PRESENTATION BY: ABC CHINAKE SENIOR PARTNER KANTOR & IMMERMAN

Most of us here either attend or prepare for general meetings of members or owners of a company or entity in which we are associated at least once a year.

I will focus on an annual general meeting of a public company in this discussion, BUT I will also adress parastatals and state enterprises.

Apart from the ordinary business of the AGM, I have also selected special business, which will assist us in the discussion.

Parastatals and state enterprises Preparation: None required Outcomes: CASH BERT for life

Typical Annual General Meeting Agenda: 1.Presentation adoption of annual reports submitted by directors; 2.Election and re-election of directors; 3.Appointment of external auditors; 4.Perennial renewal of share buyback approval; 5.Appointment or re-appointment of auditors; 6.Transaction of any business in respect of which special notice has been given UNDER THE ARTICLES OF THE COMPANY; 7.Share buyback – perennial renewal; 8.Employee and management share option scheme – creation of and allotment of shares; 9.Rights offer; 10.Approval of company borrowings of USD 58 million.

How do you prepare for such a Meeting?

Common failings in preparation: Not knowing the Memorandum and Articles of Association of the company; Not reading the annual reports, focusing on qualifications and the notes of auditors; The chairman and board of directors not reading the annual reports and preparing for the meeting on the basis that there will be contentious issues; Taking shareholders for granted; Not engaging Regulators in obtaining approvals, where required.

 election and/or appointment of directors: i)eligibility; ii)Suitability; iii)Provisions of the M&A’s limiting the number or size of the board of directors; iv)Catagorisation of each director in the correct compartment, i.e. re-election or a new election being ratified. Examples from the above resolutions  approval of financial statements – poison pill in mergers and acquisition activity. Without the approval a company may have to be wound up;  Approval of directors’ remuneration – unreasonable or unusually high directors’ remuneration will not be approved at members’ meetings. May also be coupled with a call for the resignation of affected directors. Looting mentality still prevails;  Shareholder activism increasing in this area.

Company Borrowings  Many companies are borrowing beyond their authorized limit.  The limits are found in the Memorandum and Articles of Association.  Most M&A’s require ratification of such unauthorized borrowings.  Impact on validity of the loan and its recoverability.  Invites personal liability for directors.  Affects going-concern status.

Management and Employee Share Option Schemes  are now regulated by the Zimbabwe Stock Exchange Rules and also Indigenisation has provisions that may conflict with the ZSE provisions – need to ensure that management and Employee Share Option Scheme dovetail neatly between the two pieces of legislation;  Share buyback resolutions must comply with the ZSE Regulations in terms of maximum number of shares to be bought back and the method of calculating the pricing for such shares;  There is also a requirement to disclose the number of shares bought back in the prior period;  Unless you ABSOLUTELY control the company, don’t spend more money on buybacks and in paying dividends.

Per-culia zimbabwe risks

Rights Offer:  Ensure that you have sufficient shares under the control of directors;  If the shares are not available, you need a special resolution to increase the authorized share capital of the company;  Pricing – the number of shares to be issued must be disclosed;  Rights Offer must be approved by the ZSE and SEC;  A circular is also required.

Filing of Proxies Key yangu handichayiwone !!:

General Observation: Proxy management poor:  Ensure the chairman has or holds as may of the shares through proxy as possible;  Ensure that as many members file their proxies on time as possible;  Carry out your own internal calculation of the potential vote, based on the proxies at hand;  Scenario planning re: vote by show of hands or through a poll;  Prepare adequately for a poll and have competent transfer secretaries or scrutineers, being the company’s auditors, to carry out the process.

Siyabonga - thank you