Meeting or not? – Whether directors and shareholders of companies can be excused from physical meetings under the Companies Ordinance

April 2020

In view of coronavirus outbreak, travel restrictions are becoming a norm in many countries and maintaining social distance becomes a duty, companies are adopting various strategies to cope. Often times, meetings are either cancelled, postponed or non-face-to-face meetings are held using different kinds of technology as a result. This article explores the meeting requirements for directors and shareholders of Hong Kong private companies limited by shares.

The position for shareholders’ meetings is quite straightforward. With the advancement of technology, the Companies Ordinance (Cap. 622 of the Laws of Hong Kong) (“CO”) which became effective from 3 March 2014 has introduced a provision that allows for the use of technology in shareholders’ meetings so that, subject to the companies’ articles, shareholders do not need to be in the same room physically to attend such a meeting. Section 584(1) of the CO stipulates that “A company may hold a general meeting at 2 or more places using any technology that enables the members of the company who are not together at the same place to listen, speak and vote at the meeting.” Such statutory provision should be applicable for all types of companies registered under the CO.

Unlike shareholders’ meetings, the CO does not require directors to meet or to hold board meetings regularly and therefore the statute is silent as to whether directors can also participate in board meetings using technology or whether a physical meeting would be required and one would have to refer to its own company’s articles.

Companies which are incorporated under the post-2014 CO regime may adopt the Model Articles set out in the Companies (Model Articles) Notice (Cap. 622H of the Laws of Hong Kong) (“Cap. 622H”). For private companies limited by shares, the Model Articles as set out in Schedule 2 of the Cap 622H (“Model Articles”) allow for non-face-to-face meetings for directors (see Article 10). However, companies that were incorporated under the pre-2014 regime (that is, the old Companies Ordinance, Cap. 32 of the Laws of Hong Kong) may be still using the old articles and referring to the previous Table A, in which case, review and amendments to the articles of association may be necessary.

Other than amendments to the companies’ articles of association, there may be certain provisions in the CO that may be relevant. One may consider the statutory presumption on the validity of the minutes of shareholders and board proceedings purporting to be signed by the chairperson of that particular proceeding or chairperson of the next proceedings under sections 621(2) and 482(1) of the CO. However, such presumption “until the contrary is proved” may not be sufficient for companies who anticipate any kind of shareholders’ dispute or challenges from outgoing directors.

Furthermore, instead of holding physical meetings, one may consider the use of written resolutions. Subject to the exceptions for removal of auditor or director(s) before the end of their term of office, section 548 of the CO allows for written resolutions for the shareholders but again the statute does not provide such assistance for directors’ resolutions. Companies adopting the Model Articles may have provisions relating to written resolutions for directors (Article 8(2)) and there are similar provisions in some of the previous Table A but one must be cautious when handling companies pre-2014 regime. This strategy of adopting resolutions instead of physical meetings may be possible if the numbers of shareholders or directors are limited and dissenting views are not prevailing.

While management of companies may be occupied by other pressing and much more challenging issues in this current situation than how to properly hold a meeting or keep proper record or whether or not to amend its own articles, there is no excuse for the directors not to fulfill their directors’ duties such as abiding by the company’s constitution and resolutions and exercising reasonable care, skill and diligence. On the positive side, one may view this as an opportunity to reconsider and update its own company’s internal management and procedures.