The impact of the Prevention and Control of Disease (Prohibition on Group Gathering) Regulation on general meetings of Hong Kong listed issuer

 

As the COVID-19 pandemic continues to grip Hong Kong, on 29 March 2020, as part of the Government's overall strategy to contain the spread of COVID-19, the Prevention and Control of Disease (Prohibition on Group Gathering) Regulation (Chapter 599G of the Laws of Hong Kong) (the "PCDR") was introduced to prohibit group gatherings of more than four persons from taking place in any public place for the specified period of fourteen days between 29 March 2020 to 11 April 2020. On 8 April 2020, the Government further announced that the specified period will be extended to 23 April 2020. Following the introduction of the PCDR, the one question on the lips of all listed issuers is whether the holding of general meetings by listed issuers would be prohibited under the PCDR.

 

1. Under the PCDR, it is an offence if a prohibited group gathering of more than four persons takes place in a public place during a specified period. Participants, organisers and those who control or operate the place in which the gathering takes place and knowingly allows the taking place of the gathering commits an offence and is liable on conviction to a fine of HK$25,000 and to imprisonment for 6 months. Participants may discharge their liability for the offence by paying a fixed fine of HK$2,000.

 

2. However, the PCDR sets out a number of exemptions to which the prohibition on group gatherings do not apply. With regards to listed issuers and general meetings, the relevant exemption is set out in paragraph 11 of Schedule 1 of the PCDR ("Paragraph 11") which states:

 

"Group gathering at a meeting of a body that must be held within a specified period in order to comply with any Ordinance or other regulatory instrument that governs the operation of the body or its business."

 

3. The broadly drafted wording of Paragraph 11 inevitably created ambiguity for listed issuers and it was widely reported that various stakeholders had approached the Government and other regulatory bodies to clarify whether general meetings fall within the ambit of Paragraph 11.

 

4. To this end, the Securities and Futures Commission (the "SFC") and The Stock Exchange of Hong Kong Limited (the "Exchange") consulted with the Government and published their joint statement in relation to general meetings in light of the PCDR on 1 April 2020 (the "Joint Statement").

 

5. In the Joint Statement, the SFC and the Exchange explained their understanding that:

 

1. Annual general meetings as required under the Companies Ordinance (Chapter 622 of the Laws of Hong Kong) (the "Companies Ordinance") and/or the Main Board Listing Rules or the GEM Listing Rules (the "Listing Rules") are in general exempted under Paragraph 11.
2. Extraordinary general meetings and special general meetings of Hong Kong-listed issuers are exempted under Paragraph 11 if the meeting must be held within the specified period in order to comply with: 

 

1. any law or regulation in Hong Kong or overseas that is applicable to the listed issuer or a subsidiary of the listed issuer (as part of the listed issuer's business);
2. any Main Board Listing Rules or GEM Listing Rules or The Codes on Takeovers and Mergers and Share Buy-backs;
3. the issuer's own memorandum or articles of association; or
4. other regulatory instrument.

 

6. From the explanation provided in the Joint Statement, it was clarified that Annual General Meetings fall within the exemption under Paragraph 11. However, the position in respect of Extraordinary General Meetings or Special General Meetings (together "EGM") is unclear.

 

7. Under the Listing Rules and generally speaking under the Companies Ordinance, there are no requirements for an EGM to be held within a certain period of time. It is also observed that the memorandum and articles of association of listed issuers do not generally contain any articles or provisions which require an EGM to be held within a certain period of time.

 

8. However, under section 566 of the Companies Ordinance, shareholders holding at least 5 percent of the total voting rights of all shareholders having a right to vote at general meetings are entitled to requisition a meeting. If within 21 days from the date on which the board of directors receives such requisition, the board of directors fail to call a meeting for a date not more than 28 days after the date on which the notice convening the meeting is given, then under section 568 of the Companies Ordinance, the shareholders who requested the general meeting, or any of them representing more than 50 percent of the total voting rights of all of them, may themselves call, at the company's expense, a meeting within three months of the above-mentioned date. It has been observed that some listed issuers have taken this approach under the laws of their incorporation jurisdiction which have similar provisions to convene an EGM and which would fall within the exemption of Paragraph 11. 

 

9. It is also noted that the PCDR prohibits group gatherings in a public place. Section 2 of the PCDR defines a "public place" as: 

 

"a place to which the public or a section of the public may or are permitted to have access from time to time, whether by payment or otherwise".

 

10. In Kwok Cheuk Kin v Commissioner of Police [2017] 6 HKC 93, the court had to consider the meaning of a public place under the Public Order Ordinance (Chapter 245 of the Laws of Hong Kong) which shares the same definition of "public place" as the PCDR. In that case, the critical question that the court would ask is whether the meeting was open to the public or any section of the public, and not whether the meeting took place in public or private premises, although the fact that the meeting took place in private premises would obviously be relevant to the former question. Further, private premises to which access was restricted to the lawful occupiers' invitees or licensees (in addition to the lawful occupiers themselves) would not generally be regarded as "public places".

 

11. In respect of general meetings of listed issuers, most meetings are held in private conference centres or conference rooms in hotels, which are generally considered to be private premises and where only shareholders of the particular listed issuer would be permitted to enter. As such, shareholders' authority to enter the meeting venue stem from their status as the lawful occupiers' invitees or licensees rather than as members of the public and therefore, it is arguable that the meeting venue cannot be construed as a "public place" under the PCDR.

 

12. In any event, if a listed issuer decides to proceed with the EGM after considering the factors set out in the Joint Statement, it is recommended that listed issuers should implement precautionary and preventive measures at the general meeting in order to comply with the underlying rationale and intention of the PCDR, including but not limited to:

 

1. the taking of the body temperature of all attendees;
2. the wearing of surgical face masks by all attendees;
3. refraining from serving any refreshments or handing out corporate gifts;
4. restricting attendance to only shareholders and other necessary personnel; and
5. arranging for multiple rooms linked by telecommunications facilities and limiting the seating in each room to four persons or less.

 

13. Further, listed issuers should ensure that the above measures are published by way of an announcement together with the rationale on why the EGM must proceed despite the measures implemented under the PCDR.

 

14. It is strongly advised that listed issuers seek legal advice on the applicability of the PCDR to their own circumstances.

 

 

關於本行

 

何韋律師行是一所香港獨立律師行，其律師經驗豐富，具創造性及前瞻性思維。

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