The Securities and Exchange Commission (SECP) would encourage listed companies to provide video conferencing facility to its minority shareholders to cut their cost for attending general meetings. Sources told Business Recorder here on Tuesday that the SECP has drafted a concept paper on the general meetings (GM) through videoing conferencing facility which is being discussed by the commission's officials.
The facility would allow shareholders, residing at different locations, to participate in meetings. This would be a great step towards shareholder's facilitation which may lead to introduction of electronic voting after incorporating necessary legal amendments in the Companies Ordinance 1984. The rights of the minority shareholders would be protected with the help of the said facility under proposed arrangement of the SECP.
Sources said that the video conferencing can be used to enhance shareholders involvement during GM. The use of video conference appears to be the best option as it allows face to face interaction among various people sitting at different locations. The GM through video conference/other electronic means has been allowed in other jurisdictions like India, Hong Kong, USA and Denmark.
Sources explained that the GM is an important event for the shareholders since it is a forum where main aspects of the corporate and financial life of the company are deliberated and approved. On the other hand, shareholders meetings provide the company with an opportunity to apprise shareholders at least once a year of its activities, accomplishments and prospects. For a minority shareholder, such meeting is often the only forum to obtain information on the company's operations and question the management regarding the company's affairs. Besides such meetings on one hand comfort investor's confidence and on the other hands serve as an internal governance system for a company.
However, benefits envisioned form shareholders participation in the affairs of a company could not be realised without their maximum attendance. Thus necessity to facilitate maximum shareholders participation and use of modem means of communication for quick, efficient and cost-effective communication between shareholders and management/ board has been realised globally.
In this connection, the SECP has proposed requirements and procedures for companies which choose to provide video conference facility to its shareholders in general meetings. Firstly, the listed companies may provide videoconferencing facility during their general meetings to their shareholders at as many places as possible considering the geographical dispersal of its shareholder. The companies may choose locations where at least 5 percent members are living. Secondly, the notice of the GM shall state the availability of video conferencing facilities. The notice shall also provide complete information necessary to enable the shareholders to access such facilities. Thirdly, in a general meeting where the shareholders are allowed to participate through video conferencing, the chairman of the meeting as well as the quorum required for the meeting shall be present in person. Fourthly, the chairman shall ensure that no one other than the shareholder or proxy holder is attending the meeting through video conference and shall take any further steps to maintain the integrity of such meetings. Fifthly, the chairman of the meeting shall take the responsibility to ensure availability of adequate facilities at specified locations without interruption/ distortion.
Sources said that the shareholding especially the minority portion of listed companies are wide spread thus resulting shareholders to be widely located across the territorial jurisdiction of Pakistan plus the, international geographical locations by virtue of listing of securities on the international stock exchanges. Assuming if all these members were to attend GM in physical terms, they would have to budget very high cost and valuable time to attend these GM. For physically attending the place of GM, the opportunity cost (ie cost of forgoing the alternative of video conferencing) of the members is the money and time expended. The benefits envisioned in the form of members' participation in the affairs of a company could not be realised without their maximum attendance either in physical or virtual through video conferencing.
The SECP has allowed companies to hold their board meetings through video and teleconferencing. However, use of this facility for members meeting has not been still considered. Present legal framework allows use of technology as a supplement to traditional mean of holding general meetings. The SECP has proposed an alternative option and related requirements for availing video conferencing facility for maximum members' participation at GM.