Given the stringent measures enforced over the last few days and the warning of tougher measures to come, a Company’s ability to hold its AGM is becoming ever more unlikely.
Why must an AGM be held?
Under the Companies Act 2006, a public limited Company must hold its AGM within six months from the end of its financial year. The Companies Act does not specify what business must be transacted at the AGM but usually the meeting will deal with matters that must be dealt with in each financial year, such as the re-election of directors, fixing remuneration of auditors and considering the annual accounts, directors report and auditors report. It is also worth remembering that many public companies pass resolutions at their AGMs which are limited in time, to say “the earlier of 15 months from the date of the meeting or the next AGM”, particularly in relation to resolutions relating to the issue of shares/securities and the disapplication of pre-emption rights.
What options are available?
The Chartered Governance Institute has issued guidance offering various suggestions which companies should consider using in light of the unprecedented circumstances that we find ourselves in, however, companies will still need to consider their own individual circumstances, including what their articles of association say.
In essence, companies have the following options:
- Adapt the basis on which the AGM is held.
- Delay convening the AGM.
- Postpone the AGM.
- Adjourn the AGM.
- Conduct a hybrid AGM.
As the situation evolves Companies may need to use more than one of these options.
1. Adapting the basis on which you hold the AGM
If you are holding an AGM, you should consider:
- Arrangements with the venue provider. Is the venue still prepared to host the AGM? Should a fallback venue be booked? If you need to move the venue or if the situation changes then you may need to adjourn or postpone the meeting. The company’s articles may permit the use of supplemental nearby venues that are linked by satellite or other means. If they do, then consider the use of this as a way of restricting numbers in a particular location to allow for social distancing. If notice has already been issued without referring to supplemental venues, use appropriate announcements and website updates to inform shareholders.
- Establish a dedicated area on the Company Website. This area should be used to detail arrangements for the meeting and can be used to update shareholders about changes to the situation.
- Encourage proxy voting. As experts have warned that COVID-19 might last for many months, shareholders should be strongly encouraged to register their votes through appointing proxies, ideally earlier than usual if possible, in case of any postal delays. Such votes should be encouraged even such shareholders are planning to personally attend in case circumstances change at the last minute. Companies can also facilitate online voting to pre-empt any postal disruption.
- Establish an online shareholder Q&A for the AGM. Shareholders can post questions related to the business with the AGM and these should be kept up to date with answers up to the deadline for proxy voting. Questions can also be answered at the AGM in particular if the AGM is being live streamed.
- Consider announcing a shareholder event to be held later in the year. Although this will not be the AGM, Companies may wish to offer shareholders the opportunity to engage with directors later in the year.
- Ensure that the AGM will be quorate. Check your articles to see how many you need for a quorate meeting and ensure you can get that number to attend.
- Restrict the number of non-shareholder attendees
- Pre-register attendees.
- Livestream the AGM. Where technology allows, provide a live stream of the event and/or a phone link. These options will not constitute formal attendance for quorum purposes.
- Introduce appropriate safety measures. These could include restricting the number of people, requiring temperature checks, and self-certification. Details of these arrangements can be included on the website.
- Attendance of Directors. It is good practise for as many of the directors as possible to attend the AGM, but this is not a legal requirement. Therefore, if only a small number of directors attend this will not invalidate the meeting. They could also be available for questioning via video link.
2. Delay convening the AGM
If the company has not yet issued its AGM notice, then it could delay its despatch and potentially change the location of the AGM. However, remember the latest date to hold any AGM is six months after the financial year end. Therefore, companies with a 31 December year end will have relatively little leeway. If companies do adopt this approach, then they must update the market and also consider the following:
- Annual Authorities. Check the expiry dates of any authorities that were approved at the last AGM. Generally, authorities will be said to expire at the earlier of the date of the next AGM or fifteen months after the date granted.
- Renumeration Policy. If companies are required to approve the renumeration policy at the 2020 AGM, then they have until the end of the financial year to approve the new policy.
- A delay may mean that a final dividend is not paid when expected. Payment of interim dividends may be necessary.
3. Postponing the AGM
If notice of the AGM has already been issued, then the Articles of Association may permit a postponement and will usually specify the process that must be followed. As for the section on delaying an AGM, consideration needs to be given to the time limit on holding an AGM and also on the times given on annual authorities and approval of renumeration policies.
4. Adjourning the AGM
If a company is issued at AGM Notice and its Articles of Association do not allow for a postponement, then there is the possibility of an adjournment. Generally, a quorate meeting is required for an adjournment, but this will depend on the content of the articles. If it is known that the meeting will be opened with the intention of adjourning it, an announcement should be released, and the website updated. If it is not possible to hold the meeting at the relevant venue, an announcement should be made, and representatives should be outside the venue at the time of the meeting to inform the shareholders.
5. Conducting a hybrid AGM
Virtual only meetings are not viable given that they may not constitute valid meetings. However, a company may hold hybrid AGMs, if the articles allow it (this is a combination of a physical and electronic meeting).
If a company has already issued its AGM notice it can change to a hybrid meeting by making an announcement and updating the website.
For more information on the issues raised in this article or if you would like assistance in preparing the paperwork for your AGM, then please contact a member of our corporate and commercial team on 01524 548494 or 01228 552600.