5 points to consider
1. What is corporate governance?
Corporate governance refers to “the framework of rules and practices by which a board of directors ensures accountability, fairness, and transparency in a company’s relationship with [its] all stakeholders (financiers, customers, management, employees, government, and the community).
The corporate governance framework consists of (1) explicit and implicit contracts between the company and the stakeholders for distribution of responsibilities, rights, and rewards, (2) procedures for reconciling the sometimes conflicting interests of stakeholders in accordance with their duties, privileges, and roles, and (3) procedures for proper supervision, control, and information-flows to serve as a system of checks-and-balances.” (source: Business Dictionary)
Corporate governance does not only consist in statutory provisions sanctioned by law; soft law, being non statutory provisions issued by professional associations or market authorities, is an important source of corporate governance.
In Hong Kong, soft law corporate governance guidance are issued by the Hong Kong Institute of Directors (for SMEs and non listed companies) or SEHK (Stock Exchange of Hong Kong)(for listed companies), among others.
2. Should the board of FIS be concerned with corporate governance?
Yes, the board of FIS should be concerned with corporate governance and how to ensure that its decisions are considered rightful and accepted by the community.
The French International School “Victor Segalen” Association Limited (FIS) is a private company limited by guarantee incorporated under Hong Kong law governed by the common law, the Companies Ordinance and its articles of association (the current version was adopted on 3 December 2016).
The ongoing discussions and various initiatives of the board, parents, teachers, AEFE, Consulate General etc. reveal a corporate governance crisis: the specific rules resulting from the articles of association and the bye-laws do not ensure the legitimacy of the board decisions.
There have been previous indicators that the modus operandi of the board was no longer suitable to: “ensure[s] accountability, fairness, and transparency in a company’s relationship with [its] all stakeholders”. One previous indicator was the general meeting where the board announced its decision regarding uniforms in 2016. Another is the succession of three presidents of the board in three years, Arnaud de Surville, Yves Bernard and Clement Brunet-Moret. Last but not least, the recent resignation of two board members, Isabelle Chabrat and Hend Lemenage, is another indicator.
3. Does the “binding online consultation” organised by the board on 13 to 16 May 2019 sort out the crisis?
No, the debate continues about the same question and other dividing questions may generate similar chaos.
4. Is there any legal ground for the “binding online consultation” lack of legitimacy?
Yes, since the board has organised a written consultation of the members outside the provisions of the law.
The articles of association do not contain any provisions regarding such “binding online consultation”; they only refer to the Companies Ordinance which provides the board of directors with two options for consulting members: either by holding a general meeting or by proposing written resolutions. For both, the Companies Ordinance contains detailed provisions on delays, how members can request resolutions and the majority required for a resolution to be passed. According to the law, a written resolution is passed when all members have signified their agreement to it.
5. What next?
The annual general meeting of the FIS has been called for Thursday 23 May. The agenda proposed by the board, and as completed by two special resolutions submitted by members, as well as the various voting instructions, indicate the debate is far from closed. Independently of the outcome of the votes, the board would be well advised to consider first and as a priority how to renew the corporate governance of the FIS.
This article does not constitute legal advice; it constitutes the independant expression of our view.
For information on the question debated itself, you may refer to French magazine Trait d’Union various articles and interviews.