A significant number of companies listed on the Hong Kong Stock Exchange ("Stock Exchange") are incorporated in the Cayman Islands. The popularity of using Cayman-incorporated vehicles stems in part from the flexibility of the Cayman Companies Law. For example, Cayman law does not impose specific requirements for holding a general meeting and laying financial statements before a general meeting each year. As a consequence, a Cayman-listed issuer in Hong Kong must ensure its memorandum and articles of association contains the relevant requirements for holding annual general meetings in accordance with the Hong Kong Listing Rules.
Both the Rules Governing the Listing of Securities on the Growth Enterprise Market of The Stock Exchange of Hong Kong Limited ("GEM Listing Rules") and the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited ("Main Board Listing Rules") impose requirements on listed issuers to lay financial statements before an annual general meeting to be held within a specific timeframe.
In view of the unprecedented challenges arising from the COVID-19 pandemic, the Government of the Hong Kong Special Administrative Region introduced the Prevention and Control of Disease (Prohibition on Group Gathering Regulation (Cap. 599G) ("Regulation") which came into effect on 29 March 2020.
Following the introduction of the Regulation, the Securities and Futures Commission ("SFC") and the Stock Exchange consulted the Hong Kong Government and on 1 April 2020 published a joint statement ("Joint Statement") in relation to general meetings considering the implications of the Regulation.
Salient points of the Regulation and Joint Statement
We note the following salient points of the Regulation and Joint Statement:
- Pursuant to section 3 of the Regulation, no group gathering may take place in any public place during a specific period. However, this does not apply to an exempted gathering specified in Schedule 1 of the Regulation.
- Pursuant to paragraph 11 of Schedule 1 of the Regulation, any group gathering at a meeting of a body that must be held within a specified period in order to comply with any ordinance or other regulatory instrument that governs the operation of the body or its business is exempted.
- In the Joint Statement, the SFC and the Stock Exchange clarified that an annual general meeting as required under the Companies Ordinance (Cap. 622) and/or the Main Board Listing Rules or the GEM Listing Rules are in general exempted under paragraph 11 of Schedule 1 of the Regulation for the specified period. Extraordinary general meetings are similarly exempted if certain conditions are satisfied.
- Notwithstanding paragraph 11 of the Regulation, which enables some general meetings to be held during the specified period, the SFC and the Stock Exchange determined that it is appropriate for listed issuers to consider certain guidelines when deciding on the timing of their general meetings and the manner in which such meetings are to be held. This includes:
i. whether the general meeting is subject to any mandatory legal or regulatory requirement on timing;
ii. whether any such requirement is capable of extension, waiver or other variation by way of application or otherwise; and
iii. whether any business to be considered at the meeting is of such urgency and importance that an adjournment or delay would, taking into account all facts and circumstances, materially harm the interests of the listed issuer and its shareholders considered as a whole.
Management of physical meetings
Pursuant to the Joint Statement, listed issuers who decide to proceed with a physical general meeting during the specified period should:
- take all practicable precautions to ensure the safety of attendees, including mandatory screening of body temperatures and use of face masks, physical distancing, no food and beverage service, no handing out of corporate gifts at the meeting; and
- where possible, adopt other appropriate measures to manage the number of physical attendees, including the use of multiple meeting rooms or venues linked by telecommunication facilities to reduce the headcount at a single venue; and restricting the number of non-shareholder attendees.
To keep investors and other stakeholders informed, listed issuers that have called a general meeting during the specified period should, as soon as practicable, publish an announcement to:
- confirm whether their general meeting will proceed as scheduled during the specified period;
- if applicable, explain the necessity for holding the meeting during the specified period; and
- where applicable, outline the meeting arrangements and precautionary measures to be adopted to ensure compliance with the Regulation.
The Joint Statement also encouraged listed issuers to consider a longer adjournment or delay to their general meetings to allow themselves more time to monitor how the current situation develops in order to better decide how to manage the potential health risks of a physical meeting (if one is needed) and to explore and assess measures permissible under the laws of their jurisdictions of incorporation and their constitutional documents to reduce the need for physical attendance, including but not limited to the use of technology such as webcast, video conference, virtual meetings) to enable non-physical attendance and voting.
The SFC and the Stock Exchange have indicated that they will continue to monitor the situation as it evolves and will issue further guidance if appropriate. We similarly continue to monitor the evolving situation. With extensive expertise in supporting offshore companies with IPOs, introductions, placements and listings of both equity and debt securities in the Cayman Islands as well as other offshore jurisdictions, Appleby's capital markets specialists are able to provide commercial and practical legal advice on a wide range of capital market deals on the Hong Kong, US, Singapore and many other internationally recognised stock exchanges. Should you require assistance, please reach out to your usual Appleby contact.
We have also published articles on the COVID-19's impact on annual general meetings for Bermuda companies and separately on annual general meetings and social distancing restrictions in Asia, respectively. Please click here to learn more.
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