In light of the coronavirus (COVID-19) crisis, the Government of the Hong Kong Special Administrative Region of the People’s Republic of China (HKSAR) introduced a new Prevention and Control of Disease (Prohibition on Group Gathering) Regulation (the Group Gathering Regulation), which became effective on March 29. The regulation prohibits gatherings of more than four persons in any public place from March 29 until at least April 11 (the Specified Period). Violations are punishable by a fine of up to $25,000 Hong Kong dollars (about $3,225) and imprisonment for six months, subject to certain exemptions.
One exemption under the Group Gathering Regulation is for any group gathering at a meeting of a body that must be held within the Specified Period in order to comply with any laws or other regulatory instrument that governs the operation of the body or its business. In this regard, the Hong Kong Securities and Futures Commission (SFC) and The Stock Exchange of Hong Kong Limited (HKEX) released a joint statement on April 1 after consultation with HKSAR, providing the following guidance on the conduct of general meetings:
(a) Annual general meetings as required under the Hong Kong Companies Ordinance and/or the HKEX’s listing rules are generally exempted
(b) Extraordinary general meetings and special general meetings of listed issuers are exempted if the meeting must be held during the Specified Period in order to comply with:
(i) any law or regulation in Hong Kong or overseas that is applicable to the listed issuer or its subsidiary (as part of the listed issuer’s business);
(ii) any of the Hong Kong listing rules or the Hong Kong Codes on Takeovers and Mergers and Share Buy-backs;
(iii) the listed issuer’s own memorandum or articles of association; or
(iv) other regulatory instrument.
According to the SFC and the HKEX, listed issuers should consider whether it is possible to adjourn or delay their general meetings for a reasonable period until after the Specified Period. Listed issuers should consider the following:
(a) Whether the general meeting is subject to any mandatory legal or regulatory requirement on timing
(b) Whether any such requirement is capable of extension, waiver, or other variation by way of application or otherwise
(c) 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.
Longer adjournment or delay is encouraged by the SFC and the HKEX to allow the listed issuers more time to:
(a) 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
(b) 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:
(i) the use of technology (e.g., webcast, video conference, virtual meetings) to enable nonphysical attendance and voting;
(ii) to encourage more shareholders to vote either by proxy or by giving instructions to their brokers and custodians; and
(iii) to encourage shareholders to submit their questions to management in writing in advance of the meeting.
For listed issuers who decide to proceed with a physical general meeting during the Specified Period, the guidance is to:
(a) take all practicable precautions to ensure the safety of attendees, including mandatory screening of body temperatures, use of face masks, physical distancing, no food and beverage service, and no handing out of corporate gifts; and
(b) 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.
Although the Hong Kong listing rules do not impose a requirement on the format of general meetings, listed issuers are reminded to comply with applicable laws of their jurisdictions of incorporation and their constitutional documents. In this connection, it is important to note that an overwhelming majority of listed issuers in Hong Kong–an international financial center–are incorporated in a jurisdiction outside of Hong Kong.
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:
(a) confirm whether their general meeting will proceed as scheduled during the Specified Period;
(b) if applicable, explain the necessity for holding the meeting during the Specified Period; and
(c) where applicable, outline the meeting arrangements and precautionary measures to be adopted to ensure compliance with the Group Gathering Regulation.
Listed issuers should communicate their plans to share registrars and the HKEX as soon as practicable.
Our lawyers have broad experience advising Hong Kong listed issuers in a wide range of legal and compliance issues. We are closely monitoring new developments that might impact Hong Kong-listed issuers and are able to guide you quickly as needed.
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David C. Schwartz