In our recent update on AGMs, we mentioned that the Government is due to pass legislation giving companies increased flexibility for holding Annual General Meetings, amongst other measures to help businesses through the COVID-19 situation. The Corporate Insolvency and Governance Bill has just been published and, if successfully passed, will provide companies with more practical options for holding AGMs and other shareholder meetings whilst social distancing measures remain in place across the UK.
The provisions on meetings in the Bill apply to all companies; the flexibility will, therefore, assist not just public companies that must hold an AGM because the Companies Act 2006 requires them to do so but also private companies whose articles of association oblige them to hold an AGM. The Bill's provisions on meetings apply to all shareholder meetings, not just AGMs.
Key measures in the Bill
- The temporary measures to give companies flexibility around AGMs and other meetings will be applied retrospectively from 26th March and will be available until the end of September 2020.
- Under the Bill, all companies which are obliged to hold an AGM within a certain timeframe, whether by statute or by their articles of association, will instead have until 30th September 2020 to hold the AGM. The government will have the power to make further extensions beyond this date if coronavirus restrictions are extended or reintroduced, although not beyond 5th April 2021.
- The legislation will allow companies to temporarily override certain requirements in their articles of association relating to the mode of meeting, for example, a requirement to hold a physical meeting. During the temporary relaxation period, companies will be free to hold meetings virtually and provide electronic voting means for shareholders. Shareholders will not have the right to attend a meeting in person or participate in any meetings other than to vote during this period.
- The flexibilities around the mode in which AGMs or other shareholder meetings are held will also be available until 30th September 2020, or longer if extended by the Government.
The retrospective nature of the provisions should provide comfort to those companies which have had to go ahead with AGMs, or other shareholder meetings, which have not strictly complied with their articles, for example, holding a hybrid meeting or not having the necessary quorum present at the same place.
However, as the legislation will give temporary relaxations only, companies would be advised to review their articles and think about possible amendments they might want to make, such as the ability to hold a hybrid meeting, which will give them more flexibility in the holding of shareholder meetings in future. For more information on hybrid meetings, read our recently published update.
BEIS and the Financial Reporting Council together have also published helpful FAQs you can read here. They are encouraging directors to do what they can to provide shareholders with the best level and quality of engagement they can expect at a time when social distancing measures are in place. For example, the FAQs suggest companies hold virtual meetings, where physical meetings cannot be held, and try to ensure that their processes and timelines allow engagement and exercise of voting rights by as wide a range of members as possible.
We regularly advise on shareholder meetings and have extensive knowledge of the latest government regulation and guidance in relation to COVID-19. For more information please do get in touch with any member of the corporate team or your usual Brodies LLP contact.