The coronavirus pandemic is presenting companies and their directors with many challenges. Simply planning for business as usual requires change to normal practices. Holding general meetings, particularly as we enter AGM season for listed companies with a 31 December year-end, is one such challenge.
Proposed new legislation
The government has published the Corporate and Insolvency Bill which will introduce legislation (with retrospective application from 26 March 2020) to ensure those companies needing to hold general meetings are able to do so using electronic means, with votes cast electronically by members who need not be in the same place, notwithstanding provisions in their articles to the contrary (“new legislation”).
The new legislation will be a temporary measure:
- it will apply to general (and class) meetings held between 26 March and 30 September 2020 (the “qualifying period”);
- it will allow companies which are required to hold their AGMs during the qualifying period to move those meetings back to 30 September 2020;
- the appropriate national authority may, by regulation, extend the period in which a company must hold its AGM (where such period overlaps to any extent with the qualifying period) by up to eight weeks; and
- the appropriate national authority may vary the dates of the qualifying period in three month increments but may not extend such period beyond 5 April 2021.
The current position
Until adoption of the new legislation, key considerations include:
Is it necessary to hold the general meeting?
Pending the new legislation, 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: Companies should give notice of their AGM if the new legislation is not passed by the notice period date, even if it is likely the meeting will be delayed once legally possible.
Additionally, 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. At the current time, the notice should clarify that public gatherings of two or more persons are prohibited while stay at home measures apply.
Delay, adjournment or postponement
Delaying (if notice of AGM has not been issued), postponing (only if permitted by the articles) or adjourning an AGM (either, after being convened with a bare quorum or, if the articles provide, due to lack of quorum) does not extend the window (from the end of the relevant financial year) in which it must be held. Once the new legislation is passed the window will extend to the end of September 2020.
In the event of delay, adjournment or postponement, companies must consider that existing (time limited) authorities, for example to allot shares, may expire in the intervening period. Other considerations include: the impact on timing of payment of final dividends (consider payment of an interim dividend) and approval of new remuneration policy, the need to update listing rule and DTR disclosures, and the subsequent availability of a meeting venue.
What you should do: Check your company’s articles to understand if delay, adjournment or postponement is possible. Consider if such an approach (subject to legal deadlines (as extended by the new legislation)) could take you into a time period when the severity of the impact of coronavirus is likely to decline. Identify other ramifications, including any authorities that might expire before the meeting is held to determine if any are necessary for the company to continue its business as normal.
Form of company meeting
Under the new legislation companies will have flexibility as to the manner in which they hold general meetings, temporarily overriding any requirements of their articles. Virtual general meetings should start to increase in popularity.
What you should do:
- Until the new legislation is in force, review the company’s articles to determine the meeting options that are available to you (see Schedule).
- Subject to the new legislation, if a company is otherwise required to hold a physical meeting it should make efforts to engage with shareholders and provide them with the opportunity for challenge in advance of the AGM.
- Consider in the long term the flexibility that the company requires in its articles.
Considerations for the future
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 (which allows for shareholders to participate using electronic means, and a physical place of meeting for those shareholders who want to (and are permitted to) attend in person) 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.
Schedule – form of general meeting until the new legislation is in force
Meeting in person
Where a physical meeting in person is the only option, companies should discourage attendance in person (save to meet quorum requirements), and restrict non-shareholder attendance. Quorum requirements for most companies are low, so limited physical attendance should not be a bar. The chair may invoke powers to ensure the safety of attendees and, during any period of movement restrictions (such as the stay at home measures) when attendance in person is considered unsafe, exclude excess attendees once the quorum is present.
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 companies should encourage shareholders to:
- submit proxy votes instead of attending in person;
- clarify alternative ways for shareholders to submit questions ahead of the meeting, for example an updated online Q and A; and,
- make arrangements for live streaming of the meeting (where it might be usual to expect a large turn out at the meeting), albeit this does not constitute attendance at the meeting.
There are practical steps to take in respect of the physical venue (and supplemental venue). Reconfirm its availability. If stay at home measures apply companies should unambiguously tell shareholders not to attend. Outside of such periods companies should appropriately space attendees, and restrict numbers in any one location. Do not serve refreshments. Consider temperature checks and self-certifications.
Companies requiring employee/director shareholders to attend a meeting in person to ensure a quorum is present, should note that their normal duty of care (as an employer) to protect the health and safety of employees will continue to apply. To maintain good practice, if directors do not attend in person they can be available for questioning via video link.
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 (and are permitted to) attend in person. Currently, stay at home measures preclude shareholders from attending in person as attendance at a general meeting by a shareholder (other than one specifically required to form the quorum for that meeting) is not essential for work purposes.
The company’s articles must allow for participation by electronic means. Companies must put systems in place to facilitate electronic participation (meaning tech teams at the physical meeting (their numbers must be kept to the minimum and their presence must be essential for work purposes), and attendant cost implication), and make shareholders aware of this capability.
Virtual general meeting
A virtual general meeting has no physical place of meeting. Conference call dial-in or web browser/app technology (or a combination) must permit shareholders to communicate in real time.
However, unlike a hybrid meeting, there is debate whether English company law permits virtual meetings. Certainly, a company’s articles must not directly or indirectly prohibit them (for example, containing a notice requirement to specify a place of meeting).
For listed companies, the Investment Association has not historically supported articles that expressly permit virtual meetings (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, although it is unlikely that virtual meetings are the best current alternative.