The FRC and the Department of Business, Energy and Industrial Strategy have released some Q&As highlighting measures to be introduced to help companies holding their annual general meeting during the covid-19 related restrictions.
Virtual only meetings?
The Q&As confirm that new measures will be introduced by legislation as a matter of urgency but until then companies must work within the existing legal framework. One of the key problems is that virtual-only meetings are uncommon and largely untested in the UK.
Whilst the Companies Act 2006 provides that nothing in that Act precludes meetings being held by electronic means, some commentators take the view that the requirement for a notice of a shareholders' meeting to state the "place" of the meeting means there must actually be a physical meeting albeit that shareholders could then attend that physical meeting by electronic means – a so called "hybrid" meeting.
The Q&As state that the new legislation will overcome this by providing for "closed" meetings with a minimum number of people in attendance via telephone or other means of electronic communication.
Such a meeting should be able to comply with any quorum requirement which is typically fairly small anyway – usually between two and five people.
As noted above one of the key functions of the AGM is to give shareholders an opportunity to engage with the company and its board. There is a concern that if companies move to holding "closed meetings" this will deny the wider shareholder base both a vote and a voice.
The Q&As suggest that shareholders should be encouraged to vote by proxy to ensure that their votes on the business of any closed meeting are taken into account. Companies are also encouraged to engage shareholders before, during and after the meeting by responding to questions raised by electronic or other means. Those questions and any responses could be included in the AGM minutes.
The Q&As also recommend that companies give shareholders a voice by holding "shareholder days" later in the year at which members could be offered access to the board in a similar way as at a typical AGM.
Whilst a company will usually post details of its AGM on its website, unless a shareholder has consented to receiving electronic communications, the company is required to communicate with that shareholder in hard copy, sending them a copy of the AGM notice and any accompanying documents. This will be a challenge for companies which may currently have little or no staff working in their offices. The Q&As state that the new legislation will temporarily relax this requirement so companies only need to communicate notices and other meeting documentation via emails, website and other electronic means.
This AGM season is also likely to see lower resolution versions of the usual professionally designed, glossy annual reports that we've become used to. Nonetheless, the information contained in those simpler documents must still be accurate and up to date.
As well as providing measures to facilitate holding an AGM within existing timetables, the Q&As suggest that an option of extending the deadline for holding an AGM will also be given. It seems likely that this will reflect the extension of the accounts filing deadline previously announced by Companies House.