant exchange to be approved within a specific number of months after the company’s year-end.

In addition, the company would also seek approvals from shareholders to allow it to carry out certain parts of its business, which could include the re-election of directors and auditors, approval of remuneration policies, and other matters such as share buy-backs. 

“In South Africa, there is a trend that a large proportion of shareholders (unless there is something very contentious on the agenda) do not attend these meetings in person but rather submit in advance (either by email or deliver to the company) their written proxy authorising (most commonly) the chairman of the company to vote their shares in a manner detailed in a written voting form,” says Gary Clarke, head of legal and regulation and A2X. 

“This is provided for in the applicable legislation.

“In addition, for the last number of years, companies have provided shareholders with the option to connect electronically to the meeting and ask questions of the company without actually attending the meeting, which in my experience has worked well,” he adds.

“With the above in mind, it would seem that companies should be able to have totally virtual AGMs (at least for the duration of this unprecedented crisis) without prejudicing the shareholders or the company if they use the proxy structure. However, this may require some flexibility on behalf of the regulators as the Companies Act requires that the AGM gives notice to detail the date, time and place of the meeting.”

But because of the president’s announcement last week and local issuers being compelled to give shareholders at least 15 days’ notice in moving or changing arrangements of an AGM, imminent meetings might find themselves in a spot of difficulty.

That doesn’t even include the company’s challenge to ensure that shareholders receive AGM-related notification, if there is delivery disruption or delay due to load shedding (electronically) or a post office strike in the case of physical delivery.

Of course, companies should have room in their usual AGM timetable to send out notifications a bit later than planned, electronically or via public announcements in newspapers or on radio. But those with a large retail shareholder base still often need to send out a number of hard copies.

In a letter to issuers on 17 March, the JSE reminded issuers that the Companies Act does allow companies to convene and hold shareholder meetings through electronic means and communications (ie, virtual meetings) subject to the following requirements:

• The issuer is not prohibited to do so by its memorandum of incorporation; and
• The electronic communication employed ordinarily enables all persons participating in that meeting to communicate concurrently with each other without an intermediary and in an effective manner.

“It should be noted that shareholder meetings are primarily governed by the provisions of the Companies Act and issuers must ensure that any shareholders’ meeting (including meetings conducted through electronic communication) comply, in all aspects, with the applicable statutory provisions,” the JSE states.

“In addition, companies which do not currently, should consider live-streaming the meeting on the company’s website and/or making a recording available afterwards. In such cases, communications should make clear that these facilities are provided for information purposes only and not as a formal part of the meeting.

“All shareholders should also be encouraged to exercise their rights to appoint a proxy and to submit questions to the board in advance of the meeting (eg, via an online portal or a dedicated email address).”

But according to the author of the letter, Andre Visser, director of Issuer Regulation at the JSE, the exchange is not blind to the challenges faced by issuers in the current crisis.

He says, “As long as issuers keep us informed of their respective, perhaps unique challenges, we remain open to accommodate them accordingly,” adding that such dispensations will be considered on a case-to-case basis.

Bloomberg reports that offshore markets are allowing for similar dispensations, including the US, Switzerland and even Pakistan.

The smaller incumbents across the globe might be a tad more flexible.

Etienne Nel, CEO of ZarX, says that since inception, the exchange has been supportive of using technology to drive compliance while reducing costs.

“To this end we have always allowed electronic AGMs with e-voting solutions, of which there are a number of service providers that offer world-class solutions. It speaks to the cost of continuing obligations of being listed and it is something ZAR X has always been focused on to maintain high compliance levels with reduced cost,” he says.

Despite platforms like Zoom and Skype being widely available worldwide and webcasts the format of choice back home, there are emerging platforms that can cater for the wider demographic going forward, says Danie du Toit, founder and CEO of local community TV platform DigiTV, who is working on a solution to cater for AGM requirements to a wider public audience.

DigiTV is well known among the school community across SA. 

“We are currently the largest streaming service of live events in Africa and are the biggest individual video content creators on a monthly basis as well,” he says. The company has already scaled its proposition. 

“We are already assisting both classrooms and churches on a grand scale,” he says.

DigiTV has committed to launch classroom education in English and Afrikaans from grades R to 12 by 14 April, as well as in Xhosa up to Grade 3.

It will include all subjects of the public curriculum up to the end of the second quarter. The remainder of the year’s curriculum and other languages will start rolling out from June, Du Toit says. The company has also already dedicated space to various church groups on its platform called DigiFaith.

Du Toit says that with its established infrastructure, and zero ratings recently announced by all mobile operators, establishing a platform for AGMs on all internet-linked devices will be child’s play. It could be a proposition that catches on quickly. BM