Publicly listed companies and Coronavirus
There is a lot of writing out there on business support during COVID-19 but many of our listed clients have been crying out for a simple summary that brings it all together, we therefore thought this might be useful for you.
With another three weeks of lock-down confirmed, the short-term bump in the road of how companies normally operate looks to be a longer stretch of uneven road.
COVID-19 has made the business of running a business difficult but not impossible, even when you are bound by the rules of being a publicly listed company.
Lockdown has meant that the way we used to do things and the laws and regulations that we all had to follow have had to be put to one side just so that some semblance of order can continue to exist in the corporate world. Companies cannot just stop having meetings of directors, shareholder meetings are still required and agreements still need to get signed – business has to continue.
Government measures mean that travelling to a meeting is only permitted if it is a necessity. For most companies that means that a directors’ meeting held virtually is the only practical alternative. You should check the company’s articles of association but normally these will allow director meetings by telephone or other telecoms links. Alternatively, actions can be agreed by way of written resolutions signed by all the directors or even by way of each director confirming his agreement by email. In order for a virtual meeting to be effective you need to ensure that papers are sent in good time for the meeting, everyone has access to a decent phone signal and the IT on which the call is being managed is working. Boardroom manners need to be impeccable so the chair needs to stop “overtalk” (you can take this to mean either talking too long or talking over other participants) and participants need to remember that they are not the only one in the meeting with good ideas or with just something to say. There is some excellent guidance on holding virtual meetings from the Chartered Governance Institute (including guidance on meeting etiquette at Appendix 4) that everyone should read if you do not want to end up with a meeting that runs like this one.
These can be tricky, especially if you are a fully listed or AIM company with potentially large numbers of shareholders. AGM season is bearing down on the public companies and trying to work out whether your AGM can be put back until the lockdown storm has been weathered is one thing but quite another if you need a general meeting (“GM”) to obtain shareholder approval in order to complete a transaction or fundraising. Again, there is some excellent guidance and supplementary guidance on this from the Chartered Governance Institute but the key takeaways are as follows:-
- Check your articles of association (“Articles”). These will determine whether you can hold a ”virtual” GM (ie no one present except via a telecoms link) or a “hybrid” GM (ie some shareholders physically present at the meeting location while the rest of the shareholders attend by some form of telecoms link). If the Articles do not contain these powers then you will need an actual meeting of two shareholders at an actual location (and they should observe normal “social distancing” guidelines) as their presence is a necessary requirement for the meeting to be able to be held.
- Attending a GM is not necessary for the Company’s business (only two shareholders attending is necessary) and so attending the GM would be contrary to Government measures. So, make sure your circular to shareholders/chairman’s letter/GM notice emphasises that shareholders should not attend the GM but should appoint a proxy instead.
- Make sure that the proxy a shareholder appoints is the meeting chairman and not someone else who will not be allowed into the meeting. Consider deeming the appointment of anyone other than the meeting chairman to be an appointment of the chairman.
- Ensure the venue for the meeting will be available for the meeting to be held there and is not at risk of being closed. If it is, check your Articles to see if there is a power to postpone general meetings once the notice of meeting has been sent to shareholders. If your Articles do not contain such a power, you will need to attend at the meeting place at the time of the meeting and adjourn it to a more suitable venue. This could be anywhere nearby (even the steps of the building you are trying to hold the meeting in) but you need to check your Articles to ensure what process has to be followed.
- As shareholders will not be able to attend, invite them to pose questions on the company website and answer those that are appropriate before the meeting and post the answers on your website.
- If your Articles allow “hybrid” GMs, then put in place a suitable dial in facility but if attendees are to vote you will need some form of secure entry to ensure non-shareholders are not voting. Even if you do not have “hybrid” or “virtual” meeting powers then shareholders could still attend via a dial-in facility (again you will need to ensure only shareholders have access) but they will not be able to vote or be counted in the quorum. They will though be able to ask questions and hear answers.
- Your GM notice notes will set out a lot of process that will not be relevant for the COVID-19 affected meeting. Some of this is required by the Companies Act 2006 and your Articles. You cannot change this unless you change the Articles so do not try to amend it. Instead, add wording at the start of the notes that given the current Government measures some of the notes are not appropriate and shareholders should comply with the alternative meeting processes outlined in your circular/chairman’s letter/GM notice.
If you are a private company, again, check your Articles but in all likelihood you should be able to pass the necessary resolution by having a written resolution signed by the requisite number of shareholders without the need to hold an actual meeting.
Signing a (non-deed) document (ie one that does not require witnessing) is relatively easy to do if you have a printer and scanner or even a phone to take a picture of the signing page. However, a deed requires a signatory to sign in the presence of a witness and currently it is not effective for a witness to watch the signatory sign the deed via a phone or video link and then add their own witness signature to a separate witness block. The witness and signatory have to be physically present (albeit socially distanced) at the time of signing.
E-signatures on ordinary agreements and deeds are permitted and most e-signing facilities have the ability for the witness to add their signature (but they have to be present at the time and place of signing by the signatory).
If the above is difficult or impossible then consider whether the document needs to be executed as a deed. If there is valuable consideration being given for the obligations under the agreement, then it may not need to be executed as a deed.
Witnesses do not need to be independent but it helps. If you can get an adult who is not a member of your family to witness you signing the document then that is going to avoid difficult questions later on.
I hope you have found this summary useful, please don't hesitate to get in touch if you would like further information on any of the above or if we can help, please contact a member of the Corporate Team.
These notes have been prepared for the purpose of an article only. They should not be regarded as a substitute for taking legal advice.