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Shareholder meetings under the Corporate Insolvency Governance Act 2020 – a response to COVID-19

The Corporate Insolvency and Governance Act (the Act) received royal assent on 25 June 2020 with the purpose of providing temporary flexibility for companies and other legal entities that are due to hold members’ meetings on or before 30 September 2020. The government can extend the period in which this temporary flexibility is available (until 5 April 2021, at the latest). The Working Party of the City of London Law Society Company Law Committee and the Chartered Governance Institute has released some guidance on the use of the Act when it comes to company shareholder meetings in the wake of the COVID-19 crisis.

How can companies hold share meetings under the Act?

The Act allows companies to hold fully or partially virtual meetings at which attendance and voting can occur electronically, without any requirement for a physical meeting location. The Act allows for electronic attendance to also fulfil quorum requirements. Companies are free to choose what forms of electronic communication to use, with many options available such as video conference (using platforms such as Zoom or Microsoft Teams) or by telephone call.

What rights do members have under the Act?

While under the Act, members do not have the right to attend in person, they do retain voting rights on resolutions put to the meeting. Companies are free to choose the manner in which those voting rights are to be exercised (but can still stipulate the manner in which members have to vote in order for their votes to count). It is likely that where attendance is restricted, companies will provide facilities for their members to appoint the chair of the meeting (and not a third party) as their proxy to vote on their behalf and in accordance with their instructions. Companies may also choose to allow their shareholders to vote at the meeting by means of online facility or a dedicated app.

Companies should still ensure they have engaged appropriately with their members. The guidance gives examples of online shareholder Q&A or additional shareholder events once appropriate to do so.

Do members still have the right to cast their vote directly at the meeting itself (for example online or through a voting app)?

Although companies may provide technology to enable voting, the Act states that a member does not have the right to “participate in the meeting other than by voting, or to vote by particular means”. All members have a right to vote by proxy and therefore, the right to participate in the meeting by voting for the purposes of the Act if their appointed proxy attends the meeting. Companies are not required to offer members the ability to vote in any other way. The Act therefore does not require a company to make an electronic method of voting available for use by members at the meeting, although it is envisaged many will choose to do so.

What about the company’s articles of association?

The temporary measures in the Act, allowing companies to hold meetings flexibly, override any provisions to the contrary in a company’s articles of association.

What if a company has already issued its notice of meeting?

There is no explicit provision in the Act that reverses the ordinary position that companies cannot, in advance of a meeting, change the location or date once notice has been issued (unless the articles specifically allow them to do so).

If changes are made to the format of the meeting to one which is allowed under the Act, then the company should provide shareholders with sufficient notice of any such changes. This can include, for example, links to the use of online platforms and video conferencing software. It is good practice to asses any risks that may be associated with the changed meeting format.

During the COVID-19 lockdown, companies have already been holding meetings on an adapted basis, so what difference does the Act make?

The meeting chair has broad common law powers to preserve order, ensure safety of attendees and allow the business of the meeting to be transacted. These powers are usually backed by a company’s articles. These are the power that many companies have been relying on during the strict lockdown resulting from the COVID-19 crisis. The Act replaces the effect of these common law powers and ensures that companies can continue to limit attendance and require proxy voting now that lockdown restrictions on public gatherings are beginning to be eased.

The Act specifically provides that general meetings may be held without any number of those participating being present in the same place. This means companies can hold fully virtual meetings where no two attendees are in the same physical location, whether or not the company’s articles allow for this situation.

The Act also applies retrospectively to all meetings held on or after 26 March 2020. Therefore, as of 26 June 2020, any meeting that was held on or after 26 March 2020 is valid if it complied with the looser procedural requirements in the Act.

Can companies still hold a physical meeting to be attended by shareholder generally?

Recent easings of the lockdown restrictions mean that a physical meeting that is attended by shareholders generally may be possible. However, companies need to assess what works best for them ensuring the government guidelines are followed and that risk mitigation is implemented at the meeting venue.

Given the uncertain nature of the situation and the possibility of local lockdowns or future tightening of national restrictions, the planning and holding of physical meetings may not be practical. The flexibility allowed under the Act is likely to provide companies with more certainty that their general meetings can still go ahead.

Does the Act change a company’s AGM deadline?

Companies that have a deadline for holding an AGM on a date between 26 March 2020 and 30 September 2020 will now be able to hold their AGM at any time up to 30 September 2020. The Act also gives government the power to extend AGM deadlines further (by up to eight months from the original deadline). These extensions also apply to the deadline for a public company to lay its annual reports and accounts before a general meeting.

Companies should however consider the use and general impact of such extensions carefully. For example, the Act does not however extend the expiry date of corporate authorities. Therefore, companies should ensure that they do not delay their AGM beyond the expiry of their existing corporate authorities.

Do the meeting provisions of the Act apply to charities?

Not all charitable organisations are covered by the Act. This issue has been raised with government, who have noted the Charity Commission’s statement that it will take a pragmatic approach to charities that have not been able to hold meetings in the normal way.

If you have any queries, please contact our Corporate and Commercial team on 01228 552600 or 01524 548494.

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