Shareholder Communications in the Electronic Age: A Legal Perspective a presentation by AMYN MUSSA Partner, Anjarwalla & Khanna Advocates

Shareholder Communications - Objectives Need for an entrenched investor relations culture amongst listed companies. Increased use of IT in shareholder communications.

Need for an entrenched investor relations culture amongst listed companies.

Increased use of IT in shareholder communications.

Shareholder communications – relevant legislation Companies Act (Cap. 486) Capital Markets Act (Cap. 485A) and Regulations Corporate Governance Guidelines issued by the Capital Markets Authority draft Companies Bill

Companies Act (Cap. 486)

Capital Markets Act (Cap. 485A) and Regulations

Corporate Governance Guidelines issued by the Capital Markets Authority

draft Companies Bill

Companies Act (Cap. 486) Section 26 – Copies of memorandum and articles to be “ sent to ” members. Section 130 – “ Forwarding ” of statutory report prior to statutory meeting

Section 26 – Copies of memorandum and articles to be “ sent to ” members.

Section 130 – “ Forwarding ” of statutory report prior to statutory meeting

Notices of meetings Regulation 50 Table A: twenty one days’ “ notice in writing” required for AGM. Section 133(1)(b) – notices to be “ in writing ”. Meaning of term “in writing” Table A – “ Expressions referring to writing shall, unless the contrary intention appears, be construed as including references to printing, lithography, photography and other modes of representing or reproducing words in a visible form” Cap 2 (IGPA) - section 3(2) of the IGPA - ““writing” and expressions referring to writing, include printing, photography, lithography, typewriting and any other modes of representing or reproducing words in visible form”

Regulation 50 Table A: twenty one days’ “ notice in writing” required for AGM.

Section 133(1)(b) – notices to be “ in writing ”.

Meaning of term “in writing”

Table A – “ Expressions referring to writing shall, unless the contrary intention appears, be construed as including references to printing, lithography, photography and other modes of representing or reproducing words in a visible form”

Cap 2 (IGPA) - section 3(2) of the IGPA - ““writing” and expressions referring to writing, include printing, photography, lithography, typewriting and any other modes of representing or reproducing words in visible form”

Section 134 – General provisions as to meetings and votes Relevant if Articles are silent. Notice of meetings to be served on every member either personally or sending by post to his registered address. Service deemed to be effected by properly addressing, prepaying and posting a letter containing the notice

Section 134 – General provisions as to meetings and votes

Relevant if Articles are silent.

Notice of meetings to be served on every member either personally or sending by post to his registered address.

Service deemed to be effected by properly addressing, prepaying and posting a letter containing the notice

Other relevant provisions… Section140 – notice of proposed resolutions to be given to members. Section 146(2) – members entitled “ to be furnished” with copies of minutes of AGMs. Section 158 – right of members “to receive” copies of balance sheet and auditors reports.

Other relevant provisions…

Section140 – notice of proposed resolutions to be given to members.

Section 146(2) – members entitled “ to be furnished” with copies of minutes of AGMs.

Section 158 – right of members “to receive” copies of balance sheet and auditors reports.

Section 30A – requirement to publish information memorandum Definition of “information memorandum“ - invitation in both print and electronic form Relevant provisions under the Capital Markets Act (Cap. 485A)

Section 30A – requirement to publish information memorandum

Definition of “information memorandum“ - invitation in both print and electronic form

Relevant provisions under the Capital Markets (Securities) (Public Offers, Listing and Disclosures) Regulations, 2002 Regulation 6(1) - issuer of securities to “ publish ” information memorandum. Regulation 6(5) - restriction on offering securities through an electronic form unless approved by CMA. Regulation 7 – distribution of prospectus through electronic form if approved by CMA. Regulation 16(3) – requirement to disclose number of prospectuses “printed”. Regulation 16(4) – publishing of “bridge” prospectus in at least 2 daily newspapers. Fifth Schedule – Continuing Obligations.

Regulation 6(1) - issuer of securities to “ publish ” information memorandum.

Regulation 6(5) - restriction on offering securities through an electronic form unless approved by CMA.

Regulation 7 – distribution of prospectus through electronic form if approved by CMA.

Regulation 16(3) – requirement to disclose number of prospectuses “printed”.

Regulation 16(4) – publishing of “bridge” prospectus in at least 2 daily newspapers.

Fifth Schedule – Continuing Obligations.

