The issue of AGMs during the current pandemic is complex and has led to the publication of the Corporate Insolvency and Governance Bill (which is currently going through the House of Lords) as well as the publication of two sets of Q&As from BEIS and the FRC.
Currently public companies (and some private companies if their articles of association require them to do so) still have to hold an AGM within the normal statutory timeframe. The Q&As note that some companies are holding off convening their AGMs until the government brings in its legislation. The Q&As2 now put flesh on the bone around enabling companies to postpone holding AGMs and facilitating the holding of virtual general meetings.
What has changed
AGMs can be postponed until the end of September 2020 irrespective of what is in the Companies Act 2006 (Act) or an entity’s constitutional documents.
If you still want or need to hold an AGM or general meeting then you can do so without the need for a physical meeting but you need to encourage shareholder engagement.
The new measures override the Act and articles of association etc and permit meetings to be held by phone or other electronic communication without the need for a quorum to be physically present at any one place. So, there is for the moment no requirement for a quorum to be present in a physical location for a meeting to be valid although you still need a quorum to be formed on whatever form of communication you choose to hold the meeting.
As regards voting this can be done electronically or in any other manner the company determines. This will depend on how securely the meeting has been set up. Some companies require their shareholders to contact the company’s registrars if they wish to participate in the meeting. The registrars will check that the individual is a shareholder and then issue that shareholder with an individual dial in code that is specific to that shareholder (and so cannot be shared around). In this case, voting by way of some electronic format could work. However, other companies might take a less strict approach and be happy for anyone to attend the virtual meeting. In that case, as only shareholders are entitled to vote and the company will not know whether the attendees are actually shareholders, it would be more sensible for any voting to be done by way of normal proxies.
One of the fundamentals here is that the Government still requires companies to engage with their shareholders. If a company makes use of the ability to postpone the AGM or hold the general meeting virtually (i.e. without a physical meeting/quorum), shareholders should still have the opportunity to engage with the company and its board. This also applies if the company decides to hold a physical meeting. So, just because a physical or a virtual meeting is convened does not allow the company NOT to engage with shareholders. This means that, however the meeting is held, the company should give shareholders the opportunity and time to ask questions, digest company feedback (given before the cut off time for returning proxy forms) and exercise their voting rights.
Of course, if you still want to hold a meeting with people physically present then you should consider whether (with the consent of the shareholders) there might be scope to convene a physical meeting with a representative cross-section of members. If such a meeting were to be possible it is important to ensure that all shareholders can ask questions before any voting takes place. However, you should bear in mind (a) the Government’s advice on how many people should attend and guidance as to social distancing and (b) that the health and safety of company officers, employees and shareholders is paramount and (c) that the company should continue to engage with its shareholders and consider their rights (see above).
The Q&As2 state that the postponement of AGMs will last until the end of September 2020 (but this period may be extended depending on circumstances). In the longer term, companies are also encouraged to review their articles of association to see what amendments are required to ensure that their AGMs can be run more flexibly in the future. Whatever they do, companies should ensure that shareholders can engage with them and their management. So, changes to articles need to be considered now in order not to be caught out.
The measures, once brought in, will be retrospective (i.e. apply back to 26 March 2020) and will continue until the end of the AGM season (i.e. 30 September 2020) although, depending on circumstances, the Government will be able to extend (or shorten) this period.
This extension covers not only the Companies Act requirement to hold an AGM but also any similar requirement contained in a company’s articles of association or other constitutional documents.
Timing requirements for other general meetings will also be relaxed but how this helps a general meeting required to approve a fundraising is not clear.
Some further points to note….
Share authorities (i.e. the right for directors to allot shares for cash or otherwise) are normally granted at the company’s AGM and last until the commencement of the next AGM or, if earlier, by a given date, often 15 months after the last AGM. Postponing your AGM until 30 September might mean that your share capital authorities run out before they can be renewed at the postponed AGM. If a company is going to be undertaking a fundraising or otherwise allot shares then it should consider whether the last AGM authority will have expired before it enters into any arrangement to allot such shares. Share authorities normally permit the issue of shares after the expiry of such authority if the arrangement to do so was entered into before such expiry.
Articles normally direct that at each AGM a certain proportion of the directors should retire. Whilst it is unlikely, check that your articles or the relevant resolution appointing a director does not reference a particular date on which he or she will retire. If it does and there is no intervening AGM then the director will have ceased to hold office and you would need the board to appoint him or her to hold office until the next AGM (assuming they have this power in the Articles).
These are meetings where no one is actually present at a given location, so there is no need for a physical meeting. All shareholders and directors would participate by telephone or other form of electronic communication. These are different from hybrid meetings which are a mix of people physically present at a given location and others present by phone or video link. Currently, institutions do not look favourably on virtual meetings but will live with a company taking powers to hold hybrid meetings. Very recently Standard Life Aberdeen plc attempted to change its articles to permit it to hold virtual meetings not just during the pandemic but also thereafter by way of a permanent change to its articles of association. That was voted down. The lesson here is that hybrid meetings would probably have been acceptable but the possibility of the company never holding a physical or hybrid meeting was not.
Now that the Bill has been published, companies CAN hold virtual meetings but remember that the measures set out in the Bill are only temporary and will cease once the Government decides that lockdown is over. Whether this temporary relaxation will change institutions’ minds as regards virtual meetings we wait to see.
Check your articles to see if you can hold hybrid meetings. If they do not, then ask your legal adviser to draft some for you. You will then need to hold a meeting to adopt the relevant changes.
AIM companies are normally required to announce their half-yearly results within three months of the end of the relevant six month period. AIM has just announced that AIM companies may have an extra month to announce their half yearly figures provided their nominated adviser clears this with AIM, and the company makes an announcement of this extension, before the end of the normal three month period.
These notes have been prepared for the purpose of an article only. They should not be regarded as a substitute for taking legal advice.