Board Matters

FACT: PROXIES

Summary:

  • Proposed limitation on proxies is NOT allowed under Hong Kong law
  • Such limitation has the effect of suppressing members’ ability to vote
  • Voting on such limit by separate resolution is nonsensical
  • Our Articles need amendments that create clarity, not new problems
  1. GSIS is incorporated as a company, “The German Swiss International School Association Limited” (the “GSIS Association” or “GSISA”) under Hong Kong law. It is subject to Hong Kong’s Companies Ordinance (“CO”).
  2. The CO protects the rights of shareholders and members in a number of ways, including by giving them the right to appoint proxies who attend and vote on their behalf at general meetings (Sections 597-608 of the CO).
  3. As one of its five demands, the Swiss government requested that the Articles of the GSIS Association contain a provision that would limit to five the number of members any one person could be a proxy for at a general meeting.
  4. In our communication to the members for the EGM on March 17, 2020, we noted that this limitation would likely be found illegal if challenged. The GSIS Association’s legal counsel had confirmed this last summer when preparing the draft amended Articles that were submitted for a vote on December 9, 2019.
  5. In its Supporting Statements, the Requisitionists (finally) accept that this right to appoint proxies cannot be restricted, but then accuse the Board of “flip-flopping” because the December Draft Articles contained a “proxy limit” of 20. The fact is that, in negotiations with the ZfA (the German authority that oversees German schools abroad), the Board agreed to a limit of 20 because we considered it high enough to minimize its effect of voter suppression and thus the risk of legal challenge by members.  The Board believes that a limit at five would face immediate challenge because the vast majority of our members participate in general meetings via proxies.
  6. It is important to note that any limitation on members’ rights to appoint proxies is generally viewed as advantageous to entrenched boards at the expense of members. It is precisely for this reason that the Companies Ordinance gives members a statutory right to appoint proxies and protects this right.
  7. The distinction in the Supporting Statement between “illegal” and “void” is meaningless. If the GSIS Association adopted this 5-Member limit in its Articles, the provision would be, at best, unenforceable and therefore meaningless.  More likely, it would be cause for new disagreements among the members in the future.  The point of amending our Articles is to provide clarity, not to create new problems.
  8. It is incomprehensible as to why the Requisitionists believe that voting separately on the Swiss demand to limit proxies would have made any difference at our EGM on March 17. The Swiss Government had made it clear, also at the December 2019 EGM, that it would not accept anything less than all five demands being met.  If the members had voted on and approved the proxy limit separately and, somehow, the resolution on the other four demands had failed, the Swiss Government would still have withdrawn support and the GSIS Association would have been forced to make amendments to the Articles for no good reason.
  9. Lastly, we fail to see how including an illegal, void or by law unenforceable provision in our Articles can be viewed as good governance, especially if the effect of such provision is to make it more difficult for our members to participate in our general meetings.