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Coronavirus and AGMs

Henry Catchpole explains how your firm can ensure good decision making can be facilitated during the current pandemic.

In uncertain times, good decision-making by company directors is vitally important. Equally important, where people other than directors hold shares in the company, are critical decisions being scrutinised by shareholders.

An annual general meeting is one tool used to avoid details being overlooked, with shareholders able to check and challenge the directors (as well as support and encourage them).

However, just at the time when that effective oversight is perhaps most valuable, the coronavirus – with restrictions on travel and people gathering in one place – has made physical meetings all but impossible for companies with shareholders beyond a single family group who live together.

It’s worth remembering that private companies – this article isn’t intended to cover requirements for public companies – aren’t under a legislative obligation to hold an annual general meeting. As long as it is consistent with their articles of association, some companies may consider options to defer the AGM or look at other permitted ways to make key decisions.

For example, it will often be possible to pass written resolutions – whereby shareholders sign to assent to a proposed course of action –  instead of decisions being made at a meeting.

Can UK firms hold virtual meetings?

Virtual AGMs – and hybrid meetings, where some shareholders physically attend while others join remotely – are more common in the USA than the UK. Virtual meeting software, which so many businesses have used successfully over the last few months, can in principle be used for AGMs. It enables virtual attendance and voting, while avoiding the health risks associated with shareholders gathering in person.

The Model Articles for private companies provide that company meetings can be held electronically, with members ‘attending’ from different locations. As long as members are able to exercise their right to speak and vote, therefore, Article 37(4) states that they can be counted as in attendance, regardless of whether they are in the same physical location as each other.

Practically, a company will need to consider a range of issues relating to a virtual meeting, including:

  • Whether the meeting will be audio only or audio and video.
  • In what way shareholders will be able to participate (anyone able to listen but not speak will usually not be counted as in attendance) while avoiding a ‘free for all’.
  • Verifying that the technology is secure and meets the company’s needs.
  • Having a dry run beforehand to test the technology works seamlessly without interruption.
  • How will voting work? Polls on votes may be recommended.
  • How will shareholders with less technical expertise be supported?
  • Who will be available on the day to deal with any issues with the technology?
  • Cost – is the selected functionality worth the cost?

The company should communicate details of the meeting format clearly and early. As well as the date and time, the meeting notice should include instructions on how shareholders should access, speak and vote at the meeting. To ensure the meeting will be quorate, it may be prudent to ask people to pre-register their attendance. Shareholders may also be invited to submit questions for the directors in advance.

Other AGM tips

Check and, where needed, amend the articles of association: Where a private company’s articles of association do not permit a virtual meeting, they could be amended via special resolution to permit that option. Similarly, if the articles are unclear on whether those attending a meeting remotely count as part of the quorum, or the number required for quorum is otherwise not practical, these provisions could be updated.

Use proxy voting: As long as quorum requirements are met, any necessary resolutions can be passed by the proxy votes of those who do not attend the meeting alongside those present.

A good chairperson: The chair of a general meeting has broad powers in common law to preserve order, likely supplemented by specific powers in the company’s articles. As well as handling the technicalities of proxy voting and polls, a skilful chair will be able to keep a virtual meeting flowing.

Reduce the scope of the AGM: Often, shareholder meetings have developed to include features over and above the core requirements of an AGM. Given the current situation, it may be sensible to scale back the AGM to the key elements required for corporate compliance.

Companies should keep abreast of government legal and public health advice. This guide should be considered in that context, including proposed legislative changes first announced by the Business Secretary on 28 March 2020 to give companies more flexibility over when and how to hold an AGM.

• Henry Catchpole is CEO of Inform Direct. Call 01473 226482 or go to www.informdirect.co.uk

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