Many companies have been grappling with how best to conduct general meetings during the current COVID-19 pandemic in the light of emergency measures to slow down its spread.
This article provides guidance for private and public companies under current law and practice, fast moving as the government announce phased easing of the ‘Stay at Home Measures’ prohibiting public gatherings of more than two people announced on 23 March 2020 (and passed into English law on 26 March) unless essential for work purposes.
On 26 June 2020, the Corporate Insolvency and Governance Act 2020 (the “Act“) came into force, allowing for a moratorium period to override any requirements under the law or a company’s constitution to permit virtual meetings during the period 26 March – 30 September 2020 and postponement of AGMs to 30 September 2020 (with further scope for the Secretary of State to extend this period by up to three months to 5 April 2021 at the latest).
The Act is retrospective from 26 March 2020 so that any company that has already held an AGM in a way that adhered to social distancing measures, but that, as a result, did not meet relevant obligations in their constitution, will have done so in accordance with the law. The new measures will not prevent shareholders from exercising their right to vote on resolutions or other matters brought before the meeting, though they may be prevented from voting in person (rather than by post or by electronic means).
The board and its shareholders should consider the following:
- Can a meeting be avoided by passing the resolution as a written resolution circulated to all members for consent (which may be given by email).
- Is the company required to hold an AGM at all under its articles of association. Consider a temporary suspension by amendment by written resolution (which will require the consent of shareholders holding 75% or more of the total share capital).
- If helpful for the conduct of future meetings post the Act’s moratorium, implement amendments to the Company’s articles of association to permit ‘virtual only’ meetings by dial-in audio / video technology (eg Zoom).
- If an AGM (or GM) must be held consider implementing the following procedures to limit the numbers of those who may attend:
- identify the minimum quorum required to attend and how best to select eg partners sharing the same household;
- encourage proxy appointments in favour of that quorum and make it clear that the attendance of others will not be permissible under the Stay at Home Measures;
- permit proxy voting by email;
- provide dial-in audio / video technology during the meeting to permit non-attending shareholders to participate remotely;
- chose a venue accessible by car and discourage use of public transport; if those who comprise the quorum live in the same household consider convening the meeting there;
- ensure strict social distancing protocols at the meeting;
- take the vote on a poll (not on a show of hands); and
- exclude any shareholder whose attendance is not required to form a quorum.
Many of the same factors apply. However, a public company cannot pass a resolution as a written resolution and, subject to the Act’s moratorium, is required under the Companies Act 2006 to hold an AGM each year (within six months of its financial year end).
The Chartered Governance Institute and the City of London Law Society have published joint guidance to assist companies holding shareholder meetings during the Act’s moratorium: Shareholder meetings under the Corporate Insolvency and Governance Act 2020. The updated guidance, published on 9 July 2020, has been supported by GC100 (the Association of General Counsel and Company Secretaries working in FTSE 100 Companies), the Investment Association and the QCA (the Quoted Companies Alliance), and is endorsed by the Department for Business, Energy and Industrial Strategy (BEIS) and the FRC.
The main points arising from the latest guidance are as follows:
- The Act is silent on how a company can hold a virtual meeting. Therefore, companies are free to decide whether to hold partially or fully virtual meetings, and may also determine whether meetings are conducted by telephone or by video conference.
- Companies may choose to limit attendance at shareholder meetings to the minimum required to ensure that the meeting is quorate.
- Shareholders who are not permitted to attend the meeting must still be allowed to vote. This may be by way of appointing the chair of the meeting as their proxy, or by allowing voting through an online facility or app (although this is not expressly stipulated under the Act).
- Where a company has already issued its notice of general meeting, there is no scope under the Act to amend the meeting location or date. This is only permissible if the company’s articles of association allow for it. In any event, legal advice should be sought on this point.
- The temporary measures under the Act allowing companies to hold meetings flexibly override any provisions to the contrary in the company’s articles of association.
- The provisions of the Act apply to charitable incorporated organisations, but not to other types of charitable organisations.
This article was first published on 24 March and last updated on 15 July.
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