Why does it matter?
Company law and individual company’s constitutions impose particular requirements for both the timing and format of meetings which are (typically) incompatible with social distancing guidelines.
For example, the strict statutory timescale within which a public company must hold its AGM has presented real difficulties for companies with large shareholder bases in holding meetings during the COVID-19 pandemic.
Similarly, whilst some companies’ articles permit the holding of “hybrid’ general meetings (where a main, physical meeting is coupled with a form of electronic participation), this option certainly isn’t available to all and, even then, physical attendance needs to be carefully managed.
In order to reconcile the company law position with restrictions on physical gatherings, the CIGA, with retrospective effect from 26 March until 30 September 2020 (unless extended further), temporarily suspends statutory and constitutional requirements to allow companies to:
- benefit from an extended time period within which to hold an AGM; and
- be flexible about the mode in which a meeting can be held (ie, a meeting can be convened with a quorum formed by members situated in different locations and communicating by electronic media, including by telephone).
By way of example, a public company with a 31 December financial year end that would ordinarily be required to hold its AGM by 30 June would have until 30 September to hold its 2020 AGM.
No one-size-fits-all approach
In the lead up to the CIGA, the Department for Business, Energy and Industrial Strategy (BEIS) and the Financial Reporting Council (FRC) published guidance on best practice for AGMs and other meetings during COVID-19 (the Guidance).
The Guidance acknowledges that there is no one-size-fits-all approach and companies will have to make their own judgements when deciding which date to hold, or how to adapt, their AGMs.
“Business as usual” physical meetings open to all members (or a representative cross-section of members) are preferable but, where not possible, companies can explore other modes such as virtual meetings or live streaming. In any event, companies must carefully balance shareholders’ safety against their right to engage with the board (and where engagement is ultimately limited, should try to accommodate later virtual or physical events).
The Guidance also sets out minimum best practice essentials for communications to shareholders to be followed regardless of the chosen mode of the AGM. These include providing sufficient clarity on, and time to consider, the AGM procedure and matters to be voted on, a Q&A system (with the company providing answers at the meeting or as soon as possible afterwards) and offering a physical meeting to all members once Government restrictions are lifted.
Whilst some retailers have opted to delay their AGMs, others have chosen to hold their AGMs virtually or stream them online. For example, Co-op livestreamed and posted its AGM on YouTube (with a “lively discussion” taking place between shareholders in the sidebar) and, to comply with Q&A requirements, WM Morrisons set up a dedicated telephone service for shareholders to call and record their questions.
What action should you consider?
1. Understand what flexibility exists under the company’s existing articles of association to determine the extent to which it’s necessary to rely on the CIGA; if you don’t have as many options as you would like, consider changing your articles now to allow for the possibility of a hybrid meeting model and other future flexibility around AGM planning (such as a power to postpone).
2. If you are thinking about holding an electronic meeting, how good is the company’s voting and meeting technology?
3. When deciding on the timing and mode of an AGM, remember that boards still need to discharge their wider duties and carefully balance the safety of shareholders with the opportunity for engagement.
4. Should Covid-19 restrictions continue, for companies with a 31 March financial year end which would ordinarily need to hold their AGM by 30 September 2020, watch for further developments as the Government may permit an extension beyond that date.