The temporary measures introduced in May to enable company meetings to be held virtually have been extended. But a recent report considers whether remote meetings are reducing the ability of investors to hold boards to account.
Virtual meetings until 30 December 2020
In May new legislation was introduced to facilitate holding company meetings, particularly public company AGMs, during the Covid-19 pandemic. As we explained, the new measures applied to company meetings held between 26 March and 30 September 2020. This period has recently been extended to catch meetings held up to 30 December 2020.
The measures enable meetings to be held entirely remotely, without any physical meeting. Shareholders have no right to attend such a meeting but they must be given the ability to vote at the meeting, either by appointing a proxy or by some form of electronic means.
The extension of these measures will be welcomed by companies and other qualifying bodies that were facing the challenge of returning to physical meetings just as many regions saw stricter restrictions re-imposed. But are virtual meetings always a good thing or are there any downsides?
Balancing flexibility with shareholder participation
A recent report by the International Corporate Governance Network (ICGN) considered the future format of AGMs. It notes that the move to virtual-only meetings has been controversial for many investors who saw it reduce the opportunity for them to challenge boards with the lack of an unmoderated Q&A session – a key feature of a typical physical AGM - making it harder to hold directors to account.
The report does acknowledge that virtual meetings dismantle geographic barriers to attendance and reduce participation costs. The fact that voting at virtual meetings is necessarily conducted via a poll, rather than a show of hands, also means they produce a more accurate reflection of the shareholders' views.
What happens in January 2021?
The extension to 30 December 2020 was the maximum extension which the Government was able to grant at present. But with the new guidance encouraging people to work from home for the next six months, it seems likely that we could see a further extension into 2021 in due course.
And even if the measures are not extended, companies may wish to consider amending their articles of association to accommodate this kind of flexibility in the future once the temporary measures lapse.