The social-distancing measures, remote working, and massive interruptions in the economy arising from the COVID-19 pandemic are complicating the normal course of business for all companies and persons. For listed companies, two legal and regulatory IR issues they will need to grapple with in April are first, when and how to report first quarter earnings, and second, how best to hold the annual shareholder meeting (normally held in April).
We consulted three top Mexican law firms – namely, Kuribreña, Ritch and Creel – on what to do on these matters, and summarized our conclusions below. Also, please see the comprehensive document from CREEL on this issue, (https://www.creel.mx/en/news/creel-insights-on-covid-19-for-mexico-issuers-shareholder-meetings/). Naturally it will be important to receive your own legal advice:
- Both Mexican stock exchanges have asked the CNBV to delay the filing of 1Q20 financial information for 45 days, but as of yet there has not been a response to this request from the CNBV. We will know shortly if companies can delay their 1Q20 filings, and if so, if they need to justify such a delay or a blanket waiver is being given. Irrespective of the CNBV decision, we would recommend companies try and report according to the normal deadline, unless it is not possible. Some companies (few) have already published their report date (1Q20 calendar attached).
- As of now, the CNBV has not authorized any permitted delay to shareholder meetings, and it’s far from clear that the CNBV has such authority, says RITCH. In short, it is best to assume that shareholder meetings need to go ahead in April.
- Per Kuribreña, in the normal course of business, listed companies in Mexico (ie, SAB de CV) cannot substitute a physical shareholder meeting with a virtual one (ZOOM, SKYPE etc), unless by-laws already allow for that. What companies can do is ask investors to give their proxy to a single attorney who votes on their behalf. This could be a solution to holding a meeting with very few people present. The proxy votes would need to meet the quorum. Many companies are facilitating this process (see below.)
- In the case of force majeure (in CREEL’s view, the current situation) the law does allow for a remote meeting. As CREEL writes “Article 179 of the Mexican General Law of Business Corporations, which is suppletory to the General Law of Negotiable Instruments and Credit Transactions and to the Securities Market Law, and which is therefore applicable to both Mexican companies and issuing trusts, specifically provides that shareholder meetings are required to be held at the corporate domicile of the issuer, except in case of acts of God or force majeure… It is therefore advisable to include in the corresponding call a brief mention of the force majeure event which caused the meeting to be held remotely…. In order to control the access to the telephone or digital platform on which the meeting is to be held, the access information must be provided only to those shareholders that have processed their passes to the meeting by presenting the deposit certificate issued by Indeval and the list of positions issued by their custodian which evidences their status as a shareholder on the corresponding record date…. Issuers must ensure that their by-laws, trust agreement or other incorporation document do not restrict holding shareholder meetings remotely, even in the event of force majeure.”
- FIBRAS, as trusts, have their own rules governing such meetings. These may or may not allow for legally valid video shareholder meetings.
- Various Mexican companies have already made announcements regarding their shareholder meetings. Alsea, GAP, Qualitas, Banorte and Santander had links or highlighted the proxy process in their Annual Shareholders Meeting PRs.
Holding the meeting on April 20 electronically with accordance of DLA Piper.
Requested representatives at DLA Piper to help conduct the meeting electronically. Listed out steps of the procedure and people to contact for further clarification.
Already had its shareholder meeting remotely on March 13. Shareholders followed a procedure and exercised their rights via a form on the company website.
Moved the meeting to April 22.
Cancelled the General Extraordinary Shareholders’ Meeting and changed the General Ordinary Shareholders’ Meeting to April 28th and outlined measures to exercise proxy voting.
Has the meeting on April 24th, with a link to the proxy voting procedure.
Is going on with the shareholder’s meeting on April 23.
Hoteles City Express:
Has the meeting on April 29, and doesn’t mention any COVID-19 effects.
Cancelled the event and plans on holding it at TBD date in April.
Holding the meeting on April 28.
Delayed the meeting to June 2nd, with further updates planned end of April.
Has meeting on April 15 but mentions space for the meeting is closed.