Alok Sharma, the Secretary of State for Business, Energy and Industrial Strategy, announced on 28 March 2020 that the UK Government will introduce legislation to ensure companies required by law to hold AGMs will be able to do so safely and in a way consistent with the compulsory social distancing polices or “stay at home measures” introduced in the UK in an attempt to halt the spread of Coronavirus.
We are told that the legislation will, among other matters, temporarily permit companies greater flexibility in holding AGMs online or in postponing shareholder meetings. The UK Government has stated publicly that it intends to introduce the legislation “at the earliest opportunity”, including provisions to enable the changes to be extended if necessary.
Until we receive further information about the proposed new measures, where does this leave listed companies with December 31 year-ends who will need to have robust contingency plans in place for their upcoming AGMs?
Conducting online AGMs
In some jurisdictions (notably the US), many public companies will simply switch to virtual or “hybrid” shareholder meetings, where shareholders can attend online and in person (if permitted by the relevant jurisdiction’s social distancing policies). In the UK, however, although online meetings are permitted under current legislation, not all listed companies’ constitutional documents will expressly provide for this and such meetings are unusual in UK practice (so far). Accordingly, an online shareholder meeting may not be straightforward to implement for listed companies whose articles of association have not already been amended to allow for electronic participation at AGMs.
Listed companies that have such provisions, and have not sent out their AGM notices, should implement an online-only AGM in order to comply with the UK’s compulsory stay at home measures. This should, among other things, include putting in place shareholder identification and voting procedures with a suitable technology provider.
To address any corporate governance concerns about virtual meetings, in conducting online AGMs listed companies should ensure that real debate is not hindered because of poorly run and/or truncated meetings.
Listed companies should make it unambiguously clear in their AGM notice, or by a public announcement and by updating the information on their website where the AGM notice has already been despatched, that public gatherings of more than two people are not permitted and that shareholders are not therefore allowed to attend the AGM in person (in fact they will be refused entry to the meeting), and should instead exercise their right to vote by proxy.
In general, given the constantly evolving nature of the Coronavirus pandemic, listed companies should keep shareholders actively apprised of developments as and when they occur (including by means of market announcements if necessary).
Encouraging shareholders to appoint proxies
Appointing a proxy is always open to shareholders who do not wish to attend the AGM in person. Listed companies should therefore urge shareholders to vote by proxy in the current circumstances. Shareholders should also be encouraged to submit questions to
In any event, shareholders should be reminded by listed companies to return their proxy forms as early as possible prior to the AGM as a matter of good practice.
Postponing an AGM
Listed companies should consider whether they can postpone an AGM. Under UK legislation, this is not possible unless the listed company’s constitutional documentation expressly allows for postponement and, as applicable, if permissible under the UK Listing Rules, the Disclosure and Transparency Rules and the AIM Rules.
Any postponement of an AGM should be within the relevant time period set out in the listed company’s articles of association. Given the requirement to hold an AGM within a fixed period after the financial year-end, however, postponement may only be of limited value if compulsory social distancing policies have not been relaxed during the intervening period. As a result, in most cases it is not advisable to postpone an AGM, unless it is impossible to hold it in compliance with the UK’s stay at home measures.
Listed companies should also be mindful of any knock-on effect for any resolution to be proposed at AGMs. Some standard resolutions (for example, share allotment authorities) expire at the following AGM or a specific date following the AGM. Consequently, the listed company may not have a valid authority in place if the 2020 AGM cannot be held before the relevant long-stop date.
Paying final dividends
Shareholders are required to sign off final year dividends by means of a vote at the AGM. If an AGM is postponed, this raises questions about dividend payouts. Guidance published in the UK recently provides that an interim dividend (which can be declared by a listed company’s directors) in lieu may be considered in the event of a delayed AGM.
Dividend resolutions also raise issues for listed companies who need to carefully manage cash flow during this period of uncertainty. For listed companies yet to despatch their AGM notices, the board of directors should consider whether to include a resolution proposing a final dividend. If cash flow concerns arise which mean that the payment of the dividend is unlikely to be in the listed company’s best interests, the board of directors may decide to withdraw the resolution before the AGM, provided that the reasons for the withdrawal are explained at the AGM. In both these scenarios, listed companies need to be careful they do not mislead the market and they should therefore seek advice from their advisers at the earliest opportunity if they are considering this issue.
We have also seen other approaches being taken in the market in respect of dividend payouts. For example, a company could implement a scrip dividend option, encouraging shareholders to accept dividend payments in shares rather than cash in order to help maintain the company’s financial strength amid the Coronavirus outbreak.
In light of the Coronavirus pandemic and the proposed (but as yet unpublished) legislative changes to be implemented by the UK Government, all listed companies required to hold an AGM this season should review their arrangements (particularly their constitutional documentation) as a matter of priority and, at a minimum, consider the various measures described above.
We are on hand to provide support and guidance on these and other matters and to help you navigate your way through this evolving situation. Please speak to one of our capital markets specialists below or visit our website for further updates.