Dealing with Shareholder Meetings during Covid-19

As at the time of writing, the Business Secretary has announced that the government will introduce legislation to ensure those companies required by law to hold Annual General Meetings will be able to do so safely, consistent with the restrictions on movement and gatherings introduced to address the spread of coronavirus. Details of this legislation are yet to be released and this note will be updated when they are available.

This is a constantly evolving situation and there is various guidance on this point. Set out below is a summary of our current thinking.

This note is written from the perspective of companies governed by the UK Companies Act. In every case the relevant provisions of individual articles of association should be checked. This note can only provide general suggestions based on current guidance.

When do we need to hold an AGM?

All UK Plc’s must hold an AGM under the Companies Act in the period of six months beginning with the day following its accounting reference date.

A private company which is a traded company has longer in which to hold its AGM. It must hold a general meeting as its AGM within nine months beginning with the day following its accounting reference date.

A company’s articles of association may also make provision as to the holding of its AGM in which case both the articles and (if relevant) the statutory provisions must be complied with.

At present, there has been no relaxation of these requirements and companies will need to comply with applicable timing requirements.

Further current guidance emphasises the importance of the AGM for shareholders and, given the uncertainty surrounding the current situation, it is likely many companies will both need to hold their AGM and also refresh current authorities to facilitate capital raisings or other transactions in the near future.

Should we just postpone/adjourn?

A company meeting cannot be postponed once notice of the meeting has been given, unless the company’s articles of association contain specific provision permitting this course of action.

Most company’s article of association permit the adjournment of a meeting by those present if the Chair is of the opinion that the meeting should not be held as planned. We have already advised a number of companies and it has since been accepted that this could be achieved by the small number of employees/others who plan to form a quorum (see below) attending the planned venue (or close to it – e.g. outside the door) and adjourning.

If the directors are of the opinion that the meeting should not be held as planned and the company’s articles do not contain appropriate provision, if it is not possible to hold the meeting, it will not be quorate, and if there is no quorum, the individual company’s articles of association will generally provide for an adjournment to another time/location in any event.

Where an adjournment is anticipated we recommend that prior announcement is made (where possible) to let shareholders know the proposed course of action. Once the adjournment has occurred details of the adjourned meeting should be published.

It should be noted that if the meeting is adjourned, it will be deemed to be a continuation of the originally scheduled meeting, which may be of benefit to those companies who are contemplating holding the AGM during the current period and have limited time to re-schedule.

Can we still hold a meeting?

Under the current government regulations, it is still possible to hold meetings however specific reference will need to be made to the requirements set out in each company’s articles of association. Undoubtedly meetings will need to be held in a different way to those that have been held previously.

How should we hold a meeting?

What is critical to note is that shareholders cannot attend a meeting in person. Instead shareholders should be encouraged to vote by proxy / electronically and it should be made clear that physical attendance is prohibited.

Companies may wish to provide a longer notice period for the meeting to reflect both difficulties with the postal system and this change in procedure. Companies should ensure that this is clearly notified to shareholders in both the notice of meeting, accompanying documentation, RNS announcements and the company’s website.

Companies should also consider providing shareholders with an electronic forum to submit questions to the board on the subject of the meeting. Responses can be made available on the Company’s website.

It is not a requirement to do so but companies may wish to make it possible for directors to dial-in to the meeting. This facility should generally not be made available to shareholders in general due to the difficulties in regulating and recording attendance.

Should we change the way proxies are used?

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 shareholders have already appointed someone other than the Chair of the meeting as their proxy, they should be encouraged to submit a new proxy form appointing the Chair of the meeting instead. 

How can the meeting be quorate?

This is slightly uncharted territory and reflects the unique circumstances of the current situation. In each case the articles of association of the company should be considered.

The FCA has stated that it supports the effective exercise of the rights of shareholders, while recognising that as a result of coronavirus this may need to involve the use of virtual methods. This is particularly relevant in the premium listing category, where various FCA rules require issuers to engage with shareholders on certain matters.

It is often the case that the quorum requirements permit a meeting to be held if two shareholders are present ‘in person or by proxy’. For meetings that are being held in locations that are accessible to the board, it should be possible to hold a quorate meeting that can either be conducted as usual or adjourned. Resolutions will be passed by proxy and the votes of those in attendance.

Current ICSA Guidance notes that a quorum might be achieved by, for example, an executive director and the company secretary being present at the meeting, provided that each is a member, a corporate representative or appointed as a proxy.

The fact that their presence is necessary in order for a quorum to be formed means that their presence is ‘essential for work purposes’ (and therefore permitted under the current regulations), especially given they are both employees and the company needs to deal with the business of the meeting.

What if we can’t access the venue?

When the location is physically inaccessible consideration should be given to postponing the meeting or otherwise adjourning it (see above).

A postponed or adjourned meeting should be moved to a more accessible location. While some companies may ordinarily have security concerns (especially if their general meetings are normally very well-attended or if they operate in contentious sectors), the fact that the meeting may be held behind closed doors should mitigate these concerns.

Is it possible to hold the meeting electronically?

There is no provision under the Companies Act and this option will depend on individual company’s articles of association.