Temporary relaxations of rules for holding company meetings and filing accounts aimed at minimising the spread of COVID-19, in place since June of last year, have now come to an end, yet many COVID-19 restrictions remain in place. What does this mean in practice for UK companies?
The temporary provisions
The Corporate Governance and Insolvency Act 2020 (CIGA) provided temporary flexibility for general meetings to be held by means other than a physical meeting, including the holding of virtual or hybrid (a combination of physical and virtual) meetings. Companies were permitted to hold meetings without shareholders having the right to attend in person or to participate other than to vote. Meetings could be held and votes cast electronically and without a quorum being present at one single location.
CIGA also provided a temporary extension to the period for filing accounts and reports due to be filed between 27 June 2020 and 5 April 2021, giving private companies 12 months and public companies nine months from their accounting reference date to file accounts with Companies House.
General meetings - new regulations
The CIGA provisions concerning the conduct of company meetings expired on 30 March 2021.
Companies in England must now consider the Health Protection (Coronavirus Restrictions) (Steps) (England) Regulations 2021 (Step Regulations) which came into force on 29 March 2021 and implement the UK Government’s COVID-19 response roadmap for the easing of restrictions in England, following the national lockdown.
England is currently subject to Step 2 level restrictions and these will be in place until at least 17 May 2021. Under Step 2, certain gatherings are permitted, including those which are “reasonably necessary for work purposes or for the provision of voluntary or charitable services.” There is no definition of “reasonably necessary” or what constitutes “work” in the Step Regulations, which is left to be determined by companies in light of the applicable circumstances.
However, based on the Government’s COVID-19 roadmap published on 22 February 2021, it is likely that the easing of social distancing measures and in particular indoor gatherings, which will take place under Step 4 of the Step Regulations, will not occur before 21 June and so it is likely that company meetings will continue to need to be held on a restricted basis until this date at the earliest.
For companies based in Wales, current restrictions stipulate that gatherings with people outside of your household are permitted only in limited circumstances: these may include gathering for work purposes where it is not reasonably practicable to do your work without meeting with other people or gathering in order to meet legal obligations. Any gatherings within these parameters must be socially distanced. Businesses are generally encouraged to support people to work from home unless there is a demonstrable business need for staff to attend the workplace.
As a result, it is likely that, in Wales as well as England, general meetings will be required to continue to be held on a closed basis until further announcements are made.
Company meetings - what is permitted now
Although companies will no longer be permitted to exclude or restrict shareholder attendance at meetings by virtue of the CIGA provisions, common law provisions give the chair of the meeting broad powers to preserve order, ensure the safety of attendees and allow the business of the meeting to be transacted. In many cases these will be backed up by express powers in the articles.
This means even without the CIGA provisions, while restrictions on gatherings remain in place, companies will be entitled to exclude anyone whose presence is not reasonably necessary for work purposes – this may be limited to the chair and such other member(s) as constitute a quorum and, in some cases, any additional personnel required for the running of the meeting e.g. technicians may be required to organise a webcast of the meeting.
Companies will also continue to be able to conduct hybrid meetings, even if not expressly permitted by their articles, provided there is nothing in their articles which prevents this.
There is doubt over whether virtual meetings constitute valid meetings and as a result purely virtual meetings are best avoided.
Good practice recommendations for general meetings
This all combines to create a confusing and somewhat unclear situation for companies who are required or planning to hold general meetings over the coming months. Where possible, companies may wish to delay the holding of non-essential meetings until restrictions on gatherings are eased. If this is not an option, for example, where an AGM must be held to comply with company law requirements, guidance issued by the Corporate Governance Institute (CGI) in February 2021 (Guidance), which is aimed at public companies but may also be helpful for private companies, provides some helpful pointers:
- Meetings will need to be arranged based on the restrictions on gatherings in place at the time that the notice of meetings is sent out, but companies should also be ready to respond to any changes in restrictions which may occur before the meeting is held;
- Engaging electronically with shareholders in advance of the meeting, as well as during and afterwards, may reassure shareholders that they can effectively participate without the need to attend a physical meeting;
- Shareholders should be encouraged to vote by proxy;
- Companies should make it clear, on their website and in communications to shareholders, that due to the continuing restrictions on gatherings and the requirement for social distancing, shareholders are not permitted to attend the meeting in person and that anyone seeking to attend the meeting in person will be refused entry
While the Step 2, or equivalent, restrictions restricting public gatherings remain in place in England and Wales, each company will need to consider what form of meeting is most suitable for their specific circumstances and the interests of their shareholders and stakeholders. The CGI suggests that this decision should be made in consideration of the following:
- prevailing legislation and/or guidance;
- their individual circumstances;
- the wishes of their shareholders;
- any relevant stakeholder expectations;
- the level of engagement with shareholders generally in 2020;
- the availability and reliability of the technology available; and
- how their meetings are generally run and attended outside the pandemic.
The CGI Guidance also suggests that companies ensure that shareholders not attending the meeting can still make an informed vote and asked questions through the following:
- an online Q&A, made available ahead of the meeting—ideally with answers provided in advance of the proxy deadline;
- webinars and town hall events, ideally before the proxy deadline;
- live streaming the meeting, with a facility for asking questions in real time; or
- holding shareholder engagement events (ideally with physical presence once appropriate)
Download and read the full Guidance here.
Companies House filings – updated rules
Since 5 April 2021, the automatic filing extensions granted under CIGA have come to an end for:
- confirmation statement filings;
- accounts filings; and
- event-driven filings.
However, eligible companies citing coronavirus issues in their application can apply for a three month extension for accounts filing deadlines falling after 5 April, if they have not already had their accounts deadline extended. Companies must apply for an extension before the filing deadline.
Read the full Companies House guidance on applying for an extension here.
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