In light of Covid-19, companies planning an AGM or General Meeting may need to consider contingency plans to ensure that these meetings can be held safely and in line with the changing government guidance on social distancing and self-isolation.
In light of Covid-19 companies may be considering whether to hold shareholder meetings in alternative forms, such as virtual, hybrid or satellite meetings, to reduce the number of people physically present or avoid a physical meeting altogether in order to better protect shareholders and attendees.
Virtual - held without a physical place of meeting.
Hybrid - there is both a physical place of meeting and electronic access.
Satellite - more than one physical place of meeting.
The Companies Act 2006 permits electronic meetings, provided those persons who are not present together at the same place may by electronic means attend and speak and vote at it.
There are differing views regarding whether meetings can be fully virtual under UK law. This note therefore considers the options available.
Public company considerations
The first virtual AGM of a publicly listed company was held by Jimmy Choo PLC in 2016. This was held through a conference call to enable shareholders to ask questions and had separate app and web browser functionality so that shareholders could follow a presentation by management and vote. No institutions or investor bodies appear to have publicly objected to Jimmy Choo holding a virtual-only AGM, but it should be noted that Pensions and Investments Research Consultants Ltd and the Investment Association have expressed concerns with virtual-only meetings in their general guidance. The rationale for such concern appears to be on the basis that the AGM is the only opportunity that shareholders have to meet and address the entire board.
It is unclear whether in the current climate fully virtual meetings would be acceptable, however on 17 March 2020, the Chartered Governance Institute and Slaughter and May published guidance on the impact of COVID-19 on AGMs in which it was suggested that virtual-only meetings are not viable given they may not constitute valid meetings under UK law, however, if permitted by its articles, a company could conduct a hybrid meeting.
This note provides guidance on matters to be considered when holding electronic/virtual meetings and possible next steps for companies planning shareholder meetings in the short term.
Holding a meeting virtually/electronically?
Articles of association
Companies should ensure that they check their articles of association to make sure they do not, directly or indirectly, prohibit holding meetings entirely in virtual form. By way of an example, if the articles require a notice of a general meeting to state the time, date and place of a general meeting, this could mean that general meetings would have to be held in a physical place. Even if the articles do not prohibit holding virtual meetings, as best practice before any such meeting is held, the articles should be amended to specifically allow meetings to be held electronically. For private companies, this can be approved by way of a written resolution with relative ease, whereas for public companies, this could mean that moving to a virtual general meeting would involve a two-step process of:
– Amending thearticles at the next general meeting or AGM.
– Holding the following general meeting or AGM as a virtual meeting.
The company's articles should cater for any failure in the technology used for the general meeting and should give the chairperson the discretion to adjourn the meeting as the chair would not be able to put a resolution to adjourn to the shareholders.
The correct technology should be put in place for any electronic meeting enabling participants to both speak and vote at the meeting. For public companies, registrars should be contacted to source the correct technology to hold the meeting.
It is sensible to have a run through of the meeting in advance to ensure that the technology and process work and that the chairperson is able to identify who is speaking and that all participants can speak and vote.
Shareholders and board
Companies may consider it appropriate to consult with key shareholders to ensure that they are comfortable with virtual general meetings. The process of the meeting and the chairperson's script should also be updated to reflect the electronic nature of the meeting to ensure that the meeting runs smoothly and the chairperson is easily able to communicate how the meeting will be conducted.
For traded companies, the use of electronic means to enable shareholders to participate in meetings can only be subject to such restrictions and requirements as are necessary to ensure the identification of the participants of the meeting and the security of the electronic communication. Any such restrictions and requirements must be proportionate to the achievement of those objectives.
Notice of meeting and proxy form
The notice of general meeting and proxy form should contain clear instructions on how to access, speak and vote at the meeting and it is considered best practice to include a helpline number to the registrar or technology provider, or both, for those shareholders who need assistance with using the technology before or at the meeting. The notice should make it clear that voting will be done on a poll.
