Shareholders’ resolutions at AGMs

Considering shareholders’ resolutions at AGMs is allowed in terms of the Companies Act (“Act”).  The Act grants shareholders wide powers to propose such resolutions.

Requirements of the Act

The following requirements apply – and we also outline a number of recommendations to be followed in this regard:

1. Section 65(3) – Any two shareholders of a company may propose a resolution concerning any matter in respect of which they are each entitled to exercise voting rights.
2. Section 65(2) + 65(3)(b) – The shareholders may require the resolution to be submitted to shareholders for consideration:
   1. at a shareholders’ meeting convened by written demand in terms of section 61(3) of the Companies Act, or
   2. at the next shareholders’ meeting, or
   3. by written consent.
3. Whether or not it is to be tabled as an ordinary or a special resolution.
4. Section 65(4)(a) – A resolution proposed by shareholders must be expressed with sufficient clarity and specificity.
5. Section 65(4)(b) – It must be accompanied by sufficient information or explanatory material to enable a shareholder…… to vote on the resolution.

In our experience item 5 above represents the most obvious basis for a board to refuse to table shareholders’ resolutions at AGMs.  It represents a subjective assessment of the adequacy or relevance of the information or material made available by them.

Recent AGMs of JSE-listed companies

Often company boards are not in favour of shareholder resolutions.  The risk such boards run is that their fiduciary duties as directors may be undermined. Some of the recent AGMs of JSE-listed companies are the following as reported by Just Share:

1. Sasol AGM Nov 2019 – a group of six investors co-filed another climate risk shareholder resolution with the Sasol board.  It sought to compel Sasol to report on how its greenhouse gas emission reduction strategy aligns with the goals of the Paris Climate Agreement.  The board refused to table the resolution.
2. Standard Bank – refused to table a climate risk-related shareholder resolution co-filed by two shareholders ahead of its AGM on 26 June 2020.

Our advice

We advise shareholders to ensure that the resolution is worded as narrowly as possible.  Keep in mind the correctness/validity of the information and material to be submitted in support. This means that the wording of the resolution should not:

1. make general statements or claims,
2. require the board to commit to expensive and wide-ranging additional work to be performed, if ratified,
3. demand that the board should produce documentation or records that it may not have.

Shareholders should submit such resolutions well in advance of the proposed meeting of shareholders.  You may find that informal discussions with all or some directors of the board held beforehand will assist in winning the support of the board.   This is however not always possible.