Relevant provisions under the Capital Markets (Securities) (Public Offers, Listing and Disclosures) Regulations, 2002... Fifth Schedule – Continuing Obligations: “ publish ” cautionary announcements “ publish by means of a press announcement ” dividend and interest payments “ publish ” interim and quarterly reports.

Fifth Schedule – Continuing Obligations:

“ publish ” cautionary announcements

“ publish by means of a press announcement ” dividend and interest payments

“ publish ” interim and quarterly reports.

Shareholders to receive relevant information on company performance through “distribution” of reports and accounts. Use of company website encouraged. Establishment of shareholders associations. The Guidelines on Corporate Governance Practices by public listed companies in Kenya

Shareholders to receive relevant information on company performance through “distribution” of reports and accounts.

Use of company website encouraged.

Establishment of shareholders associations.

Draft Companies Bill, 2008 Section 633 – defines “hard copy” and “electronic form” and related expressions Section 630 – “ Deemed delivery” of documents and information sent by electronic means: email – if properly addressed, deemed to be received 48 hours after it was sent website publication – deemed delivery when posted

Section 633 – defines “hard copy” and “electronic form” and related expressions

Section 630 – “ Deemed delivery” of documents and information sent by electronic means:

email – if properly addressed, deemed to be received 48 hours after it was sent

website publication – deemed delivery when posted

S. 190 - Manner in which notice is to be given (hard copy, electronic form or website) S.191 - Publication of notice of meeting on website S. 194 – newspaper publication of notices S. 177 - Circulation of written resolutions S. 179 - Procedure for signifying agreement to written resolution Draft Companies Bill…

S. 190 - Manner in which notice is to be given

(hard copy, electronic form or website)

S.191 - Publication of notice of meeting on website

S. 194 – newspaper publication of notices

S. 177 - Circulation of written resolutions

S. 179 - Procedure for signifying agreement to written resolution

S. 181 - Sending documents relating to written resolutions by electronic means. S. 182 - Publication of written resolution on website. S. 213 - Sending documents relating to meetings etc in electronic form. S. 221 – Publication of results of polls on website. Draft Companies Bill…

S. 181 - Sending documents relating to written resolutions by electronic means.

S. 182 - Publication of written resolution on website.

S. 213 - Sending documents relating to meetings etc in electronic form.

S. 221 – Publication of results of polls on website.

S. 383 - Option to provide summary financial statements. S. 387 - Annual financial statements of quoted companies to be made available on website. S. 388 - Preliminary statement of results of quoted companies to be made available on website. S. 458 - Website publication of audit concerns. Draft Companies Bill…

S. 383 - Option to provide summary financial statements.

S. 387 - Annual financial statements of quoted companies to be made available on website.

S. 388 - Preliminary statement of results of quoted companies to be made available on website.

S. 458 - Website publication of audit concerns.

S. 619 - Company records may be kept in hard copy or electronic form. Must be capable of being reproduced in hard copy form. S. 628 - Right to receive hard copies Draft Companies Bill…

S. 619 - Company records may be kept in hard copy or electronic form. Must be capable of being reproduced in hard copy form.

S. 628 - Right to receive hard copies

United Kingdom The Companies Act 2006. Permits electronic communication with shareholders. Includes communication via email and company websites. Shareholder consent to electronic communications required. Other Jurisdictions

United Kingdom

The Companies Act 2006.

Permits electronic communication with shareholders.

Includes communication via email and company websites.

Shareholder consent to electronic communications required.

South Africa Company law provides for electronic communication. Australia Company legislation provides for electronic means of communication. Shareholders have right to nominate preferred mode of communication. Other Jurisdictions…

South Africa

Company law provides for electronic communication.

Australia

Company legislation provides for electronic means of communication.

Shareholders have right to nominate preferred mode of communication.

Cost large shareholder base. reduced costs through use of IT. Avoid vagueness “ forward”, “distribute”, “send”, “in writing” etc. Mix of hard copy and electronic communication default positions vs. opt in positions. Issues for regulators to consider…

Cost

large shareholder base.

reduced costs through use of IT.

Avoid vagueness

“ forward”, “distribute”, “send”, “in writing” etc.

Mix of hard copy and electronic communication

default positions vs. opt in positions.

Access to information technology: rural areas Deemed delivery (postage/electronic communication) shifting burden from company to investor? dilution of investor rights? Affecting voting and participation? transitional phase Issues for regulators to consider…

Access to information technology:

rural areas

Deemed delivery (postage/electronic communication)

shifting burden from company to investor?

dilution of investor rights?

Affecting voting and participation?

transitional phase