With the Annual General Meeting (AGM) season rapidly approaching, companies will need to consider contingency plans to manage the risks presented by the spread of COVID-19, whilst ensuring shareholders continue to have the maximum opportunity to have their say.
The Chartered Governance Institute (ICSA) has prepared useful guidance offering practical support for companies holding AGMs:
This article summarises the key aspects of this guidance and what it means for companies holding AGMs.
It should be noted the guidance reflects UK company law and regulation, but companies will still need to consider their own individual circumstances, including their articles of association (Articles) and any other relevant matters.
AGMs provide one of the few opportunities shareholders of companies have to question the board of directors, engage directly with management, and hear the views of other shareholders.
However, the outbreak of COVID-19 is causing companies to rethink their arrangements for AGMs held this year, particularly in light of the UK Government’s recent restrictions on public gatherings (of more than two people), travel restrictions and the compulsory closure of most venues (Stay at Home Measures).
At a time of great uncertainty and instability, directors of companies will need to focus on making important decisions for the business that will enable them to get through this unprecedented period with the least disruption.
There are many options available to companies to deal with and manage AGMs during the COVID-19 pandemic such as:
- Postpone the AGM
- Delay convening the AGM;
- Adapting the basis on which you hold the AGM; or
- Conduct a virtual AGM.
Postpone the AGM
If a company has issued an AGM notice, it can postpone its AGM if its Articles permit it to do so. The Articles should contain the process to follow when postponing the AGM. Assuming the Articles do not provide otherwise, there is no statutory minimum notice period for rearranged meetings. As a matter of good practice, the company should try to provide 21 clear days’ notice but it may be reasonable in the circumstances to have a shorter notice period. The postponed meeting must be held within six months of the company’s financial year end.
Delay convening the AGM
A company which has not issued its notice can also delay the holding of the AGM, so long as the Articles permit this. Similar to postponed AGMs, the latest date to hold the delayed AGM is six months after the companies financial year end.
It must be noted that that given the uncertainty around the timeframe for resolving the COVID-19 pandemic, the options to postpone or delay holding the AGM may not be the most viable for companies, especially those companies which need to refresh authorities of directors, approve capital raising or other urgent transactions. Therefore companies should consider other options to hold AGMs.
Adapt the basis on which you hold the AGM
It is still possible to hold a valid AGM whilst the Stay at Home Measures are in force.
Quorum for AGM
The Stay at Home Measures prohibit public gathering of more than two people. The exception to this is if the gathering is ‘essential for work purposes’. Attendance at an AGM by shareholders is not ‘essential for work purposes’. However the attendance of a small number of directors or employees (if they are shareholders) in order to form a quorum for a meeting means their presence is ‘essential for work purposes’ and is therefore permitted. The gathering should only consist of enough attendees for the meeting to be quorate, which for most companies is two shareholders. All appropriate social distancing measures should be observed by the small number of attendees. The meeting should be no longer than is required and if those attending are not from the same household they should maintain at least the recommended minimum degree of physical separation (2 metres distance).
Location of the AGM
Companies that have already convened an AGM for a specified venue that has since closed will need to find an alternative venue. If the company’s Articles allow the board to move its location to an alternative venue, they should consider exercising this power to move the meeting to a more controlled venue, such as the company’s head office (if safe) or one of the director’s home, so long as the social distancing measures are adhered to.
Vote by proxy
Once the quorum is satisfied, the business of the AGM can be commenced, with the shareholders who are not attending in person voting by proxy. Vote by proxy is where you authorise someone else to vote on your behalf.
To make sure that the chair of the meeting can exercise all proxy votes submitted, companies should make sure that the form of proxy appoints the chair of the meeting (and not the chair of the board or a specific director who may on the day be unable to attend).
Where possible, the company should facilitate on-line voting to pre-empt any disruption to postal services and have appropriate announcements and website updates to give the shareholders sufficient information in advance to vote on the business at the AGM.
Virtual-only meetings are not really viable given they may not constitute valid meetings as quorum provisions usually require attendance in person. However, the Articles of a company may allow the company to conduct a hybrid AGM; a combination of a physical (only those attendees necessary for a quorum) and electronic meeting.
If the technology is available, a live stream of the AGM or a phone link could be set up, as well as online Q&A facilities, to allow non attending shareholders to ask questions. This may be preferable to the AGM being conducted ‘behind closed doors’.
The situation with COVID-19 is changing on an almost hourly basis and it is likely there may be further restrictions to companies in the coming months which may impact on the holding of AGMs.
If you have any questions about how the coronavirus might impact your business, get in touch with our team of expert lawyers today.