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COVID-19: is an extension to virtual meetings a good thing?

Gateley Legal

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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.

Challenges to overcome

There are a number of challenges which the ICGN report says must be overcome before virtual-only meetings can truly replace physical ones in the absence of emergency measures required by the pandemic. For example:

  • verifying that each remote participant is actually a shareholder;
  • overcoming possible technical issues;
  • the additional costs of adding a virtual element to a physical meeting;
  • restrictions on live voting; and
  • the likelihood of any non-transparent or mediated approach to selecting questions reducing the quality of interaction.

Best practice for virtual meetings

To counter some of the disadvantages of virtual meetings identified in the ICGN report, companies are encouraged to follow the best practice guidance issued by BEIS and the FRC. 

Amongst other things, this recommends:

  • issuing communications in a timely fashion to ensure shareholders can consider the matters to be voted on;
  • ensuring that clarity is given on proxy voting;
  • explaining the procedure for both the meeting and any communications before the meeting;
  • giving all shareholders the opportunity to both ask questions and receive responses to those questions before voting, either at a real-time on-line meeting or via proxy;
  • making answers to any questions raised available to all, both in the meeting and in written form following the meeting; and
  • offering a physical meeting to all shareholders once government restrictions are lifted.

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.
 

More information

For more information regarding the legislation which facilitates virtual company meetings, please contact our experts listed below. For all coroanvirus related insights, please visit our coronavirus hub.

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