The Coronavirus pandemic is presenting companies and their directors with many challenges. Simply planning for “business as usual” requires change to usual practices, involving a balance between compliance obligations and official public health advice.
Holding general meetings, particularly as we enter AGM season for listed companies with a 31 December year-end, is one such challenge. A number of listed companies are warning about the potential impact of coronavirus to their AGMs, given the risks of aiding the spread of the virus where a large number of people gather. Planning ahead can help minimise disruption, and we have listed some key issues to consider.
- Is it necessary to hold the general meeting?
Public companies must hold an AGM within six months of the end of the relevant financial year. If you are a director of a private company which is not a traded company, check its articles to confirm if it is required to hold an AGM.
What you should do: If it is not a requirement to hold a general meeting, consider if company business can wait or, for a private company, whether it can be addressed by a written resolution.
- Notice of general meeting
An annual general meeting of a public company must be called on 21 clear days’ notice with other general meetings (of public and private companies) being called on 14 clear days’ notice. Always check the company’s articles to confirm deemed timing of receipt of the notice.
What you should do: To minimise risk of future challenge be aware of the impact of coronavirus on the ability to print and post notice of meetings and the effect travel restrictions may have on timing of actual receipt of notice. If shareholders have previously consented to receiving communication by electronic means, where possible take advantage of this consent.
- Adjournment or postponement
Postponing or adjourning an AGM (after it being convened with a bare quorum) does not extend the six month window (from the end of the relevant financial year) in which it must be held. If, as appears likely, coronavirus has an impact throughout that period adjournment or postponement may not have requisite benefit.
Companies must also consider that if a general meeting is adjourned or postponed, existing authorities may expire in the intervening period. Existing authorities (for example to allot shares) which are time limited are not extended by an adjournment or postponement.
What you should do: Check your company’s articles to understand if adjournment or postponement is possible. Consider if any such adjournment (subject to legal deadlines) could take you into a time period when the severity of the impact of coronavirus is likely to decline. Identify any authorities that might expire during the period of adjournment to determine if any are necessary for the company to continue its business as normal.
- Form of company meeting
Companies should consider whether, if a general meeting must go ahead, it is necessary to have a large gathering of people in a single venue.
What you should do: Review the company’s articles to determine the options that are available to you.
- Meeting in person
Where a physical meeting is person is the only (or best) option, companies might consider discouraging attendance in person. Quorum requirements for most companies are low, so limited physical attendance should not be a bar.
AGMs and other general meetings are regarded as fundamentally important to the exercise of shareholder rights and the accountability of a company’s board, so where attendance is limited, companies should encourage shareholders to:
- submit proxy votes in case they cannot attend in person;
- clarify alternative ways for shareholders to submit questions ahead of the meeting; and,
- make arrangements for live streaming of the meeting (where it might be usual to expect a large turn out at the meeting).
Where companies require employee/director shareholders to attend a meeting in person to ensure a quorum is present, they should note that their normal duty of care (as an employer) to protect the health and safety of employees will continue to apply.
- Hybrid general meeting
A “hybrid” general meeting allows for shareholders to participate using electronic means, and a physical place of meeting for those shareholders who want to attend in person.
The company’s articles must allow for participation by electronic means and systems must be in place to facilitate this.
- Virtual general meeting
A virtual general meeting has no physical place of meeting. It can be held by conference call dial-in or web browser/app technology (or a combination) but must permit shareholders to communicate in real time and, for a traded company, can be subject to proportionate restrictions to enable the identification of shareholders and the security of electronic communication.
English company law permits virtual meetings, but a company’s articles must not directly or indirectly prohibit them (for example, containing a notice requirement to specify a place of meeting). Ideally a company’s articles should expressly permit virtual meetings, but for listed companies, the Investment Association has not historically supported such changes (favouring a hybrid meeting), which it is felt could make company boards less accountable. However, we are now operating in changing times, and this stance may evolve.
In addition to the here and now, what can companies do to prepare themselves for comparable events in the future? Options include:
- where possible, obtaining shareholder consent to electronic communication;
- engaging with shareholders and shareholder bodies. Regular engagement should mean they receive a more sympathetic response to decisions they take which might impact on the openness of a future general meeting (in troubled circumstances);
- consider making changes to the company’s articles to ensure that the ability to hold a hybrid general meeting or virtual general meeting is available (whether or not in limited circumstances) in the future.
As the Coronavirus situation is rapidly evolving, our advice may change in light of government announcements and on-going developments; please consult our Coronavirus COVID-19 hub for our latest thinking.