Quorum, notice periods, documents
The usual requirements such as those relating to quorum, notice periods, documents to be put on display, and counting and announcing the results of the vote, still apply and must be met by the company.
Next steps for shareholder meetings taking place imminently
Depending on the timescales for a proposed meeting and any statutory requirements for the meeting to be held within a specific time period (in particular, the requirement for public companies to hold an AGM no later than six months after the financial year end), there are a number of options companies may consider. If a company intends to proceed with a virtual only meeting, the advice above should be considered. If the company is a public company or has already taken steps to call a shareholder meeting, it may consider the following options:
1. Proceed with physical meetings
If proceeding with a physical meeting, companies may consider it appropriate to check whether the articles permit using multiple venues linked by some electronic means to limit the number of people in each location. Additional announcements and updates may need to be provided if companies have already circulated the notice of the meeting – these may take the form of formal announcements and it may therefore be worthwhile implementing an area on the company's website to share any updates and announcements and also permitting shareholders to raise questions to be discussed at the AGM.
Companies may also consider it appropriate to encourage proxy voting to limit the number of individuals present at the meeting on the day, although care should be taken to ensure that the physical meeting is quorate.
Companies should consider (and public companies should consult with their registrars regarding):
– On-line voting facilities available if postal services will be disrupted for the submission of proxy forms.
– Pre-registration of attendees to allow consideration of the expected numbers.
– Live-streaming the AGM.
From a safety perspective, if proceeding with a meeting, companies may want to consider whether the articles permit arrangements being made at the meeting for general health and safety and if this should include a restriction on attendees or any other health and safety requirements (such as hand sanitising and temperature checks). It may also be appropriate to avoid providing any other refreshments and making this clear to attendees in advance.
2. Postpone the meeting
If the notice of meeting has been issued, the meeting can be postponed if permitted under the articles and any such process set out in the articles should be followed. Public companies should keep in mind the requirement for its AGM to be held within six months of the company’s financial year end when postponing a meeting.
3. Adjourn the meeting
If the notice of the meeting has been issued and the meeting cannot be postponed pursuant to the articles, companies may consider adjourning the meeting in accordance with the articles. Often a quorate meeting must be held for the meeting to be adjourned but articles can provide additional flexibility and therefore it is sensible to review the articles for any options. As above, public companies should keep in mind the requirement for its AGM to be held within six months of the company’s financial year end. If it is known in advance of the meeting that the meeting will be opened with the intention of adjourning it, an announcement to this effect should be released and the company’s website should also be updated.
4. Delay the meeting
If a company has not issued its notice, it could delay its despatch and potentially change the location of its shareholder meeting, subject to the notice requirements in its articles and taking into consideration the time periods set out above in which public companies must hold their AGM. If this option is taken, companies should also keep in mind:
– Whether the market/shareholders have been made aware of the proposed date for the meeting an updated announcement should be circulated.
– Time periods for certain approvals, such as, annual share authorities from the prior general meeting which may expire, approval of remuneration policies, delay of dividend payments and updates required to any listing rule and DTR statements made by public companies in the report and accounts if the notice of meeting is likely to be more than one month after the date of such report and accounts.
5. Conduct a hybrid meeting
If permitted by its articles, a company can conduct a hybrid meeting and proceed with a physical meeting but also provide the ability for shareholders to access electronically.
If a company has already issued its notice of the meeting for a physical-only meeting but its articles allow a hybrid meeting, it can change to a hybrid meeting and should make an announcement to confirm this and update its website accordingly. If companies do proceed with a hybrid meeting, communications should be made with shareholders to make them aware that they can participate in the meeting electronically.
Given that a hybrid meeting will require a small number of people to be physically present in order to form a quorum and holding such meeting will not preclude shareholders attending in person, the considerations set out above regarding proceeding with a physical meeting should also be considered.
This note should be considered alongside UK company law and regulations, articles of association and other governance and constitutional documents of the company and any other relevant matters to the company.