Gulf Holding Kuwait - Was There a Legal Quorum at Its 2016 AGM and EGM (Held 1 March 2018)?

Definitely Not the Eminent Courts of Sharjah

The annual ordinary shareholders meeting (Annual General Meeting or AGM) of a company requires that a minimum percentage of shareholders attend in order for the AGM to be legally constituted.  The same with any Extraordinary General Meeting (EGM).  Typically the company’s Articles of Association provide that if a quorum isn’t reached at the first meeting, a lower quorum will apply to the second, and then an even lower quorum to the third.  

For no doubt good reasons Gulf Holding Kuwait didn’t hold its FY 2016 AGM or EGM until 1 March 2018.  If you’ll look at GH’s package for its FY 2017 AGM  you’ll find a copy of the minutes of both the FY 2016 AGM and EGM.  It appears that the FY 2017 AGM/EGM took place sometime after 1 March 2018.  And, as outlined below, sometime after 25 March 2018!

You may want to download a copy of this document and the 2016 AGM/EGM package as a precaution that GH might change its disclosure policies and remove both of these interesting documents from its website. 

According to the minutes, shareholders representing 517,785,847 of GH’s total 847,000,000 shares or 61.6% of total shareholding attended.   Page 6 for the AGM.  Page 9 for the EGM. 

AA does not know the quorum requirement for a second GH's AGM or EGM.  But it sure looks like we’ve got one.  

But what if one of the shareholders did not have a valid Commercial Registration?  

From the minutes we see that one of the shareholders BSB Ventures asked and succeeded in getting an item added to the AGM agenda.  If you’re interested that was to allow the Board or whoever they delegate to negotiate with related parties regarding legal cases and sign any agreements to resolve. The item was approved.  The minutes state that BSB owns some 19.81% of GH.   Point 10 Page 9.  

So who are BSB Ventures? 

A check in the Bahraini MOIC’s CR search tool www.sijilat.bh  returns a Bahraini WLL company with that name holding CR 95777-1.  This company is shown as owned by GFH.  Formerly EMAD Ventures, its name was changed to BSB 23 April 2017.  So fairly compelling evidence that this is the vehicle through which GFH holds its GH shares.  You can check details at the Bahraini MOIC website.  

One rub BSB’s CR was “deleted by law” 30 November 2017 with the CR “revived” on 25 March 2018 as you will see at the MOIC website.  

According to AA’s understanding of the Bahrain Commercial Companies Law of 2001 as amended a Bahraini company must have a valid CR to conduct business. There are penalties for conducting business without a CR.  

As noted above, BSB Ventures WLL took part in GH’s FY 2016 AGM and EGM held on 1 March 2018.  At that point it appears that BSB Ventures did not have a valid CR.  

If so, it may be that BSB Ventures lacked the capacity to attend and act at the meeting.  Or in other words it wasn’t legally present at the AGM and EGM.  That may well mean that shareholders representing only 41.8% (61.6% - 19.8%) were present.  If so, was that a quorum? 

AA doesn’t know.  AA is not a lawyer.  

Are there any Bahraini or Kuwaiti law legal experts out there who would care to comment on the following questions and provide any other insights they have? 

1. If BSB did not have a valid Bahraini CR on 1 March 2018, did it have legal existence and capacity to act at the AGM and EGM? 
2. If not and therefore a quorum was not reached, are the results of the AGM and EGM invalid?  This could present difficulties if the Board agreed settlements with related parties over legal cases (AGM added agenda item).  Or if the Board took action regarding the capital reorganization approved in the EGM. Presumably lack of a legal quorum would also affect other decisions taken at the meetings as well, but the first two would appear to be the most serious matters..  
3. And finally if BSB did not have a valid CR, but voted in the AGM and EGM, would it be subject to any legal penalties in Bahrain or Kuwait? 

It may well be that GH's FY 2016 AGM/EGM had the required shareholder quorum.  

1. The 25 March 2018 date is the date of recording the revival of BSB’s CR but that event took place prior to 1 March.  
2. Companies without valid CRs may be permitted to undertake certain actions without violating the law.  
3. Or GH’s Articles may allow a much lower quorum for second meetings and so if GH legally did not attend, then a quorum was still reached.