As the 2020 annual general meeting ("AGM") season approaches, public companies incorporated in England and Wales need to consider what actions they can take to ensure their AGM is compliant with the law and how to facilitate shareholder participation in light of new challenges posed by COVID-19.
On 16 March 2020 the UK Government advised all citizens to avoid large gatherings and gatherings in smaller public spaces. Further restrictions may be imposed in the coming days and weeks. This will impact public companies looking to hold their AGMs in the coming months.
Delaying the AGM
Companies considering a delay to the AGM need to note (a) the AGM timing requirement under the Companies Act 2006 (the "Companies Act") and (b) the expiry date of existing authorities:
- Under the Companies Act, a public company's AGM must be held within six months of its financial year-end. Those with December year-ends that typically hold their AGMs in April or May can consider delaying until June to take full advantage of the six month period in the hope that COVID-19 impacts will be diminished by then. Those with March year-ends will have more time to see how matters develop.
- Companies also need to be mindful of the expiry of current shareholder authorities. A resolution displaying pre-emption rights for example, will typically have expired if the AGM is held more than 15 months after the 2019 AGM.
Changing the AGM date, time and location
If the AGM has already been convened and notice posted to shareholders, companies (whilst mindful of the time limits just noted) can check their articles of association ("articles") for powers to postpone the AGM. Where not permitted, companies can consider adjourning the meeting until the next practicable date.
Note that subject to the articles, adjournment requires the Chair and sufficient shareholders for a quorum to attend the venue and pass an adjournment motion (however the Chair generally holds sufficient proxies for this to pass).
Venues may close or cease to be available. Companies should think about alternative options in the event that the venue for a meeting has to change.
Wholly-virtual or hybrid meetings
Companies hoping to increase the flexibility of their AGM can check whether virtual or hybrid meetings are permitted by their articles and whether they can support such meetings in practice.
A wholly "virtual" AGM allows the meeting to be held by entirely electronic means. A minority of companies may have specific provisions in their articles which allow for this. Standard investor guidance recommends a physical meeting should be provided for governance reasons. Given current safety concerns, it is expected that investors will be more understanding. Nevertheless when planning a virtual meeting, it would be sensible to have clear statements assuring shareholders that they will have the same participation opportunities as in a physical meeting.
A "hybrid" AGM on the other hand, is a combination of a physical and virtual meeting – shareholders can attend physically or participate online. UK hybrid AGMs have been rare but increasing demand is expected in the coming months on a limited number of service providers. Therefore, arrangements should be made as soon as possible if a hybrid AGM is proposed.
Companies need to bear in mind the quorum and notice requirements and how COVID-19 could have an impact. Further, companies may wish to consider safety measures for the AGM itself.
Companies should check their articles to confirm the quorum needed to proceed. Even if this is likely to be low and possible to satisfy with less attendees than usual, it is still sensible to check exactly which directors and shareholders are definitely able and willing to attend to ensure there will be a valid meeting.
Printing and posting of notices
Companies should check if previous specific consent has been obtained from individual shareholders to use electronic communication in accordance with the Companies Act. Companies that have not obtained this consent will need to send hard copy notices (and accompanying documents) for the AGM. These companies need to work with their registrars to manage possible disruptions so necessary documents are printed and sent in time. If there is postal disruption, companies are likely to be able to rely on the deemed notice by law or in their articles that notice has been received by a certain time (usually 24-48 hours after posting). Companies, however, should monitor the situation and take mitigation action if possible (for example by using alternative postal services).
Many companies' articles permit entry to an AGM to be refused on 'security' grounds. Companies wishing to impose restrictions, for example requiring attendees to self-certify regarding COVID-19 will need to review their articles to ensure this is a permitted action.
Action: What can be done to facilitate shareholder participation?
The following are measures companies can adopt to facilitate shareholder participation in light of COVID-19 challenges. Companies can consider:
Specifically encouraging shareholders, via an RNS announcement or other communication, to submit proxies ahead of the AGM to help ensure their votes are counted. Even shareholders that intend to attend should be encouraged, in case their circumstances subsequently change.
Observing the meeting and asking questions
Using technology such as a livestream webcast or recordings made available at a later date can enable shareholders to observe the meeting, presentations and Q&As. Note, however, that these shareholders will not count towards the quorum or be able to vote at the AGM (other than by proxy). In addition, it should be made clear that these facilities are provided for information purposes only and not as a formal part of the meeting. Further, setting up online portals to enable shareholders to submit questions for management before the meeting can allow these questions to be addressed at the AGM or on the company's website. If there is a live webcast, it may also be possible for the Chair to exercise their discretion during the AGM to allow questions from observing shareholders.
Chair's covering letter
Companies can consider including additional language in the Chair's covering letter in the notice. This could notify the issues caused by COVID-19, and that the company shall update shareholders with any special security arrangement through its website. This will allow some flexibility for companies regarding the arrangements at the meeting as it is easier to update the website continuously than anticipate in advance what will be required. Further, the letter can encourage the use of voting by proxy.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.